Your Business Is Doing Well. What Should You Do With the Money Personally?

2 hours ago

3 min read

Your business is doing well.

Revenue is growing, there is money in the company and things are moving in the right direction.

But at some point, a different question starts to matter:

What should that success be doing for you personally?

For many business owners, the company becomes the centre of their financial life. That can make it easy to keep reinvesting, leave cash in the business or take money out without a wider personal plan.

Good financial planning helps connect the two.

Start With Your Personal Goals

Before deciding what to do with money from the business, think about what you want it to help you achieve.

That might mean:

Building personal savings and investments
Increasing pension provision & planning for retirement
Paying down your mortgage
Creating more financial security
Helping your family
Retiring earlier
Reducing the number of hours you work
Building wealth outside the business

The right strategy depends on what you are actually working towards.

Building wealth personally can give you more flexibility and reduce the pressure on a future sale of the business to fund everything you want later.

Think About Your Pension

Pensions can form an important part of financial planning for company directors.

Depending on your circumstances, pension contributions may offer a tax-efficient way of moving money towards your longer-term future.

But the amount, structure and suitability of any contribution needs to be considered carefully alongside your wider finances and the needs of the business.

At Brancaster House, we look at pensions as part of the overall plan rather than as a standalone product.

Be Deliberate About How You Take Money Out

Salary, dividends and pension contributions can all play a role in how business owners take value from their company.

Dividends, for example, can only be paid from available company profits and are subject to specific rules and personal tax treatment.

Rather than simply taking money out as and when you need it, it can be useful to have a clearer strategy.

Your accountant can help with the company and tax position, while a financial adviser can help you think about what happens to that money once it reaches you.

Build Wealth Outside the Business

Once money is available personally, think about what role it should play.

Do you need more accessible savings?

Could some be invested for the longer term?

Should retirement provision be a bigger priority?

Are you carrying borrowing you would like to reduce?

There is rarely one correct answer.

The key is making sure your personal finances are progressing alongside the business.

Protect What You Have Built

Business success can also increase the amount you have to protect.

It is worth considering what would happen if you were unable to work, became seriously ill or died unexpectedly.

Could your family maintain their lifestyle?

Could the business continue?

Would there be enough personal wealth outside the company?

Protection planning can help make sure the success you have built is not dependent on everything continuing exactly as expected.

Think About the Exit Before You Need One

Even if you have no plans to sell your business soon, it is worth considering what eventually stepping away could look like.

Do you expect to sell?

Pass the business on?

Reduce your involvement gradually?

Keep it as an income-producing asset?

The sooner you understand what role the business may play in your retirement, the easier it is to build a personal financial plan alongside it.

Ideally, selling the company becomes one part of your future rather than your entire retirement strategy.

Why Speak to Brancaster House?

At Brancaster House Financial Planning, we work with business owners across Norwich and Norfolk to connect business success with personal financial planning.

We can help you look at: