Live Well Today and Better Tomorrow.
Sound Money Advice and Financial Strategies for Individuals, Families and Businesses
Business support that works as hard as you doLEARN MORE
Work on your business, not in your businessLEARN MORE
Solid business, solid strategyLEARN MORE
About Mardell Financial CentreWe believe most accountants have it wrong. They focus on compliance and "looking in the rear view mirror" at what has already happened. At Mardell Financial Centre, we help business owners, families and individuals navigate a prosperous financial future with proactive financial strategy and value-adding advice.
Whether by design or otherwise, the day will come when you leave your business. It may be that you decide to sell it, retire and leave it to family; or perhaps are forced to get out because of ill health.
Having spent so much time, effort, and money building your business to the success it is today, it would be catastrophic to see it all disappear because of an unexpected event or because you hadn’t planned for the inevitable.
This is where business succession planning – sometimes called exit planning – becomes effective.
What is succession planning?
In a similar way to planning for the passing on of your estate upon your death, a business succession plan will see to it that your business continues to flourish even though you are not at the helm. Of course, such planning will include establishing how your business is to be run (and by whom) after your death, but also upon other events, such as:
- Selling the business
- Retirement from the business
- Selling to/ or by business partners/ major shareholders
- Passing the business to family members
How to create your business succession plan
There are several steps to take when considering your business succession planning. One of these is to involve your family members or business partners. It will be important for them to know you are considering their welfare through your actions now.
You’ll also need to take advice about how to affect your succession plans, and take into consideration the wishes of those closest to you. For example, you may be planning to leave the business to your children: but what would happen if one of those doesn’t want to be a business owner?
There is also the very real issue of taxes applied to businesses upon any significant change. There may be taxes to pay on a sale of the business, or its inheritance, or passing on of your shareholding.
Your employees and your clients
You shouldn’t forget the effect that your personal situation can have on your business, its employees and its clients. Morale, productivity, and client confidence can all be adversely affected by a lack of visible business sustainability. And that will harm your profitability.
Succession planning will give peace of mind to your employees. The knowledge of dealing with a business that will be around for the long term will offer a high level of comfort to your clients.
Why you should plan for the succession of your business
Acting early, and planning what happens to your business when you are no longer involved, will make certain that your business transitions smoothly. While there will be less disruption to the running of the business, there are also other very real benefits:
- Business successors will be prepared for the transition;
- Tax implications can be prepared for and value protected against;
- Increasing and preserving the value of your business.
When should undertake business succession planning?
The sooner you begin planning for the future of your business, the better. In fact, some new businesses even include succession planning as part of their initial business plan when applying for finance.
As with all financial planning, business succession plans will need to be updated regularly as your business grows and your life goals change.
In the modern world, it’s easy to get caught up in the daily routine of here-and-now that you forget to make plans for your future. It’s too easy to think that tomorrow will take care of itself and then, before you know it, tomorrow is already here.
It’s important to spend time doing what is important to you – your family, building a business or career, your hobbies and out-of-work activities, holidays – and not on the mundane ‘planning for your future’.
However, ensuring your financial affairs are in order should be an essential part of your financial budgeting. Delaying planning could have disastrous consequences, and failing to keep on top of finances can cost you significantly.
Planning for now
Staying on top of your finances requires a well-planned budget, keeping on top of records and making sure you take care of debts and bills.
You’ll need to be aware of your tax situation and liabilities, as well as the tax breaks and benefits available to you. There may be tax offsets you can claim to reduce your tax bill, and you may be eligible for super co-contributions.
You’ll also have income tax and capital gains tax issues, perhaps negative gearing on investment properties, your mortgage to consider, and Medicare levies. And if you invest on behalf of your children, without proper planning you may have tax withheld at the rate of 46.5%!
Planning for the future
Your ultimate aim is likely to be to retire in comfort, doing what you want to do.
In order to do that, though, you’ll need to plan ahead and well in advance. Keeping on top of your super, and regularly revisiting your goals as life events take their toll, is an important first step.
Understanding your investment profile, and selecting appropriate investments to stay in line with the type of investor you are, requires an appreciation of your personal situation as circumstances change. An independent ‘audit’ of your finances will help you to keep on top of your finances now and in the future.
Finally, by budgeting now and ensuring you have the best financial deals available to you – for example the best mortgage deal – you’ll be able to cut costs and save more.
Mardell for families and individuals
Here at Mardell we work hard to make sure your money works hard for you.
We have the expertise to help with those one-off situations that need taking care of. We’ll also partner with you to ensure you manage your money to a successful future, negotiating the 3 stages of starting out, accumulation, and retirement. In short, our aim is helping you live for today and plan for the future.
Planning a ‘financial future’ is a daunting exercise yet is critical to financial success. Financial planning is unique to each individual situation, and involves evaluating elements that are not financial at all. These may be:
- Life events – such as marriage, the birth of children, career change, etc
- Lifestyle conditions – such as economic and employment outlook, education, and health
- Financial goals – such as early retirement, children’s education, etc
The planning stage is critical to any and every financial plan.
What are the three stages of individual and family financial planning?
Typically, we all move through three phases of life; each with its own financial demands and impact on the one that follows.
Stage One: Starting out
After leaving education and starting a career, you enter the ‘starting out phase’. Very often this will include a level of debt taken on board in the achievement of higher educational qualifications.
When starting out, there will be various calls on your money. You’ll be looking to pay down debt, while also suffering the financial constraints of buying a home, starting a family, and growing a career or business.
Stage Two: Accumulation
In this stage, the main breadwinner of a family will have reached certain career pinnacles. Earning potential is at or near peak, and your children are likely to be either fully independent or increasingly so.
During this stage of life you will be likely to have repaid your mortgage, and with careful financial planning you will be debt free. It is through these years that you’ll be accumulating wealth as hard as you can in order to enjoy a rapidly approaching retirement.
Stage Three: Retirement
In your retirement, your lifestyle will depend upon the amount of wealth you have accumulated previously and how much of that wealth you are able to access. With no income from employment, your wealth pot is likely to run down, so it’s important to plan ahead and ensure you’ll have at least enough to last your expected lifetime.
When to start financial planning
Although the life cycle is the same for most people, the amount of time spent in each stage varies greatly between us. Achieving your financial goals is dependent on good planning and excellent advice pertinent to you. But the time it takes to achieve your goals will depend also on when you start planning for your future.
Here at Mardell we help our clients reach their financial goals, and, while it’s never too late to take action, it’s clear that the sooner you start planning for your future, the sooner that future will arrive – the earlier you begin investing for retirement, for example, the earlier you’ll be able to retire.
The Bell Curve Life Cycle is a textbook term depicting the four life-stages of a business: from start-up, through growth, to maturity and lastly a ‘decline’ period where business activity slows.
At Mardell, we help our clients derail this traditional life cycle by ensuring they don’t reach the final stage of ‘decline’. We do this by ensuring a business reaches and remains in the maturity phase, in an ideal scenario where profitability and growth is maintained and kept at peak performance.
How your business moves through three stages
Stage One: Start-up
In this initial stage, you’ll need to build a business plan, access finance, find your customers and market to them. Costs are going to be high, and you’ll need to assess viability as well as keeping a tight rein on outgoings.
You’ll also need to register your business appropriately, and ensure you don’t pay unnecessary tax.
Stage Two: Growth
During this stage, the hard work and planning that you undertook at the start-up stage will begin to bear fruit. Your sales will increase and so will your profits. You’ll need to hone your production ability in order to keep up with demand and thwart competition.
Many business owners make significant errors at this stage, failing to plan properly for demands on time and cash.
As the number of employees in your business grows, you’ll also need to consider superannuation funding and, if you haven’t done so already, succession planning.
Stage Three: Maturity
This is your business ideal. At this stage you are maximising profits and your marketing costs should have fallen as your customers know you and recommend you and your products/ services.
Planning for your three stages of business
Your business begins with a business plan, researching your market, and then the exciting task of building and beginning your operations. As you move through from start-up to growth, you’ll need to plan for expansion, access funds, and work through employment contracts and forward staff planning.
You’ll need to have systems in place to invoice customers, accept payment, and lodge your tax returns in the correct format and on time.
What you do best is coming up with the idea for your business, creating new and innovative products and services, and keeping your customers and clients happy.
What we do best at Mardell is making sure your business structure, administration, and accounting is fit enough to help you grow to maturity and remain in a scenario where profitability and growth remain in healthy shape.