The cost of living crisis has affected millions of UK households but rising costs have caused severe headaches for businesses too.
As a business owner, you’ll have been juggling soaring overheads and competitive pricing while looking to cut costs and continue to provide yourself with an income.
If you’re worried about what 2024 will bring, keep reading for three top tips.
1. Revisit your business protection
After the challenges of the pandemic, the UK’s slow economic recovery coupled with the cost of living crisis likely made for a tough 2023. While cutting costs where you can is key, make 2024 the year you check in with your business protection and ensure you are covered.
Changes in personnel, business plans, or your circumstances might mean your provision needs revisiting. There are three main forms of business protection you’ll want to consider.
Key person protection
While teamwork is key to any business, you’ll also have several key players crucial to its successful running.
What would happen if one of these vital people passed away?
You might need to cover the cost of advertising and training a replacement or find you lose income if your former colleague’s clients leave. This is where key person protection comes in.
Essentially life insurance in the name of a key staff member, it will pay out in the case of their death. This should help to ensure your business continues to run smoothly at a difficult time.
Share protection
When a partner, colleague, or shareholder dies, their shares will likely pass to a member of their family.
Where the shareholding is large, this could affect the running of the company if the new shareholder has ideas that differ from yours.
One way to retain control over your business, and to ensure that non-founding members don’t get too large a say in how the business is run, consider share protection.
Again, this is life insurance paid on the death of a shareholder. You can then use this money to buy back the deceased’s shares, without having to scramble to find the capital. A share protection arrangement would mean each shareholder taking out cover equal to their share.
Loan protection
As its name suggests, loan protection can help to ensure you can still cover any loans your business has taken, if the death of a colleague would make repaying the debt difficult.
Business loan protection could even be used to cover all the business’s outstanding debt in the event of a colleague’s death.
2. Consider how to extract an income while dealing with rising costs
There are several ways you might have opted to take an income from your business but this can get trickier when markets are volatile and the outlook uncertain.
A salary is one option. You might be taking dividends. Another option might be to pay your future self through tax-efficient pension contributions.
At Fingerprint Financial Planning, we can help you navigate each of these, ensuring your business and personal financial plans stay on track and that you make the best use of the allowances and tax breaks available to you.
This might include maxing out your Dividend Allowance (set to drop again to just £500 in April 2024) and the tax relief you receive on pension contributions.
If you are taking a salary, this is likely to be a crucial part of your monthly household income so maintaining this will be key. We can help here too, giving you reassurance, confidence, and a sense of control.
This will leave you free to concentrate on the important job of running your business.
If rising costs are taking their toll, consider areas where you can afford to cut back or make changes, whether these are by training staff in energy efficiency or revisiting your supply chain to look for less costly alternatives.
3. Think about your exit strategy and succession plans
Whether you plan to sell your business in the future or you want to pass it on to the next generation on your death, having a plan in place is key.
If you are planning to sell, you’ll need to think about:
- How to make sure your business is sale-ready
- The price you’re willing to sell your business for
- The type of buyer you want and how to find the right one.
If you plan to keep your business in the family, meanwhile, you’ll need to consider whether:
- Your loved ones will want to continue running your business
- A chosen beneficiary has sufficient knowledge, skill, and training to take on greater responsibility
- You want to retain a stake or role in the company after you’ve passed it on.
In both cases, there’ll be an emotional toll to consider too. Owning a business for a long time can make it difficult to let go so it’s important to factor this into your planning.
Get in touch even if you’ve only just started thinking about taking the next big step.
Get in touch
If you would like help managing any aspect of your business in 2024, speak to us now. Get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
