Plan ahead: how financial planning can help business owners future proof their finances

Being a business owner can mean working long hours and wearing multiple hats to ensure the business runs smoothly; from marketing to human resources.

This often results in the owner’s personal finances being pushed to the bottom of the pile. Working with a financial planner to build a long-term plan will not only manage your risk, but will work alongside your business, complimenting one another.

At Active Chartered Financial Planners, we have a number of clients who are business owners, from a variety of industries. Below are some of the key areas we look at when building a long term financial plan for those running their own organisation.


Many businesses rely on the owner as the sole/key person to generate profit for the company – but this can also be the case at home, with them also being the main breadwinner.  Here, we look at how well both the company and the individual are protected in both the short term and the longer term. What if they were unable to work for several weeks? How would that affect the cash flow? Or if they were ill, leaving them unable to work for months or even years; how would that affect the business and the family?

Some tools to help with this include:

  1. Insurance to provide the business with income over a short period or a lump sum for something more serious.
  2. An accessible investment the business could call on to help cashflow when required

Tax Planning

A good accountant will help a business proactively manage their cashflow and tax liability before HMRC comes calling. Limited companies can utilise tools to help reduce corporation tax liabilities while also providing the business owner with the ability to spread their wealth outside of the company.

Other options for business owners include:

  1. Pension contributions – a deductible business expense that can help reduce the company’s tax liabilities
  2. A business property held in a SIPP (self-invested personal pension) could be used to free up cash flow while the owner benefits from rental income
  3. Providing benefits for the family (of the owner) through the business can improve the tax efficiency of the premiums

Retirement/Exit Planning

When planning for retirement, the most difficult question is often ‘how much will I need?’ Having a good financial plan in place will ensure you know if the business has sufficient value to provide the retirement you want, or if you also need to explore other, additional options.

This may also help reduce the risk of having all your eggs (or assets) in one basket (i.e ring fencing money outside of the business) and at the same time it may help with the tax planning of the business.

A business sale may sound like the perfect default retirement strategy for you – but is it always the right one? Some businesses may pass to the next generation, but for some, all of the value may be in the current owner – without them does it have the same value?

The more this option is considered, the less reliance there may be on the business to provide everything needed for the owner to step away to start something new or begin their retirement.

The information provided here is a starting point; working with a financial planner to build a long-term financial plan can give peace of mind – for you and for your business.

The Financial Conduct Authority does not regulate taxation advice.

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