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FOCUS FEATURE


BUILDING A ROBUST REGIONAL ECONOMY


Whatever they decide to do, the remaining shareholders will be at their mercy. They could even sell to a competitor. Having shareholder protection means the remaining


shareholders will receive a lump sum that can be used to buy back the shares from their beneficiaries and retain control over the business. Without the protection they may struggle to find the money to buy the shares. Business planning has got to marry into your personal


plan and be reviewed on a regular basis, at least every year. But are you one of those business owners who believes


their business is their pension? It is one of those myths that does the rounds, especially with new business owners. You may get asked ‘how much do you want your business to sell for when you retire?’ and then told to plan to make it worth that. I have heard of business advisers who have advised entrepreneurs to do this and entrepreneurs who have taken this approach and in some cases I know it works. But generally, this approach is so short sighted. Businesses go bust, and/or profits slump and then you cannot sell, or extract monies from the business to retire. The risk is that you are not diversifying, spreading the risk, mitigating the tax. It’s like having a table with just one leg, and the leg breaks and the table fall over. Risk management is all about ensuring that you put as


many legs on your table as you can, on an ongoing basis, reviewing and constantly looking towards your goals, establishing your personal financial plan. If your approach is to assume your business is your


pension and do nothing about planning, get your head out of the sand, and stop being an ostrich! Your business might be worth £1m or £10m at the time you want to retire, but it might not. So, it’s never too early to do some serious financial planning for yourself. Owning your business means that you assume the risk


and have the risk premiums when the profits are being distributed. So often you can forget to ensure your risk premium is being reflected in your remuneration. Have you done a cashflow forecast to give an indication


of when you can retire? A forecast will also pick up the shortfalls in your plan, so they can be rectified. Reverse cashflow is also essential. On creating your post-


sale or retirement requirements for personal financial planning, it can identify the minimum sale price required for the business to achieve the plan. How powerful to realise that you need to enhance the profits in the business to achieve this, or when going into negotiations the minimum price you need to achieve. And what about your pension? Changing pensions


legislation means that you may not be maximising the amount you can put into your future retirement kitty. Pensions input is a very efficient cornerstone of your remuneration package, and should be included as such, and not just be an afterthought. In times of investment uncertainty, consideration should be given to investing monies on a regular basis, say monthly, to benefit from pound cost averaging, rather than just inputting a single premium before the tax input year end, or better still pay in regular contributions over the year and then just ‘sweep up’; working with your accountant before the company or business year ends to ensure that corporate or personal tax is mitigated as much as possible. When are you going to retire? How much do you need in


retirement? How are you going to fund your retirement? How much do you need to input? What is your assumed


Are you maximising the amount you can put in your future retirement kitty?


‘When are you going to retire? How much do you need in retirement? How are you going to fund your retirement?’


investment rate and what is your inflation rate to be assumed in your plan from today, to the date of retirement and in retirement? If you do not manage your affairs on an ongoing basis,


and legislation changes (against you), then you could significantly lose out. Changes in political parties at a general election can mean that they have a different agenda. So, you need to be flexible too. And do make sure that your wills are up to date. As I


said before, think carefully about who you bequeath your shares to. If you die while still a shareholder, or especially the sole shareholder, what’s left behind may cause major headaches to your staff, your company and loved ones. Ensure you have lasting powers of attorney, particularly if


you are drawing monies out of your pensions. If you are not well enough to make those decisions, you need to ensure that income can still be produced to look after your day-to- day needs and income requirements. I said running a business is not all about taking, it is


about putting back. But you can, and should, put yourself in that picture. Making sure you can support yourself and have a decent retirement is a sensible thing to do. After all, you don’t want to be relying on the state or others to support you in your old age. As I always say, the difference between planning for your


retirement or not planning is the difference between your retirement being the longest holiday you will ever have or the longest period of unemployment. And I know which I would rather have.


No individual investment advice is given, nor intended to be given in this article and no liability will be accepted in respect of any action you may take as a result of reading this article. Any reference to providers is not intended as an endorsement of said provider. If you are unsure you are urged to take independent investment advice.


Shareholder protection will help you retain control 66 business network November 2019


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