Every business owner has a real-life number. It is everything behind the scenes, that you are working towards in your real life, things like your next house, next big investment, or your pension pot. This real-life number can and should be linked with everything that the business is working towards. It is the key to achieving the life you really want, both now and in the future.
But many business owners can find themselves controlled by their business. They become wrapped up in running the business and unable to focus on improving their lifestyle.
You see, for many business owners there can become a disconnect between the work that is being done in the business and the impact it can have on their lives. But the only way to achieve your real life number, is by looking inside the business and getting serious. One of the ways you can do this is by understanding how tax advice and consultancy can help you achieve your real-life number tax efficiently.
#1 Identify your real-life number
Sit down and take the time to really work out what you need to achieve. Chances are it’ll be more than you think and this might make you feel a bit uncomfortable. Those ‘You’ll never be able to achieve that” thoughts might start to creep in, but stick with it, keep going until you’ve got everything down. Don’t worry if you don’t know exact figures, make some estimates. Use the questions below to help draw out what you want.
Family
Are you married? Do you have children; if so, how old are they? Are your parents still around; if so, how old are they? Who is bringing in income; what is their job and how much do they earn?
Big life investments
What big life investments do you have planned? For example, do you intend to buy a bigger house, new cars, holiday home etc. How much money will your planned investments cost?
Family investments
What do you want for your kids? Nothing? School funded? University funded? First home? What amounts do these come to?
Protection Investments
How are you protecting yourself now and into the future? Things like insurance policies such as Medical, Life, Critical Illness, Income Protection, Key Person Insurance, Death in Service Insurance and so on.
Pension Investments
What are your plans pension wise? Are you planning to use a company pension, standard pensions, SIPP or SSAS? Do you want to generate more in order to take out more and fund a pension? How much would you like to fund each year?
Lifetime Investments
Outside of pension investments do you have a set amount you want to create – a disposable income wise to invest each year? What is that amount?
Lifestyle expenditure
What is your lifestyle generally like? Are you spending all the money you extract via salaries and dividends from the company on life expenses?
It looks likes like a lot of information but if you’re serious about achieving your real-life number and taking more value out of your business, this is what it takes.
#2 Identify where you are right now
This is really important for understanding your starting point. You’ve identified your destination in #1 above so in order to map out the journey you need to be clear on where you are right now, your starting point. Again this might also feel a bit uncomfortable if there is a big gap between where you are right now and where you need to be to achieve everything you want. But that’s ok, if it was easy everyone would be doing it, but trust me they’re not! Understanding your business performance is impacting your ability to achieve your real-life number.
Savings
What money have you got set aside already?
Investments
What investments do you already have? Do you already pay into a pension?
Insurance policies
What have you already got in place?
Business Performance
How is your business currently performing? How reliable and up to date is the information?
#3 Identify ways to make tax-efficiency savings
Work with your accountant to identify any tax saving opportunities. By gathering all the information beforehand on your real life number and where you are right now your accountant can take a holistic view of the potential opportunities to make tax savings. This means you can take extra money out of the business for you and your family right now as well as plans for the future. By putting the hard work in #1 and #2 you’ll get a much better outcome rather than putting yourself in a position that may save you tax one year but costs you more in the long run because other factors in your plans haven’t been considered.
It’s why we have launched a tax diagnostic review service for clients that will analyse their business and personal circumstances, to identify all the ways they can tax efficiently put things through the business, or take value out of the business, benefitting them, their family and even their employees.
If you want to get a better understanding of the tax position of your business, get your real-life number down, and get a plan in place, we can help you get you there.
Let us help build your future. Book a discovery call today and start your journey with us.