Why business owners should use financial planning methods in their businesses
What is Financial Planning?
Financial Planning is an established method for individuals to organise their finances.
It is based on an internationally recognised process that establishes the connection between an individual’s current position and their ultimate financial and lifestyle goals.
Can the process work for businesses too?
Conventionally the process is used for personal financial planning. But what if the process could be adapted by businesses? Is it possible that a business could flourish by applying Financial Planning principles?
Over the past few years something in excess of one million new businesses have been formed in the UK – many by individuals who have become self-employed, often individuals aged 50 and older. There are now around five million businesses in the UK. This surge implies a shift towards people becoming self-reliant – or reliant on their own businesses.
The ‘success’ or ‘failure’ of the business will directly affect the owner’s income position, possibly their retirement position and will have a direct impact on their wider family.
Can an application of the Financial Planning principles into a business strengthen the business and increase the chances of success? Should people who own and run businesses seek out and work with a Financial Planner?
Why Financial Planning works
- Connects the position of an individual to their long-term goals
- Instigates a series of targets that are regularly reviewed to ensure one achieves their long-term goals
- Enhances the protection of a family’s position
- Maximises tax efficiency
- Quantifies a retirement pathway
There is a plan, it is agreed between the individual and their Financial Planner, it is written down and it is regularly reviewed.
It is these combined disciplines, highlighted in the paragraph above, which work. And it is because they are combined that they work!
Too many people disconnect the bits – they do not connect tax planning, with protection, with future scenario planning and with their retirement requirements. They organise their finances in compartments and do not ever connect any of this to their lifestyle requirement.
How Financial Planning can work for businesses
How many businesses look at structuring a plan – written down and stepped out well in advance – which connects where they are today with their future stated future goals?
Businesses that represent the owner’s income stream, their family’s protection against ill fortune and their retirement prospects need to adopt Financial Planning principles to succeed. The business is not separate from the individual’s requirements. It is integral to them. Therefore the joined up, holistic, nature of good Financial Planning will create multiple benefits.
If you are in Business ask yourself this; Do I have a written plan which expresses how my business is going to support my longer-term goals (including lifestyle goals)? Do you have regular reviews with a Financial Planner to ensure that your business (and your family) is properly protected?
Each of the key components of the individual Financial Planning process applies to businesses. Equally the principle of making sure each part is worked into a joined-up plan applies.
In this respect, every business should employ the Financial Planning principles.
If you are in business and want to explore Financial Planning – get in touch for your no obligation Discovery Meeting. We can help you construct a plan that connects where you and your business are today with your future goals and where you want to be.