Integration of business, financial and family

1. Who is the client?

It is easy for accountants to see the business as the client… almost in isolation.  It has all the activity, all the problems, gets all the attention and (at least in the early days) makes all the money!  Why shouldn’t it get all the attention?

But the business is only part of the story.  In most cases, it is the primary source of earnings to support lifestyle, debt reduction and ultimately, the accumulation of wealth.  In fact, most clients have a multitude of structures (due to legacy asset protection and tax law changes over the years), superannuation funds, other investments, lifestyle assets (homes, holiday homes, cars) and of course, a family.

But in the end, all of these entities exist to benefit the business owner(s) and the family.  As such, the business is really just a means to an end!

2. The role of the business

When planning for succession of the business, the role that business plays in the life of a client becomes very real.  And it’s not just about the money.

We try to prepare clients for the loss that they are about to experience.  They know that in spite of the transition arrangements that require them to support the new owner, at some point (often much sooner than they expect), they will not be wanted any more.

They lose their daily routine.  They lose their intellectual stimulation.  Importantly, they lose their sense of identity that came with their role as founder or owner of the business that they no longer have anything to do with.  It’s like losing an arm.  It comes as a shock and no amount of holidays or golf will fix it.

We know this as we have experienced it time and time again.  We see the owner as the client, not the business.  We almost always lose the business as a client after succession occurs but keep the owner invariably for ever.  We support them through that period and guide them into the future.  And manage those complex structures that are left behind after the business goes.

3. Lifestyle

It is a funny thing.  Imagine a new client working through a strategic plan with their spouse for the first time.  What is the role of the business?  What is the succession and exit strategy?  How can we build business value?  How much money do we need to retire with?  How does the family fit within this?  How hard do we need to work?

We ask the question “how many hours a week do you (the principal) work in the business”?  The business owner usually answers something like, 35 to 40.  Their spouse disagrees (vehemently)… “more like 80”!

How can this be?  How could two people perceive such huge differences?  This disconnect relates to their individual concepts of lifestyle.  One definition is clearly broader than the other.

We work hard to help business owners realise that the value of a business is generally stronger when the business is not dependant on the owner.  That enables the family to have more time together.  Better for both.