In earlier articles we discussed how your accountant can help you grow a profitable business and how your lawyer can help you protect it (particularly in regard to implementing Shareholder Agreements). In this article we discuss the role of your financial adviser as a collaborator working with these and other professionals to identify and mitigate areas of business risk with the goal of delivering your personal prosperity.
SME Business Success = Personal Prosperity
#3 Financial Collaboration: THREE business matters that directly affect your personal prosperity
We know that mining and resources business owners work long hours, often in complex environments, to build successful businesses. As a consequence, it is common for them to overlook important business issues that can have significant implications on both the business and their own personal wealth.
As financial planners, it’s our role to consider your overall financial position and this involves asking the questions you may not know to ask, and collaborating with other professionals to mitigate risks affecting your personal prosperity that may result from your business activities.
Here we outline THREE business matters that directly affect the personal wealth of business owners in mining and resources:
(i) Understand your level of risk
If you have contracts with major corporations that haven’t been reviewed by a legal expert, it’s possible your business revenue, and therefore your livelihood, are at considerable risk.
For example, what would happen if one of your employees was injured on a work site, or an expensive piece of your equipment was damaged or destroyed during the course of providing your service? Who would be responsible – you or the mining company you’re working for?
If the terms of your contract are unclear, you could find yourself at the centre of legal proceedings and footing the bill for significant events that may not be your fault. Whether you are paying compensation for injury or unable to operate in the absence of critical equipment, the financial fallout could have significant financial implications that would directly affect the business and your own financial position.
Your business contracts should always be reviewed by an experienced legal professional who will help you understand the risk of legal exposure and how to mitigate it. Further, because contract payment terms can be complex, consulting with an accountant, and possibly a lender, can provide strategies that will suit negotiated payment schedules imposed by corporations without adversely affecting your cashflow and day-to-day operation.
(ii) Consider your options for selling the business
We’re sure you will agree, a major reason for being in business is to make money. Your goal is to create personal prosperity that will enable you and your family to enjoy financial independence and, in due course, the lifestyle of your choice in retirement.
With the big picture in mind, it’s never too early to consider your options for selling the business. With your end goal established, your financial adviser will implement a financial plan including current earnings derived from the business as well as anticipated proceeds from the business sale.
Matters including valuation, terms of sale, Capital Gains Tax (CGT) and tax effective structures for holding the proceeds from the sale, are just some of the complex matters that require advanced, coordinated input from other professionals for the purpose of delivering the best financial outcome for you, especially if an unexpected offer is received.
Collaborative advice is key to realising the full value of your mining and resources business, minimising your tax liability, and implementing a plan that will maximise your retirement savings.
As your financial adviser, we can collaborate with a legal expert to ensure your financial position is protected.
(iii) Extract wealth from your business
In the simplest of terms, extracting wealth from your business involves regularly paying yourself a wage and contributing to super. Failing to do so denies you opportunities for growing your personal prosperity through retirement savings and the compounding interest that accumulates on your super investments.
It’s also likely you’ll forfeit considerable tax savings that are available in superannuation’s tax-effective environment. It’s also important to recognise that your wealth could become locked up in a lengthy legal dispute should you leave your wealth in the business and claims are made against it.
(Click here to find out how regular super contributions and compounding interest can provide an effective and tax-efficient retirement savings strategy.)
The solution is a financial plan that considers your business and how you can extract wealth from it to create long-term wealth and achieve lifestyle goals.
Collaboration is key
While it’s well known that financial planners give financial advice, in our experience the key is collaboration. While we have specialised knowledge in financial planning, we also have a strong understanding of the broader matters at play.
Operating as the central coordinator with a helicopter view of each client’s combined personal and business affairs, we identify areas of need then assemble a team of professional advisers with specialisations in the services you require: legal, accounting and business advice, property services or business project services. The purpose of preparing and implementing a cohesive strategy is to address each area of need and achieve the stated overall outcome, namely a successful business that delivers personal prosperity for its owners.
This important strategy paper – Business Sold. Value Extracted. Future Assured! – describes the top 10 outcomes that demonstrate why mining & resources business owners need qualified multi-disciplinary advice.
Your next step…
To find out more about how our financial planning experience, specialisation in mining and resources and commitment to multi-disciplinary collaboration can help create and protect your personal prosperity, please contact Brett or James on +61 (0)7 3007 2000 or firstname.lastname@example.org
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in mining and resources.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.