Too many business owners are so focused on growing their business that they neglect their own personal financial plan, said Scott Harrington, director of William Buck NSW.
“Detailed planning has usually been undertaken at a business level, but minimal planning has been done at the personal or family level,” he said.
It is critical for small business owners to build wealth that is independent of the business so as to have assets that the owner retains even if issues arise in the business, according to Mr Harrington.
“A common issue we find is a business owner that sees the capital value of their business as their retirement fund. The idea is to build up the value of the business and then sell and retire. The pace of change in many industries as well as the vagaries of economic and market conditions can make this a high risk strategy,” he said.
The William Buck research suggests many small business owners give too little thought to issues such as personal insurances and have not sufficiently set themselves up to protect their personal assets from the risks of the business.
Mr Harrington outlined 7 key actions that he would recommend business owners implement:
1. Make sure you have the right structure in place to hold investment and personal use assets.
2. Review your personal insurance position.
3. Make sure appropriate agreements are in place with business partners.
4. Get a tax-effective remuneration and distribution strategy in place.
5. Ensure debt is structured in the most effective way.
6. Develop an exit or family succession plan (even if the potential exit is in the longer term).
7. Review the legal structure of the business to ensure it will facilitate the desired exit or succession arrangement.