Part of the ‘Planning the business of life’ series of articles written for the owners and senior leaders of successful high growth UK businesses.
Why is it that the key directors in most businesses – CEOs and Managing Directors – spend the majority of their time carefully crafting a strategic plan for their businesses but most often spend very little time working on their own financial planning?
They typically spend an inordinate number of hours planning the future of the business and how value will ultimately be released and extracted through a trade sale, but neglect to think through how that same money will ultimately be spent when it becomes ‘theirs’.
I see comprehensive and detailed business plans and cash flow forecasts charting the course of the business for the next 5 years, but witness minimal planning when it comes to the CEO’s own personal finances and how personal resources might be allocated for the next twelve months or so.
Don’t high earning business owners need to budget and plan their own finances? I think it would be a massive mistake to assume that being a high earner equates to being financially well organised and being clear that personal wealth is being spent in a targeted and structured way. My experience would suggest quite the opposite.
I have been working with CEOs and business owners for over twenty-five years and what I have observed is that in almost every case there is a disconnect between a business leader’s appetite, enthusiasm and preparedness to plan the future of the business and the time, attention and energy that they devote to ensuring that their own cash flows are ‘on-track’.
Why is this?
Clearly such individuals have the skills to forecast, plan and carefully build a strategic business plan so why such a lack of personal financial planning?
I would say that the answer to this question boils down to three key factors – time, inclination and personality type.
Time – successful business owners are most often time poor. One commodity that they don’t have is a lot of spare time. They are results focused and there are simply no short cuts to building a great business – it takes hours and lots of them, which means that spare or non-work time is at a premium.
Inclination – after spending a week sweating over cells on an Excel spreadsheet and comparing ‘actuals to budget’, do business owners really want to spend their weekends and leisure time going through the same process with their own personal budgeting and cash flow planning? Typically not. It is the important task that they never quite get round to doing, rather like the lawyer who never manages to find the time to prepare his/her Will (we act for a few such clients!).
Personality type – excellent business leaders are typically good delegators. They work to their unique ability and farm out tasks where others can do it better, quicker and are often cheaper (when valuing management time). They therefore adopt the same perspective when it comes to the management of their own personal finances. They could do some of it themselves, but they would rather delegate this area to others, so this allows them to spend weekends doing the things that they most enjoy – family, sport, recreation and fun.
Barry Horner, CFP & Chartered Wealth Manager, works with those running high growth UK based businesses who wish to delegate the responsibility of the management of their own personal financial planning, to allow them to devote time to the things in life that are more important to them. Barry has over twenty-five years’ experience in advising such private clients.
RMT Ref 151/08.16/AF