This article is the first in a three-part series about your most significant investment, your business. This week we look at how having a business can give you access to tax-effective financial and business advice.
Let’s look at two people, Chris and Emma. They both own businesses making $100,000 profit a year and they have both saved $100,000 which they want to invest.
Chris goes to a financial adviser who is only allowed to provide advice on managed investments and direct shares. The adviser does a good job and identifies an investment which make Chris a 10% return each year. For this advice Chris pays his adviser $4,000. As it relates to a new investment, this fee is not tax deductible. Chris has to earn $6,349 (before tax) to pay the $4,000 fee.
Emma goes to a financial adviser that not only provides advice on managed investments and shares, but also focuses on business advice. When Emma meets the adviser, the main focus is her business. This discussion results in her changing her payment terms, charging interest on late payment of invoices, and areas that are holding the business back.
Let’s say these suggestions increase the business profit by $10,000 a year.
Once that is done, they also look at the $100,000 Emma has to invest. Her adviser makes the same recommendation that Chris’ adviser did. Add the $10,000 return on her investment with the $10,000 increase in business profit, and her overall return becomes $20,000.
Emma is charged $6,000 for her advice. Because 90% of the advice is focused on the business (and is tax deductible) Emma only has to earn about $200 more before tax to pay her fee. And this extra $200 has made her another $10,000.
If you have your business, it is vital that you spend some time working on it, not just in it. To discuss your business and see how it can be made even better, please contact Phil Harvey from Construct Wealth on 0417 034 252 or visit www.constructwealth.com.au
General Advice Warning
This advice may not be suitable to you because it contains general advice which does not take into consideration any of your personal circumstances. All strategies and information provided are general advice only.