“De-risking business exposures to Chantelle and her partner meant ensuring that they would be adequately compensated should they be permanently or temporarily unable to work,” says Woodley.
“It also meant that their share of the business could be realised upon premature death, without placing additional financial pressure on the surviving partner.”
Phinney’s plan is to grow business revenue by at least 25 per cent year-on-year over the next six years and then exit the business. By this time, it will be a significantly bigger business, and she will reap a much larger sum than if she had exited earlier.
Meantime, Phinney will use increased earnings – which have effectively doubled – to fund myriad lifestyle expenses, including travel costs and private schooling, while also paying down the bank debt needed to buy out her partner.
“With EBIT multiples significantly lower than they were pre-GFC, Chantelle was able to buy out her partner for a third of the price we originally modelled for,” advises Woodley.
Revised modelling by Woodley projected the business growing in value to $4 million, with profit jumping to around $1 million, within six years.
“Based on these projections, Chantelle’s 66 per cent stake in the business will be worth something in the vicinity of $2.6 million,” says Woodley.
Future plans
As well as adequately providing for annual living expenses – including $15,000 in travel expenses, $14,000 in school fees and $32,000 in property rental – Phinney has already been able to use additional income to pay off 50 per cent of her original $200,000 bank loan.
Woodley says fast-tracking Phinney’s loan repayments is a much better deployment of surplus cash-flow than ramping up super at this point in time.
While Phinney still has plans to exit the business, she says additional revenue since buying out her partner has removed any need to do so until she’s absolutely ready. The plan is to wait until bank debt is completely paid off, and business valuations indicate it’s a good time to sell.
Once the business is sold, she plans to acquire an estate on the outskirts of Sydney (offering potential for B&B facilities), top-up her super and take a lower-paid, less demanding position.
“This will provide additional income, while freeing me up to spend even more time with Jacob,” says Phinney.
Unearthing the value
Had Woodley focused only on investing the proceeds from Phinney’s business sale, key non-financial considerations around whether she should have sold or not would have gone unanswered, Phinney says.
Even though her personal circumstances had changed, being forced to reassess why she went into business in the first place took her on a voyage of self-discovery, she says. It made her realise that the reason for starting this business was very much alive and kicking.
By taking Phinney to a different “head-space”, Woodley helped her to weed-out less viable solutions, which forced her to reassess what she needed to do differently.
Phinney says the decision to acquire more of the business equipped her with a badly needed road map to help achieve both financial and non-financial outcomes. This road map became particularly relevant to Phinney a year ago, when after paying down a substantial sum of the bank loan, she contemplated buying an investment property.
But after evaluating this option against the base plan, she instantly concluded that it would detract from the end game of being debt-free when she finally decides to exit the business.
“Having had ‘transactional’ exposure to professional planners before – who were only interested in technical financial management – what resonated with me about Vanessa was her interest in balancing this element with the more holistic ‘whole of life’ considerations,” says Phinney.
“Had she not done so, I would have significantly diluted my long-term wealth creation strategy by bailing out on the business far too early.”
In hindsight, Woodley says Phinney’s dilemma serves to illustrate why financial recommendations should only be provided once professional planners have a clear understanding of what is really important to clients.
“The Seantos™ process provided the framework to firstly uncover what was important to Chantelle, and then simulate the alternative scenarios to finally select the most appropriate strategy.”
THE PLANNER
Vanessa Woodley
A founding staff member of boutique dealer group, Sentinel Wealth Management, which was established in 2005, Woodley is a financial strategist with a Diploma of Financial Services (Financial Planning) and an Advanced Diploma of Financial Services (Financial Planning). She joined the financial services industry in 2002. Woodley has developed a series of workshops specifically designed for women and has been featured in numerous publications including the Sydney Morning Herald, Cosmopolitan Bride, and Latte Magazine. Working predominantly with high-income clients, she specialises in helping “accumulators” integrate financial planning with life-balance considerations.
“Rather than being the end-game, money is the tool that helps to facilitate that which is of primary importance to clients,” says Woodley.
Advice structure
Operating exclusively within a fee-for-service model, fees can be configured to reflect individual client preferences. Woodley says being remunerated directly by the client maximises her ability to provide impartial advice. Directly linked to the level of risk and complexity of the work undertaken, the firm’s four-tiered fee scale also reflects the frequency of advice requested. A proponent of values-based financial planning, Woodley and fellow planners within the firm encourage clients to make “whole-of-life” choices and not just short-term transactional financial decisions.
History
Not knowing how to sell her business or what to do with the proceeds, SME owner Chantelle Phinney was referred to financial planner Vanessa Woodley by a long-standing client back in 2008.
