Setting up for Business Success

A Case Study

David Jones is 38 years old and runs his own dental practice. He has been married to his wife, Ruby for 12 years and they live in Cardiff along with their two children, Jane (9) and John (6).

David had been feeling the pressure of running his business success and was considering selling up and going to work for someone else in order to achieve a better work/life balance and spend more time with his young family.

To weigh up the decision, he enlisted our help. We discussed David’s financial goals and his desire to be financially secure so that he could retire early.

When we met, the first thing we asked David was what his ideal financial scenario would be and what key objectives he wanted to fulfil personally, for his family and for his business.

His ideal scenario was to be able to retire at 50, lead a comfortable life financially and for him and Ruby to spend their retirement travelling around the world in their beloved camper van.

In the shorter term, David was keen to get into a position where he could cut his working hours down to three days a week. This would enable him to spend much more time with his young family. However, the couple also hope to be able to privately educate their children at a cost of about £20,000 a year, in order to give them the best possible start in life.

Following our first meeting, we got to work on the development of a financial plan to help David understand what can be done to achieve his objectives.

We did some maths based on the business’ financial projections that were put together by his accountant and reached the following conclusion: For the couple to reach their aim of having an income of £3,500 a month at the age of 50 so they can retire, the dental practice and the property it is in will have to be valued at £800,000. We thought that this valuation – making some small assumptions for inflation, an increase in property price, and business growth – should be achievable, and David agreed.

With retirement already at the forefront of our discussions, we then talked about the family’s pension arrangements. Both David and Ruby have taken their pension provision seriously and will be in good stead when they do reach retirement.

David will accrue NHS pension benefits on top of a personal pension that is currently valued at £68,000, while Ruby who also works in the practice, has a personal pension worth £48,000, which the business makes a monthly contribution to. Pension projections were taken into account as part of their Financial Forecasting and the potential retirement income figures that will be available will contribute massively to the overall income figures they are aiming for.

Next, we considered the couple’s insurance position. We quickly identified that they were both underinsured on the assumption that the value of the business would be lost without them. We arranged a new relevant life insurance policy to protect their young family and ensure their standard of living could be maintained if anything was to happen.

Their existing mish-mash of insurance policies did not provide enough protection for the young family and did not take advantage of the tax relief available to them as owners of a limited company. David was insured for around £1 million and Ruby was insured for £400,000.

On top of this, we also arranged a locum insurance policy. Should David not be able to continue his dentistry because of illness or injury, a locum dentist can be paid for by an insurance policy. This would provide a continued service to the patients, protecting the turnover of the practice to ensure they, as owners of the business, can maintain their personal drawings.

One of the most important things we did was to put the life insurance and pension death benefits (the personal pensions they have pay a return of fund – the value of the pension – on death) into a series of family trusts.

Trusts are an excellent way of protecting family assets and should anything happen to either David or Ruby, their money can be controlled on behalf of their children, allowing them to have the lifestyle the couple want for them, including private schooling. It will also protect the money from potentially exiting the family should the surviving partner go on to remarry, as well as protecting it from inheritance tax too.

Because of their financially-mature attitude towards money, David and Ruby are well aware of the benefits of maximising their Isa allowances each year. Over the past few years they have used some of their allowance to build additional savings. We agreed that this will continue to be reviewed each year and if they can afford to use this valuable tax allowance as and when cash flow allows, then they will do.

Since we originally met, David has been able to get his working week down to four days and is on track to achieve his aim of working three days a week. This has included putting an office manager in place to run the surgery while he focuses on growing the business, so he and Ruby can achieve their final goal of retiring at 50.

Regular reviews will be important for the family’s financial planning to ensure everything remains on track towards their goal of retirement, especially as they get closer to 50.


This case study is a clear example of how good business financial planning can set you up for success for both your business and your personal life – even if something goes dramatically wrong.
*Please note that the names in this case stdy have been altered for confidentiality purposes

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