I recently sat down with Jack O’Hern, partner at accountancy firm Wright Vigar and an accredited DBA Expert. The starting point of our discussion was personal finances for business owners – not usually a subject we broach at the DBA with our focus on the success of “the business” rather than the individuals who own it. But Jack’s message is clear: unless a business owner understands their personal needs and desires with regards to their business, then it will never truly be a success.
Although business and personal success are intertwined, when you boil it down, your business success can be judged on financial metrics, whereas for yourself you need a different set of metrics that don’t focus so much on money, but instead focus on the quality of your life.
“A financial advisor for a business owner shouldn’t look at the business first, they should look at the person,” says O’Hern. “The business should work for the person, not the other way round.”
The business owner (or owners) need to work out what they want from their business by answering three questions:
1. Why did you set up your business in the first place?
For design consultancy owners the words “independence” and “freedom” tend to feature heavily, both creatively and financially. Do you want double-digit growth every year, or do you just want to keep a roof over your head?
2. What do you want out of your business?
You should look at whether you are getting what you want out of the business both emotionally and financially. Does it give you security? A certain standard of living? Are you happy with what you do at work on a day-to-day basis; is it what you expected you would be doing when you set up the business?
3. What is the end game?
It’s important to know what you want to leave behind and how you want to leave. Are you interested in leaving a creative legacy, a thriving business that you have passed on in some form? Do you want early retirement and a life on the golf course, or do you want the opportunity to never retire but not have to deal with the stress of running a business?
Without truthful answers to these personal questions by all owners of the business it is difficult to successfully manage the business itself. They all impact on the financial decisions taken within the company.
In O’Hern’s experience, the most common reaction to these questions is a realisation that the owner’s original intentions on setting up a business have become lost under the morass of actually running it. That’s why you need to remember what you are trying to do – and then, more importantly, do something about it. This could mean firing that awkward client, investing in a big hire by bringing someone in to run the business thereby freeing up your time, or scaling back to a more manageable size so you can remain in control.
Life can impact on your work in so many ways, especially as we get older. From coping with poorly parents to putting kids through university – you need to make sure that work works for you, and that starts with financial management.