THE IMPORTANCE OF FINANCIAL PLANNING TO BUSINESS
A sound financial plan is the backbone of any successful business.
Having a successful business all comes down to planning and financial planning is one of the key areas that must be addressed from conception for a business to thrive and expand.
As is the case with personal wealth creation and household budgeting, it is difficult for any commercial enterprise to be financially stable without understanding where we stand financially, what we want to achieve and considering how best to get there and when.
A financial planner helps put in place a financial plan by identifying your financial goals and objectives, identifying key performance indicators and advising you on developing and implementing appropriate strategies to seek to achieve them. The end result being that you will build your business, your personal wealth and minimise your financial risk.
Below are some of the important areas that your financial planner will consider (together with your other trusted advisors where necessary) to ensure that you have the right plan from the start.
Business structuring and asset protection
When starting a new business or acquiring an interest in an existing business, getting the right advice at the outset in relation to the appropriate business structure is critical because the business structure that you ultimately utilise determines how it is managed, the accounting and taxation structures and your ability to limit liability for business risks.
Wealth creation and risk management
For many of us, we spend our whole lives establishing and growing our businesses. We depend on the income from our businesses to maintain our lifestyles and put food on our tables.
Having appropriate business and personal insurances in place can help ensure that you, your business, any co-owners in your business and their respective families are protected in the event of some unforseen occurrence that results in a business owner passing away, being unable to work for an extended period or becoming permanently disabled.
Business succession planning
Having an appropriate exit strategy in place is one of the last things on our minds when we are starting out in business or when we are growing our businesses however, we cannot stay in business forever. Either businesses need to be passed on to our children (assuming they want to follow in our footsteps – and many don’t) or some measures need to be put in place to extract some value from our business at the end of our working lives.
The business may need to be sold to a third party or perhaps current employees of the business. Consider the way in which the change of control may take place – it may be over time, it may be to more than one party or you could have an ‘earn out’ arrangement
Having the right financial plan allows your business to grow and prosper so that you can accrue your own personal wealth and ultimately transition to retirement with comfort and ease knowing that you can continue to enjoy the lifestyle that you are accustomed to.
Fionne McKillop is principal financial planner at McKillop Financial Planning and owns her own law firm McKillop Legal, which is expert in estate planning, business succession and commercial law.
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This article was prepared by Integrated Planning Systems Pty Limited ABN 21 051 429 184 trading as McKillop Financial Planning, an Authorised Representative of GWM Adviser Services Limited ABN 96 002 071 749 trading as MLC Financial Planning, Australian Financial Services Licensee, 105 – 153 Miller St, North Sydney NSW 2060, a member of the National Australia Bank Group of companies. The information is current as at 25 August 2016.
The article does not take into account your personal objectives, financial situation or needs. Accordingly, you should consider how appropriate the information is to you with regard to your personal circumstances. You may wish to obtain an adviser’s assistance, tax and/or legal advice to make this assessment. Before buying any financial product, you should read the Product Disclosure Statement (PDS) for that product and consider the contents of the PDS before making a decision about whether to acquire the product.
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