I set up my own business because I felt trapped in the corporate world and my personal integrity was under strain. I also wanted the freedom and time that being my own boss would bring me. I have family, some of whom are involved in the business to some extent. Ironically, I now find my life being consumed by my business and I am loosing sight of my important personal goals. My family and my business are the most important things in my life, but I am having difficulty squaring the circle between them. I feel that if I can get to grips with my personal finances as well as my business finances I might be able to take a step back from my business and concentrate more on living life. I plan my business but not my life or money.

So what specific concerns do I have?

Time

I am not able to live the dream I had when I started out on my business.  All my time is spent in my business to the detriment of my family, lifestyle and friends.

Family and relationships

I don’t have enough time for my family and where other members of the family are involved in the family there are stresses.  I don’t know how or when to exit the business or if the younger generations of my family want to go there, so there are inter-generational and succession issues.  I suspect I also have inheritance tax and estate planning issues to deal with.

The business and financial environment

I have been shocked by the events of the last two years and although my business continues to be profitable the downturn has had an impact; we have had to work much harder just to stand still and this has been reflected in my relations with my friends and family. My personal pensions and investments have also taken a knock and I think I will have to work for longer than I anticipated. I don’t want to be at the mercy of events like this again

Personal financial organisation

I’m not convinced that the cash I am earning from my business now is working for me in the best way.  I’m looking to use the business as a stepping stone to financial independence but not sure how that might come about. I have no idea of how much I need or when I need it in order to be able to exit from my business. I am happy to receive advice, as long as it is for the long term and is given to suppport my interests and my interests alone.

Tax

I have worked hard to build my business. I provide employment and support the local community and economy. I am angry that the only reward I get is punitive business and personal tax. The financial pages tell that this is going to get worse before it gets better so I’m looking for strategies to enable me to get more into my family’s pockets.

Business development

Developing the business is not as easy as I anticipated, and I am often in knots over marketing, staff, financing the business and investment. The pace of technology change is a constant worry.

In practice - the Planning for Life solution

Edward and Bella pulled out of London and the corporate world in 2005 to return to their native Yorkshire. Edward set up his own publishing company whilst Bella concentrated on bringing up their two children until they reached secondary school, then she returned to teaching at a local school. Bella helps out with Edward’s business from time to time.

In 2007 Edward and Bella called in Planning for Life. Edward and Bella had adequate incomes but they could not see where they were heading. Bella in particular was concerned about the future and Edward was uncertain whether his business would provide sufficient capital for their lifetime financial security.

Edward’s business was consuming too much of his time and the family was taking a back seat. They both felt it was important that they work out how to spend more time with their children, and take advantages of Yorkshire’s society and countryside. In addition, they had specific financial issues. Edward had substantial pension funds, but they were not well looked after and Edward did not really understand pensions in general and his plans in particular. They also held a substantial amount of cash from the sale of their London house and did not know what to do with it.

Edward’s personal goals and objectives had got lost in the rush to build his business. We helped Edward to understand that his business needed to be driven by his personal goals and objectives rather than circumstances and events, so we started with a thorough and deep exploration of their life goals. We discovered the couple were anxious to get more living space for themselves, that Bella wanted to reduce her teaching hours and to have more time for her hobbies and creative aspirations. Edward wanted to make his business more efficient and profitable to release more time for them to spend with their children, to enjoy the fun side of Yorkshire and to travel more, both locally in the form of frequent short breaks, and on long haul holidays every other year.

Edward and Bella were delighted to have discovered a new direction and purpose, but raised objections: how could they afford all this and how would it impact on their long term security.

We answered those questions for them by developing a lifetime cash flow (right) and using this to model various scenarios. We helped the clients understand the power of budgeting household spending, and investing for compound returns. We developed various “what-if” scenarios for them and helped Edward to structure and develop his business to give him the time and money he required. We looked at the various ways Edward could withdraw capital from his business to mitigate the impact of rising UK taxes. We overhauled Edward's pensions and developed an investment policy which we applied to his consolidated pension fund.

As a result of this work Edward and Bella were easily able to come to a decision to extend their existing house, rather than buy a larger house elsewhere. They worked out a travel schedule and have just returned from a long trip to Italy which they were able to enjoy without the feelings of guilt about spending money that they were usually prone to when the went away.

Bella and Edward now have a structured investment portfolio and although we still have more work to do to develop Edward’s business exit strategy the couple feel much more secure and certain of their future, to the point where Bella has now been able to withdraw substantially from her teaching role.

We continue to work with Edward and Bella, fine tuning their investments, looking at tax efficient ways for Edward to withdraw cash from his business and giving the couple confidence and encouragement to pursue their personal goals and values.

(This case study is based on one of Planning for Life’s actual clients, although names and some circumstances have been changed to protect our client’s privacy.)

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