5 Financial Planning Tips for Small Business Owners

Running your own business can be incredibly rewarding, but you rarely have time to address other factors. We know this all too well! However, being a business owner means there is no employer to look after your insurance or pension arrangements. That is why we are here to work with you to achieve your financial objectives and help provide financial security over the long term.

Here a five simple tips when thinking about your company finances:

  1. Exit Strategy

This may seem an odd one to begin with, but an exit strategy is essential. There are four ways you might exit your business:

  • Bought out
  • Pushed out
  • Carried out (in a box)
  • Wind the business down

Option one is clearly the most attractive. Of course, you could pass the business on to family too. Whichever option you choose and feel is the most attractive, write down how you will achieve this. Generally, there are two types of business:

A ‘cash cow’ used to strip out profits and build your own wealth over time

A ‘build and sell’ where profits are reinvested with a view to selling in future

A good template business plan will have an ‘exit strategy’ segment. Your exit strategy should be a priority when thinking about your growth.

  1. Separate your personal and business goals.

Separating your business and personal life goals will ensure you make the right decisions for yourself and your business. Keep all your personal and business expenses separate. Use separate bank accounts and credit cards.

  1. Speak with an accountant and possibly a financial adviser. 

Both professionals will guide you towards achieving your goals while providing valuable advice based on experience gained over many years working in this field. You’re on your own now – this offers an excellent opportunity to achieve your desired success. But no employer is running your payroll, covering PAYE or providing you with a pension/life insurance/health insurance.

  1. Pensions – make sure you comply with auto-enrolment legislation and save for retirement.

If you’re running a limited company and employ at least one person, you will likely need to provide a pension scheme. As a minimum, you’ll also need to contribute 3% of their salary. This is called auto-enrolment, and we find it’s often overlooked by business owners when starting out.

At Engage Wealth Management, we can help you understand the requirements of workplace pensions to ensure your business complies with auto-enrolment rules. This will provide both you and your employees with a tax-efficient retirement solution. A limited company can usually contribute up to £40,000 per year to your pension and receive corporation tax relief which is a great way (tax-efficient) of withdrawing profits from the business. You can also utilise unused allowances through ‘carry forward.’

  1. Get the right insurance in place.

It is crucial for a young business to have a business continuity strategy in place. Planning for the worst protects not only the company but also your family, your employees, and their families.

Shareholder Protection – Shareholder protection allows business owners to repurchase shares from a co-shareholder diagnosed with a critical or terminal illness, or if they die. This policy helps surviving owners stay in control and minimises disruption to the business.

Relevant Life Plan – Relevant life cover offers a tax-efficient way for an employer, usually a small business, to provide life cover for an employee. A relevant life plan protects their family against the impact of their death or terminal illness diagnosis while employed.

Key Person Insurance – Key person insurance helps safeguard a company against the financial impact of death, terminal illness, or a specified critical illness of a key person. A key person could be anyone crucial to your company’s day-to-day running. Key people might include a director, employee, or anyone whose skill, knowledge, and experience affect revenue.

Private Medical Insurance and group insurance options – Our partners at Engage Health Group can help with these areas. The past few years have highlighted the importance of staff wellbeing. Protecting your staff and providing benefits beyond the minimum is becoming essential to attracting and retaining talent.

You should continue to plan for your business’s future. Planning will help your business grow while navigating potential cash-flow issues many start-up companies face. A plan will also help you allocate resources appropriately and determine how much you should spend in areas such as product development and marketing to accelerate your business growth.

You should carefully develop a business succession plan or exit strategy. This will ensure that you can have a smooth transition in leadership and address the financial and tax planning aspects when you leave the business.

As part of our financial planning service, we will undertake an in-depth review of your business. Together, we can implement a tailored insurance plan to protect your business and help with the financial aspects to ensure you achieve your successful exit.

Get in touch today to find out more:

[email protected]

01273 076587

About the author
Picture of Oliver McDonald
Oliver McDonald
Oliver is the managing director and independent financial adviser at Engage Wealth Management.
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