Personal wealth and life after business

As business owners we focus on investing in business growth and improving the bottom line. Seldom do business owners focus on their personal wealth, their own bottom line and life after business.

When starting a business, it is typically with the vision of providing a better service, producing a better product or simply being able to work how and when you want. One of the advantages of running your own business is the ability to be able to build an asset. An asset that can be transferred to the next generation (your children) or an asset / legacy that will outlast you.

However, this desire and passion in building a business (not even an empire) often comes with sacrifices. If someone says to you that ‘running a business is a full-time job’, you know they have never run a business before. It requires much more of a commitment than that, often taking away time from your personal priorities.

  • Health
  • Physical
  • Family
  • Financial

With a focus on the personal financial area, let’s look at what is often neglected – profit investment.

To build and run a business, I often see the owner re-investing back into the business for future growth. It could be through new machinery, systems, staff, or premises. The idea being the more investment back into the business, the greater its turnover and growth potential. Ideally, if run well, the greater EBIT (fatter bottom line). Over time, this re-investment aims to increase the assets value for either sale and enjoyment of wealth, or a greater take home income to cover living expenses.

However, this comes with a risk as it shows poor diversification. If you established a portfolio, would you invest all available monies and free cashflow into CBA alone? Would you build up a substantial holding in the one stock? No, you would not (I hope) as what if the CBA share price plummets, or one bad press report closed the bank? The same goes for your own business and your own wealth.

Each year I would recommend reviewing your personal wealth accumulation and protection strategy. Just as you would review your business growth strategy. Investing in your own situation alongside the business shows smart diversification. You may want to look at:

  • Reviewing your superannuation structure and growth strategy e.g. contributions and use of an SMSF.
  • Borrowing to invest in shares or property.
  • The structure you have in place to tax effectively and build wealth over your personal and business journey
  • Personal insurances to cover you and your income if something were to happen to you (e.g. Passing away, becoming ill or totally and permanently disabled).

In life, as business owners we have two balance sheets, business and personal. Both require attention, guidance, support and a strategy. Both are not independent of one another. They rely on one another to be successful. As you continue growing your business, I would encourage you to review your personal wealth, your personal goals and objectives to assess whether you are on track to achieving the end goal you set out when starting your business.

This BLOG has been written and provided by trusted advisor and colleague, John Purl, Senior Advisor, Affinitas Capital.  John can be contacted on 0402 347 189  or via email