Financial Planning for the Family in Business

Financial Planning for the Family in Business

Introduction

Family business advice has traditionally centred on two issues – estate planning and succession. These two planning areas alone however are far too limited for today’s family firm. Family businesses not only want to generate a healthy profit but also see the business as one for self-expression, innovation and the creation of a legacy.

It is a remarkable fact that family firms make up some 70 per cent of all businesses in the UK (Source: The Financial Times). So what makes them such an important segment of the market?

Family businesses are responsible for over half of the nation’s GDP, they employ over half the workforce in the private sector in the UK and they number amongst their ranks some of the biggest names in the business world.

Unfortunately they are often misunderstood and sometimes not well served by the professional community. The family business has long been viewed as just another ‘small to medium-sized enterprise’ (SME), when in fact they range in size and complexity. Due to the dynamics of the interface between the family and the business they have quite unique needs and issues that differentiate them from non-family businesses.

Anyone who says that family businesses are no different to other SMEs does not fully understand the dynamics of the family firm. Many family businesses discover that the family is the stumbling block. This can occur for many different reasons: unresolved personal conflicts, lack of trust, different family relationships or family demands on the business.

The study of family business is still relatively new. In the last few decades academic work began with consultants’ case descriptions of family firms developing models of organisational behaviour, strategy and finance. These observations, together with contributions from family therapists, lawyers, accountants and economists have begun to coalesce into working models for family businesses.

'Ask Sean'

Questions and Answers

Q. I am contemplating stepping down from my role as MD of our family business after 40 years and handing over the reins to my very capable daughter who is keen to take the helm. However, I am unsure if I have built up sufficient levels of capital independent of the business to see me through into my old age. Can you help?

A. Your concern is one common to the family business owner who has probably invested significant personal financial resources into the business often to the detriment of their own personal asset base.

What you need is your own financial/cash flow plan which will clearly demonstrate whether you have sufficient independent assets or not. If you determine that you are financially independent then this will put your mind at rest as you discuss succession issues with your daughter. If however you have a shortfall then it may be appropriate to continue to look to the business in some way for some additional financial support possibly by retaining a financial interest in the family business and taking a monthly dividend. A cash flow plan is critical however as the next step.

Sean Seccombe - CFP DipPFS

Senior Financial Planner

Sean has 20 years' experience working with clients and has a passion for helping them gain control of their finances, enabling them to pursue their life goals.

Sean is committed to ongoing professional development. He is a Certified Financial Planner, holds the Advanced Financial Planning Certificate and is currently working towards becoming a Chartered Financial Planner.

Sean is a senior member of the Financial Planning Team and is responsible for providing technical solutions to clients’ complex financial planning issues including retirement planning, investment planning and estate planning. Sean also has a management role within his team and takes pride in ensuring the best quality service is provided to his clients at all times.

Sean also specialises in working with family businesses and is the voice behind ‘Ask Sean’, the section on the Paradigm Norton family business website that allows those involved in a family business to ask financial planning questions.

Away from work, Sean has a young family and enjoys making the most of family life.