Forecasting future finances for business owners

Cashflow modelling, when used by an expert, can help business owners make important financial decisions.

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Forecasting future finances for business owners

In this event, Ann-Marie Atkins shows us how she uses cashflow modelling to help business owners by demonstrating a client scenario.

Businesses are a lot of work…

Business owners often spend a large majority of their time focusing on the needs of their company and personal finances can get pushed to the side – usually because they see their business as their retirement, as well as something they can pass on or realise at some point.

Selling or passing on your business are big moves that comes with a degree of uncertainty.

  • Should I be doing anything differently?
  • What could the future look like for me if I sell my business?
  • Could I bring the sale of the business forward, or might I need to push it back?
  • Will I need more or even less money than I’m aiming to have in future?
  • How might Inheritance Tax affect my loved ones?It can feel like an endless stream of questions.

But our financial planners use cashflow modelling to help business owners – at any stage of their journey – understand and visualise the impact of their decisions on future finances.

Client scenario

This business owner is still working long and stressful hours, even though he can see the end in sight. He wants to sell the business in the near future for £5 million as he feels he’d need that in future. His partner wants him to think about selling now to avoid more long hours spent at the business instead of enjoying what he’s worked hard for.

He has no debt, owns his own house, has money in ISAs and has a large amount of cash savings.

So, would £5 million leave them with enough money in the long run, or could it be leaving them with more money than they need or is practical? And is this an accurate expected sale value?

The solution: cashflow modelling

Ann-Marie goes through four different scenarios in detail, how they might pan out for this client, and takes into account the questions that could arise.

SCENARIO 1

He sells the business in 2023 for £5 million. Leaves the cash in a bank account and watches inflation’s effect.

SCENARIO 2

He sells the business for £5 million and, following financial planning advice, structures his finances tax-efficiently, uses all available allowances and invests his assets. What would the impact of 25% market crash post-sale with no recovery be?

SCENARIO 3

As a couple, could they make gifts to their children sooner rather than later? And what would be the best way to do this – outright gifts or trusts, for example? What is an affordable gift for the client? How will it affect Inheritance Tax?

SCENARIO 4

He sells the business sooner for £3 million. What are the implications for the couple’s finances with £2 million less from the sale than originally anticipated?

 

Cashflow modelling allows clients to see plenty of different scenarios played out and helps them to make more informed decisions towards a healthy financial future and retirement.

A summary note from the speakers

It’s really interesting to challenge clients and their view of their businesses, futures and finances, and make them think about how different scenarios could affect these things. In this case, it was great to see how the client could weigh up what was most important to him and his family and make a decision about his business based on a sensible assumption of his future.

Cashflow modelling helps clients to ask themselves: am I travelling in the right direction with my finances and what can I do about it if not?

For business owners, it helps them get the most out of the business they’ve worked so hard on, which is what everyone wants to see!

Speak to us

If after listening to our speakers you think cashflow modelling could help you and your business, or have any questions about the topic, we offer free initial consultations where you can speak to an adviser about your queries.

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  • Mike Francis (Host) Financial Planner and Director
  • Ann-Marie Atkins Managing Partner and Financial Planner

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