Financial advice for business owners

Why is financial advice different for business owners?

Because of concentration. An employee's income and investments are separate things; a business owner's are the same thing. Where the business has a difficult year, income falls, the asset's value falls and the retirement plan weakens simultaneously. Diversification for a business owner is not a portfolio question, it is a structural one.

This is not an argument for owning less of a business. It is an observation that the ordinary advice about diversification is describing a situation business owners are not in. Growth is not diversification. It is the same bet, placed again.

The practical consequence is that building assets outside the business is not a distraction from growing it — it is the thing that makes the concentration survivable. Owners who have something outside the business also negotiate a sale from a considerably stronger position, because they are not dependent on the transaction proceeding.

How should I pay myself?

How money is taken out of a business affects tax, superannuation entitlement, borrowing capacity and insurance. Wages, director's fees, dividends, trust distributions and loans are all taxed differently, and drawing money as a loan from a company can create a deemed dividend under Division 7A where it is not documented and repaid correctly.

Three issues come up almost every time.

Superannuation is frequently skipped. Where an owner takes income other than as wages, superannuation guarantee may not be payable — which means nobody is making contributions unless the owner deliberately does. It is entirely common to meet an owner in their fifties with a substantial business and very little superannuation, having reinvested everything for twenty years. That is a defensible choice; it is much less defensible when it turns out to have been a default rather than a decision.

Borrowing capacity depends on how income is documented. Lenders assess what can be evidenced. An owner minimising declared income can find that a lending application two years later is the point at which the cost of that shows up.

Loans from the company need attention. Money taken out and left outstanding is a common and expensive oversight, and it compounds across years.

What is my business actually worth?

Usually less than the owner expects and more than the owner can prove. Value depends on how transferable the business is — whether it can operate without the owner, whether earnings are documented and recurring, and whether customer relationships belong to the business or to a person. A business that depends entirely on its owner is a job with goodwill attached.

We do not value businesses, and we deliberately publish no multiples on this page — they vary so widely by industry, size and quality of earnings that a general figure would mislead more readers than it helped.

What we do is work backwards from the number the plan requires. Where the plan requires a particular amount from the business, and the business is not currently capable of producing it on sale, that is worth knowing five years out rather than during due diligence. The gap between those two numbers is usually closeable. It is rarely closeable quickly.

When should I start planning my exit?

Earlier than most owners do — as a general rule, three to five years before the intended sale. The tax outcome on a sale depends heavily on how the business was structured years beforehand, and by the time heads of agreement are signed most of the available options have closed.

Exit is a structural process, not a transaction. Four things determine the outcome, and all four have long lead times.

Which entity owns what. Whether shares or assets are being sold, and which entity holds the goodwill, drives the tax result. Changing that at the point of sale is generally either impossible or expensive.

Whether the concessions are available. The small business CGT concessions can substantially change the outcome on the sale of an active business asset, and eligibility is tested at the time of sale against conditions influenced by decisions made years earlier.

Where the proceeds land. A large one-off sum arriving with no plan is one of the more expensive things that can happen to a successful exit. Contribution room, timing across financial years and the receiving entity all matter, and superannuation contribution caps mean this cannot be solved in a single year.

Whether the business can be sold at all. Buyers pay for transferable earnings. Making a business less dependent on its owner is the highest-return exit work available and it takes years.

One further point of timing is specific to right now: the capital gains tax rules change from 1 July 2027, and the treatment of a gain can depend on when it accrues. For any owner contemplating a sale near that date, sequencing has become a live question rather than an administrative one.

What happens if I can't work, or if my business partner dies?

Without an agreement in place, the surviving owner may find themselves in business with a deceased partner's estate, and the estate may find itself holding an unsaleable interest with no income. A buy-sell agreement sets out what happens and how the transfer is funded, usually through insurance, so that the outcome does not depend on both parties agreeing under the worst possible circumstances.

This is the largest unmanaged risk we encounter in owner-operated businesses, and it is unmanaged remarkably often — including in businesses with substantial value and long-standing partners who assume the arrangement is obvious.

The parts that need to exist together, and usually do not:

• A shareholder or partnership agreement setting out what triggers a transfer, how the interest is valued and who may buy it.
• Funding. An agreement that obliges a surviving owner to buy an interest they cannot afford is not protection. Insurance is the usual funding mechanism, and how it is owned affects the tax treatment of the proceeds.
• Alignment with the estate plan. A will that leaves a business interest to a family member, alongside an agreement obliging its sale to a co-owner, is a dispute waiting to happen.
• Key person cover for the business itself, which is a different question from cover for the owners personally.

Where a business has more than one owner and none of that exists, it is generally where we start — well before any optimisation of tax or investments.

Can my super fund own my business premises?

Potentially, yes. Business real property is one of the few assets a self-managed super fund may acquire from, and lease to, a related party where the relevant conditions are met. It is a genuine strategy for owner-occupied premises and it carries real trustee obligations.

Because the conditions are detailed and the consequences of breaching them are serious, the full treatment sits with our SMSF advice.

What do business owners most often get wrong?

Five patterns recur: everything reinvested and nothing built outside the business; no superannuation because it was never a deliberate decision; no buy-sell agreement; exit planning started once a buyer appeared; and the business treated as a retirement plan without anyone testing whether it can actually produce the required amount.

A sixth, less often named: the owner is the only person who understands the whole financial picture, and they are also the person with the least time to think about it. That is not a character flaw. It is the predictable result of running something.

How do you work with business owners?

We work alongside your accountant and solicitor rather than replacing them, and we hold the personal side of the picture — what the business needs to produce, when, and what happens to the owner if it does or does not. Fees are agreed with you before any work starts, with any life insurance commission disclosed in our Financial Services Guide.

Most owners already have good technical advisers. What is usually missing is a single view across the business, the personal balance sheet and the plan.