With 44% of business owners drawing under £4,000 per month, and a further 5% drawing nothing from their business, many will fail to hit their longer-term objectives for themselves and their families.
A great exercise we do with business owners is to look in detail at their current ‘life costs’ and also what they want their future to look like. We recently went through this exercise with a client and were able to give them an exact figure of what they needed to be drawing from the business to meet their current costs and future goals for their family. It seems like such a simple exercise, but many people forget about all of their costs and end up drawing much less than they require.
Having that figure made it easy to translate that into the business and create a plan for what sales, revenue and profit they need in order to draw that amount. It also made it easy to set corresponding targets and KPIs for the business to monitor their performance against.
Going through this process also helped us determine how much they need to be saving to meet their retirement goals and the life they’d like for their children. We also used it to consider the what-ifs and made recommendations to protect their business and family.
If we gave them a figure without this process, the numbers wouldn’t have made sense. The initial estimate they had would have paid off their mortgage but nothing more. There was a significant shortfall that wouldn’t cover other living costs and the ongoing financial requirements of the family if the worst was to happen.
If you’re unsure how much you should be drawing from your business, please get in touch with us. We’d love to take you through this process to ensure you’re drawing enough for you, your family and your future.