In today's episode we highlight key areas that every business owner should pay attention to if they want to leverage their business to grow wealth. If you're a business owner, make sure to tune in as you might learn a thing or two.
If you’re a business owner then listen up! Chances are you’re going to learn a thing or two that you may not have realised were available to you today. Most business owners would like to maximise their profits and enjoy a lifestyle that they might not have been able to if they continued working for somebody else. The benefits of being a business owner compared to an employee when it comes to building wealth are huge - and in today’s episode Kevin and Christian highlight 4 key areas that every business owner should be paying attention to if they want to leverage their business as part of their overall personal wealth plan.
Resources Mentioned In This Episode:
>> CLICK HERE to Download your FREE D.R.A.W Resources for Business Owners
>> WT67: Creating Assets Within Your Business w/ Daniel Priestley
>> Register for Free Access to the WealthBuilders Membership Site
https://www.wealthbuilders.co.uk/membership
>> Would you like to work with Kevin and Christian on your very own wealth plan? Find out more about WealthBuilders Academy
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Unknown Speaker 0:01 The purpose of wealth talk is to educate, inform and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
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Welcome to Episode 68 of wealth talk. My name is Cristian Rodwell, the membership director of wealth builders and I'm joined today by our founder Mr. Kevin Whelan. Chris Always a pleasure to be chatting to you and looking forward to this episode. Yep, Episode 68. Today and following on the theme from a couple of weeks ago when we invited the SAS director of wealth builders, Paul Brooks onto the show to talk about the six tax saving benefits that the relevant life insurance offers. And we mentioned in that episode about an acronym called draw. And so this episode we're going to focus completely on that and drawer is really the most tax efficient way to
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take profits from your business, Kevin. Yeah, I mean, if you would, it's kind of tying up a little with the episode with Daniel Priestley, you know, that good value episode with him, when he talked about the sort of
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the map of different types of business. And once you've identified the type of business you're trying to create, and for most people, I would suggest, Chris, and I'll also explain why the draw works, even if you're trying to sell your business for most business owners. The essence of being in business is to enjoy the work they do to create revenue from it, but to enjoy the lifestyle. And I think Daniel refers to it as a boutique type business, isn't it really, where you're, you're recognizing you're probably not going to get to the billions. You may not even get to the 10s of millions, but you can do well
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And certainly you could do better in most cases than a job. And if you do it well, you're creating the income on the terms that you want. Now putting aside today, we won't get too caught up in the problems of business owners, which is, obviously the fact that many business owners, when you think about the difference between a job and a business, Chris, in a job, you tend to do one thing, and the business takes care of many things. In a business, you can get caught up in a place where you can do many things. And they end up not doing all of them all that well. So we're not talking about that. We're talking about the business owners who end up being trapped in their business and simply get too caught up or just saying, you know, you've got two level of success. You've got some team members, you know, you've got a reasonable amount of flow. You've got some predictability, you know, you're established. That's really
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The draw is as best designed that so.
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So people who know what they're doing, you know, their business established, and they're thinking, well, what's the best way for me to draw money from my business because you got to take money out to enjoy the lifestyle. That's the whole concept. I like it. Okay, well, before we dive into draw, let me just quickly give a thanks. And a shout out to our latest reviews over the last couple of weeks. And on iTunes like to say thanks to Lubbers who've said I've been hugely impressed with the content and format of these podcasts with Kevin and Christian, incredibly informative and highly recommend. always packed with great advice. So thank you Lubbers for the iTunes review there. And number of new reviews on trustpilot as well this week, so Christiane, thank you, Andreas, and Sarah Whitehouse, Vicki chitter and Marty as well. So lots of lots of good reviews from our clients and members. Well, it's always gratifying Chris when the work that we do
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It's not just being received well by people kind of just consuming it, you know, but actually doing something with it. And that if it changes somebody's life in some small way, then we've done a great job. Right? Because that's, that's what we're about, you know, we're not trying to promote
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anything in particular, we're just trying to promote a concept of creating financial independence. And there's no better reason to do that. If you just see what's been happening in current circumstances where many business owners many job holders have been devastated by things outside of their control, and many of them will discover, to their horror and to their costs. They're not financially independent, and consequently, can be devastated by these things. So never more important to pay attention to the lessons to create, build and protect your wealth. Whether you resonate with wealth builders or not
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You know, just take some of the lessons and apply them in your life and get to that place where you're not relying on just one thing for your income or your lifestyle. Yeah. And obviously, one of the first things we do with our members is really take stock take off their existing assets, and very often we find that they're simply just not leveraging them to the extent that they could. And I think that's really what draw is about as well, isn't it? It's looking within the business and saying, well, there's actually many areas that perhaps business owners are just simply not aware of that they could be leveraging Far, far more. Well, exactly. Right, Chris, and as I said earlier on, the business owners always have a call on their time. That's more so than a job holder.
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But let's let's dive into draw so so you know, we love a good acronym at wealth builders, and this is another one of my acronyms. And the reason why it's relevant is because you know, we were in a kind of a lifestyle business and we love our life and we love the fact there's good revenue to be had
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But of course, whenever you're drawing that money, you've got to make decisions. And traditionally in a job, you don't have that decision making thing do you got a salary and you've got bonus, and maybe you can play around with some of the benefits in some sort of flexible benefit package with your employer. But generally speaking, that's about it. In a business, you've got complete flexibility. And what's brilliant about being a business also Chris's, the tax benefits are stacked to help business owners create more flexibility and more tax efficiency, and none more so than the D part of the draw package, which is the directors pension or the SAS. So talk about tax efficiency, Chris, when you can put money from your business, you shelter profits, so you don't pay tax on the profit. You get your corporation tax back. So you've got corporation tax relief.
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Any profits don't pay corporation tax, they don't pay capital gains tax. You're not paying anything.
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syntax. So you're building up in the directors pension or grow or SAS, which is the technical term. We've heard this many times in podcasts. It's obviously a big theme, Chris, because it's best kept secret, I think in, in the sort of business owner space, that methodology that allows the business owners to shelter that profit, and not just put it into a tax replace, but to get access to that money, and do some incredible things and build some incredible value, including, of course, the opportunity to buy property, the opportunity to generate further learning, the opportunity to own your own premises as well in business, you know, all sorts of different reasons that we've touched on many times. The directors pension is just one of the best tax planning tools around Chris. Okay. So, ah, and I think this is for relevant life, right? Yeah, the relevant life is really useful. We touched on
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Again, but it's worth just putting it into context, that when you've got a lifestyle business, then the chances are, the business is going to make you wealthy, the business isn't going to be sold for life changing sums of money, generally speaking. Now I said, I'll, I'll touch on at the end, Chris. So don't let me forget why the draw package is good, whatever type of business you're in. But for the most part, you know, the, the lifestyle business owner is never going to sell their business, they're either going to pass it on to the next generation, pass it on to the, you know, the employees or it will simply die when they die. You know, there's very rarely a focus on the acquisition.
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So So for that reason, you've got much more control about that. And the other reason that's relevant here is the fact that if, if the business itself won't, on its own, make you wealthy, you then have to build other assets.
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Module building those other assets, the purpose of the relevant live cover the tax free, live cover that light cover with all those benefits. Paul Brooks mentioned, you know, putting the creating a trust fund again,
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or completely tax free, it's interest for your family. It's ring fenced in separate from your business. And it can provide the family with basically a lump sum as if the business was sold. So it's like if you die and everybody, if you think about it, logically, Chris without being remotely negative here, every business is going to have an exit strategy, isn't it? Because we're all going to exit, you know,
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in the end, so if we know we're all going to exit our business, then why not have that relevant life cover in place. That gives the family lump sum payment, which in many cases, could well be combined with other assets that business owners can be encouraged to build. So they've got
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You know, lump sum from life cover a lump sum in their directors pension, build their assets, which we'll come on to in a minute. And then you're giving your future inheritors lifestyle that you would have wanted, had you sold the business, but you just chose never to do so. And of course, Paul did go into a lot of detail around those six different tax saving benefits in Episode 66. So certainly, if you haven't listened to that, click the link in today's show notes. And also, we've got a really good guide, which we'll put together as part of a draw package, and we'll share what that link is later on in this episode. Hmm. And was great to see that a lot of people were inquiring about that and saying, How come I didn't know that? You know, how come? My life insurance company didn't tell me about that? Well, it's the same life cover, you know, it's the same cover you're getting from the big insurance, it's just taxed differently paid for differently, with so many more additional benefits, so usually at 50% of the premium So, you know, and I think I mentioned
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Last time, if something's 50% off, then it either means you just saved a bunch of money that you can reinvest somewhere. Or you can get twice as much cover, which means you can really and genuinely provide, you know, maximum benefit for your family. So that's the R. Okay, so what is the A stands for Kevin? Well, the A stands for our favorite word, assets. And we know assets are the secret to building wealth, because, you know, the recurring income that flows from the ownership or control of assets, well managed, well maintained, well leveraged, all of those caveats is the essence of true wealth building. And of course, business owners can do that too, not least by kind of combining things so they can combine the value their directors pension, use that money to lend to themselves so they can create assets. As I've already mentioned, so many of our business owner clients are buying
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premises they're buying land, you know they're using property is a cornerstone of building wealth in addition to the business. So they're getting a rental income and becoming a business landlord, at the same time is running a business. So instead of seeing the money, going out to a third party, and building the wealth of a third party landlord to become a landlord themselves. So the key thing here is just by allowing business owners a little bit of time to start to put into their normal month you know, never let 30 days go by without doing something taking some action towards building your wealth. If we can create a little chink of light in the space of the business owners mind, we can help them create assets Chris, and this is the essence of the Seven Pillars of wealth, isn't it from understanding the leverage of their home and their pension Of course, which we've touched on many times, investing and property and
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Creating assets inside their business, which, you know, I guess I'll touch on very briefly and also mentioned Daniel again. And then creating intellectual property, which actually it's a great place for business owners, especially lifestyle business owners, Chris to create, because usually a lifestyle business owner is there sort of businesses wrapped around their persona. And because it's done that way, then it's more likely that they're creating that sense of authority, and then can create books and create memberships and create programs and create
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lots of lots and lots of partnerships in joint ventures. So there's connections and collaborations and endorsed mailings and a whole raft of activities. When you think about a business. In the wider context of what a business does. It's not really the manufacturer or the provider of goods or services, as most people would kind of contextualize their business. They kind of say that
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Wouldn't it? What business are you in while I'm in the kitchen business or I'm in the software business, or I'm in the lift business or whatever?
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The way I like to think about businesses, I'm solving a problem. And when you're solving a problem
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in the same way as I think we do an exercise, don't we, Chris, for our wealth building members, right to the beginning of life with this, which is the design of the their ideal, like our home, right. And, and we do that deliberately not because we want them to design their home, but doesn't hurt to do that, you know, the, what would be your ideal home? Where would it be? What would it look like? What will be the ingredients in there? What would be important to what about the land? What about the location, all of those brilliant things, but the key thing it gets our members to do is to recognize that they couldn't build that home on their own. And so it is with business, whatever solutions
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you're providing, there's probably other solution providers that do something with that client that you serve, either before they meet you, during the time they meet you, or after they meet you. And then you can create an elegant kind of horizontal line of connections and collaborations, where you find the best people in the field that Do you know, something that enhances what you do, or the client needs before they buy your service or the client needs after they buy your service. So when you start to think about these things, you can build collaborations all over the place, Chris, you know, connections to all sorts of things, I mean, and wealth builders. You know, obviously we do that with connections to mortgages or connections to wills or connections to live cover or connections to pensions or connections to tax experts or connections and connections to connections. So and that's because we know
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That when people are on their wealth building journey, they're going to need somebody else to provide something, some product, some service, some guidance that we know they absolutely need. And why wouldn't we want to try and seek out the best to create more value for our end user? I mean, it's just logical, isn't it? Yeah. ties into that word that we used in the episode Daniel about this ecosystem, doesn't it in a very good positive way of having an ecosystem not just assets, but you know, people and connections. Yeah, and I love that word. I think that that was probably the biggest takeaway for me from, from Daniel, which is, you know, having that ecosystem and when you think about the word ecosystem, it means, you know, system, you got to design it. It's one of the key points of our leverage, isn't it in the SI rst, the ES four systems. And so we love the idea of eco could be, you know, an economic system that supports other people that supports you
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And supports you and there's nothing wrong with with creating value for others out of integrity and getting a small amount of that value yourself either in terms of payment or in terms of an affiliate income or in terms of just synergy, you know, you send connections to somebody and somebody sends connections to you. I mean, life in business is built on these sorts of relationships. Okay, so that leaves us with the W. Kevin, here W is well being Chris and well being is an important context again, for business owners, not least as I've mentioned several times, the business of the business owner,
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often can mean they overlook things and we know this is true, right? So we know this is true. When we talk to people about their roof, you know, their, their wills, their trust, their powers of attorney, all that sort of stuff. That will mean we know from my story that, you know, my dad died without taking care of those things. And that's why, you know, I'm quite passionate to help other business owners not ignore these things.
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However, having said that, you know, the well being package is really trying to get business owners to take care of themselves. One is, and they can do so tax efficiency, one of those is getting a wellness check. And the business can pay for a wellness check. And it doesn't count as either benefiting kind
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or National Insurance Contributions. Now, let me explain benefit in Congress because it's important when you're an employee,
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and you get a benefit from your company that they pay for, then that has a tax value. And it's imputed, in other words, is a calculation done. And that's known as a benefit and can give you an example. So if you were to get a company car, then the value of the car and the benefit to you because you're driving it to and from work and presumably taking your family on trips and you're using it personally and so forth. And that's just one example a car then
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There's an imputed value called a benefiting kind or be ik tax on it. And all employees know this and it gets reported on a document called a p 11. d, which is just a sort of a supplementary bit of paper that goes to the taxman to say, Well, I earned this much in my job, but I got this value of benefits and kind and therefore I need to pay more tax. So if you can get a benefit, a personal benefit, and not pay benefit in kind tax, that's a good thing, right? It's the same as not paying tax on your pension or not paying tax on your life cover. Not paying tax on other benefits is good to know. And business owners are in this unique position where they can get these things if they know where to look if they can lift their head up for long enough to see that. So wellness check is one. You can also get payment if you happen to be ill and you need to get some treatment. To get back into business more quickly. You can get that covered with no benefit in cash.
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tax. There are many of these, Chris, there's there's probably too many to mention. But in terms of the well being, I'd say the other one would be, as we look at business owners, especially the lifestyle business owners, they will not often pay attention to what is their retirement plan going to look like? Especially if they don't sell their business, right. So where are their assets? What is the likely value coming from those assets? And of course, many business owners don't build many assets at all. They've just got their home their pension and, and, you know, a few investments as we know, so having a check, or a checkup once a year. With a qualified IFA can do a retirement and a cash flow analysis to help you understand well, where are you if you don't do anything else, that can be paid for up to 500 pounds and not benefit
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It is again free of benefiting contacts quiz. So in a sense, then you can kind of take care of your health, take a little bit of care of your wealth and a kind of a stocktaking kind of way. And both of those benefits can be paid for by the company, but attracting and therefore corporation tax receivable, but at the same time, don't incur you, as the receiver of the benefit, any taxable benefit at all. So you don't pay any additional tax. So I encourage everybody who's a business owner to do those two things, you know, get a health check, get a wealth check. And I know that we've got connections to Fes who provide that service, Chris, because often actually, you know, it's the wellness side of things, the health check, say on the finances, that will often reveal to the business owner. Oops, I think I ought to build some other assets, you know, or maybe
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need to think about how I could create, you know, something else in the business, you know, business assets.
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You know, and again, Daniel talked about creating assets inside the business didn't he? I know didn't cover that just a minute ago, we talked about assets outside of the business, but many assets can be created inside the business, you know, focus on recurring income inside the business, as well as outside of the business or you get the wellness check and you realize, you know, my retirement is not gonna look as strong as I wanted. Maybe then they, you know, focus a bit more on getting to the directors pension sorted, so that they can shelter some of their taxes and use that corporation tax relief to help build a very sizable next nest egg for the future. And and that's a good thing. And when you think about business owners also often, lifestyle business owners tend to be
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sometimes family businesses Chris like husband and wife or husband
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than in wife and children, then you've got lots of lifetime allowance that you can use. And you can build that more effectively with a director's pension than you can with a conventional pension because you've got lots of lifetime allowances you can play because you're putting them all in one pension scheme instead of just having one each. So you can see how all these things interact. They interact, interact, interact, bit like that ecosystem, you know, the interconnected parts that we know very well. And all we really want a business owner to do is lift their head up and say, you know, can we have a conversation and start that conversation? And usually they'll do so much better and get the taxman to pay for it. So most of most of the W there's one more w for fun, Chris I mentioned as well, if you don't mind.
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And that's the wheels, you know, so we know that company cars which I gave the example, for tax benefits and appeal MD benefits.
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You can now get an electric vehicle in Eevee. Short, and the Eevee value, certainly in this year is zero. So whatever price you pay for a car, electric car, then there's no benefit in kind tax at all. And that's never happened before. So they're just a timing consideration, as we know more and more pressure, certainly in the UK that all cars in the end will be electric. And as we phase out diesel and we phase out petrol, then these things will change. And, you know, I'm an early adopter of that, but doesn't matter if you are or whether you're not, but it's just a benefit that you can seek if it's relevant to you. Well, as a very powerful package, Kevin, and I like the simplicity of it as well. You know, people maybe think that wealth building is complicated, but you've showed there there really, it's very simple. If you know what to look out for. It is very simple. But I think you've got to really just create time. I mean, that's
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The thing for all business owners, Chris I've seen over the years, it's not that they lack any generally speaking, they've got good financial leverage. They've got good intellectual leverage. They they already used to connecting because they're in business. So they've got suppliers and they've got a bunch of different relationships or relationship leverage they've got, they've often got system leverage going on in their business. So the FA Rs, the thing they lack more than anything else, and I think it plays out time and time and time and time again, there's that word time. You know, they just don't have enough time to stop and consider themselves because they're considering their business more than themselves. And in some cases, so much more than themselves, that their own lifestyle is not what they wanted to be in their family. Often, you know, can be on the receiving end of that. So putting that point to one side, you know if we can get a business owner just to give a little bit of time
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Time, just a couple of hours a month, it's more than enough to create a wealth building plan that will give a business owner not just the ability to see past the business, but to see the value that the business can bring his lifestyle and to fuel a wealth building life beyond the business or as well as the business. And by the way, I did say I'd mentioned Chris, that even if somebody sells the business, there's no reason not to have a draw package.
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So let me just take a moment to explain that Chris, because quite important because I I've met business owners before. And so I don't want to do directors pension or to draw money out of the company myself, because it's going to leave the business with less profit. And then less profit means my business is sold for less that you can understand why they might think that right?
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Kind of makes economic sense of a less less profit means it's going to be worth less if I try and sell it right on. Here's the thing.
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Any acquirer of a business. And there are kind of
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the most valuable exit strategy from a business always an acquirer. Because an acquirer is the only way that you'll get a premium for your business, right? So, in other words, an acquirer will pay for the predictability of a good business. And because they wanted strategically, they'll pay more for it. They'll pay a lot more than your kids will pay if you sell it to your kids and a lot more than your employees will pay if you want your employees to run it, and a lot more than if you just die and leave the business just to wither on the vine, for no value. So an acquirer is always a great option. Now, an acquirer once you get into the head of an acquirer, Chris, they have a principle that is well known to the acquirer, but isn't often not known to the seller, which is something called sellers discretionary earnings and I call it the side
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earnings si D. But I call it that just because it's a nice acronym again, but sellers, independent discretionary earnings. That's my terminology. Now what the hell does that mean? Well, what it means is, if I'm an acquirer, and I'm looking at a business, Chris, say you're selling the business, and you show me, you've got a profit, please, let's make a million quid a profit just just because it's a nice round number. It doesn't actually matter what the number is. A business will always sell for some financial measure,
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and some valuation measure. So if it's a million quid profit might be two times profit or three times profit. Now we know that you get more value if you've got a recurring profit, but put that to one side. If you're just a normal business, million quid profit, and let's say you're selling for three times, but you've spent a million quid profit because you've been drawing money out the business. What the acquirer does, is simply says well look, if we have
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The business now, the current seller, or you in this example, Chris wouldn't be there anymore. So whatever you were drawing personally, into your pension from your relevant life cover, and through your well being package,
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they will just add it back and treat it as if it's an addition to profit. Because when you're gone, you're not there so you don't need it. So it's an add back, you see the point. So it actually shows an acquirer, you are smarter by drawing money out of your business, because you're covering the options. You're giving yourself a great benefit package, if you don't sell but it makes no difference to the selling price of the business if you do sell because they simply add it back with the sta or in my case, the SI D income. So that's the reason why every business owner should take some time.
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The perfect Dr. Ray w package the draw package, that we'd be delighted to help any business owner who recognizes this and send them a link Chris to just have a quote, have a conversation and create that little bit of time in their life to do something about it. Because you business owners out there, you know who you are, don't fall into the trap like my dad did. You know, don't ignore things, take care of things, take care of your family, and, you know, your wealth will be assured at the same time.
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So we've put all of this into a very easy to digest package online, so it's completely free. So you can go to wealth builders.co.uk forward slash draw Dr. A w very simple and find out about the directors pension, you can find out and download the relevant life guide, find out about the way that we teach our members to build assets across all seven pillars. And then of course, information around the well being as well. So wealth builders.co.uk forward slash draw
Unknown Speaker 31:00
And yeah go and enjoy that yeah one dangerous point oh Chris that's a lot right although it sounds simple you know directors pension relevant live build assets create well being oh no no no it sounds like too much time so that's why we just want you know a get get you guys to register to have a call so you can see through all this you know just grab a quick call you'll know what to do in the first 30 days just take care of you know, your your will or something then the next 30 days, just look at that the next 30 days look at that so you're doing something but you don't get yourself to an overwhelmed position within Well, I can't take care of this because I'm too busy in my business. And think as well who else do you know, that might enjoy the information that we've shared in today's episode and you know, just share the podcast with them and, and that would help us greatly and of course, if you've enjoyed it and haven't yet left a review, please please do tap on your podcasting app, whether that be iTunes or Spotify or wherever you are.
Unknown Speaker 32:00
enjoy listening to self talk. And if you have the option, please leave us a review and a rating we'd really, really appreciate that very much. So it is the way that that helps us, you know, keep the mission going, Chris, isn't it so the reviews kind of tell us that we're doing the right thing. While we've been what are we now? 68 now, so just over a year, I think, isn't it Really? Yeah and a half. So, you know, we're going to keep going as long as people keep telling us they like it and as long as the the readership or the listenership grows. And so please do tell somebody else. It makes a big difference to us. And we'd very much appreciate it. Yeah. So thanks for your time listening today. And Kevin, thank you as always, and we'll catch up on the next next episode of wolf talk. Until then, Chris, see ya.
Unknown Speaker 32:48
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders.
Unknown Speaker 33:00
Coto UK slash membership right now for free access. That's wealth builders don't co.uk slash membership