Personal Finance for Owners
Separating personal and business money, and building wealth outside the business.
Notes from Randall Harper. Thirty years working alongside owner-operators, executives and boards — companies of all types and sizes — across entertainment & media, hospitality, service based business, lifestyle businesses, financial services, retail and not-for-profit, in Australia, Asia, the United Kingdom and the United States. What follows is the thinking I keep returning to.
The trap of all your wealth being inside the business
Most owner-operators build their wealth almost entirely inside the business — every spare dollar reinvested, every profit pulled back into growth. It is a natural instinct, and a dangerous one. A business is a single asset, exposed to industry, geography, and personal risk all at once. Diversifying wealth outside the business is one of the most important financial decisions an owner makes — and one of the most consistently deferred.
The clean separation
- Personal current account — receives your wage, pays your personal bills.
- Personal savings — receives a fixed percentage of every paycheck.
- Super — paid by the business, plus voluntary contributions where appropriate.
- Investment account — for shares, ETFs, or property outside the business.
- Tax holding account — for any personal tax you'll owe on owner distributions.
Pay yourself a real wage, then save from it
Treat your wage as if it were a normal salary. Save a fixed percentage — 10%, 15%, 20% — automatically, on the day it lands, before you have a chance to spend it. The owner who saves 10% of every wage for ten years is meaningfully wealthier, regardless of how the business performs, than the one who saves whatever is left over. There is rarely anything left over.
Super is the most underused tool
For most small business owners, super is one of the most tax-effective ways to build personal wealth. Voluntary contributions are deductible to the business and concessionally taxed inside super. An hour with a financial adviser to set up an appropriate contribution strategy — concessional, non-concessional, and possibly an SMSF if the situation warrants — is one of the highest-leverage personal finance conversations available.
The business is not your retirement plan, alone
Many owners assume the eventual sale of the business will fund retirement. Sometimes it does. Often it does not — businesses fail, sell for less than hoped, or sell at the wrong time. Building wealth outside the business means you are not dependent on a successful exit to retire. The business sale, when it happens, becomes a bonus rather than the foundation.
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The contents of this paper are the opinion of Clear Point Advisory only. Readers should rely on their own judgement and obtain professional advice appropriate to their circumstances.