Case Studies

Take a look at these real-life examples of how we’ve helped business owners generate powerful financial results, both personally and professionally.

Preparing for retirement.

Graham contacted Sullivan Dewing for advice when he was looking for ways to provide his wife Helen with an income stream of $100,000 p.a. from his company. This would help fund her lifestyle and allow her to plan a comfortable retirement.

The company had plenty of franking credits available to pay dividends to shareholders. However, because Helen wasn’t a shareholder, she wasn’t entitled to any dividend benefits. Graham was also in the top marginal tax bracket, which means if he received a dividend of $100,000 and gave it to Helen, he would need to pay $23,571 in tax on this transaction.

To help Graham and Helen achieve their financial goals, we restructured the shareholding ownership of the company, which allowed Helen to acquire shares and receive dividends. We also avoided any exposure to Capital Gains tax in the process.

Helen received a dividend of $100,000 p.a. that was disclosed in her tax return. The tax payable on this dividend (after allowing for imputation credit) was $4,278. This was a saving of $19,293 that would have been payable if Graham didn’t seek our advice on restructuring the shareholder ownership of his company.

To make the most of her dividends, Helen contributed $50,000 into superannuation, which allowed her to receive a tax refund of $16,472. Altogether, Graham and Helen enjoyed a tax saving of $41,043! Importantly, Helen still had $42,500 in her superannuation fund after the 15 percent super fund tax. As Helen will be 60 in five years, she’ll receive the benefit plus accumulated earnings tax-free, to provide her with a comfortable lifestyle when she retires.

Increasing the re-sale value of a business

Mary met with the Sullivan Dewing team when she was considering selling her business. It was clear that the business wouldn’t sell at its true value, as sales revenue was too low and Mary was struggling to retain business profitability.

In fact, it turned out the real reason that Mary wanted to sell her business was that it wasn’t operating at it’s full potential. The business enjoyed a niche market with few competitors and had a loyal customer base—yet it was still losing profits.

When we reviewed the businesses results, we asked Mary an important question: ‘When was the last time you put up your prices?’ Her answer almost knocked us over: ‘I haven’t put up the prices since I bought the business three years ago,’ she said. We discovered that the prices had not been increased for seven years. Naturally, the businesses costs had risen substantially in that time, so we recommended that Mary increase her prices immediately by 23 percent.

It was a great move! Business revenue grew by $41,170 without any additional costs. Most customers accepted the price increase and those that moved on were replaced by more profitable customers who understood the value of the service. Mary was so thrilled with the results that she decided not to sell the business after all. If she decides to sell, it will be worth $164,680 more and have a healthy balance sheet to entice buyers. Along with other recommendations, we suggested that Mary review her prices on an annual basis, to ensure she is not under-valuing her services.

Turning debt into opportunity

A lovely young couple walked into Sullivan Dewing and asked for help building their business. After taking a quick look at where their assets and debts were sitting, we knew they needed it!

They had an interest-only home loan; an investment property home loan (principal and interest); a loan of $60,000 from their personal savings to start the business; and $80,000 cash sitting in their business bank account. As a result, their home loan balance wasn’t reducing at all, while valuable funds were being used to repay the deductible investment property loan. Meanwhile, there were no tax deductions being claimed for the interest on the business loan.

To put the couple in a stronger financial position, we made the following recommendations:
  • Repay the $60,000 loan to the business owner and put it directly onto the home loan
  • Refinance the home loan to principal and interest, so every payment will reduce the balance
  • Refinance the investment property loan to interest only, so that every payment is tax-deductible
  • Ensure any future business loans are in the form of a bank loan or overdraft

These simple changes allowed the business owners to grow their wealth effectively. They were delighted with the results and wondered why no one had ever told them to make these changes before. And we hadn’t even looked at how we could build their business yet!

Getting the most from an executive team

We were approached by a local family business that had never held regular business meetings and wanted to get the most out of their board and shareholders.

First, the Sullivan Dewing team developed an Annual Profit Plan, so the business owners and board knew how much profit the business needed to make for the year. A Key Performance Indicator (KPI) monitoring system was also put into place. Monthly board meetings were formed, attended by family shareholders and key employees and managed by Sullivan Dewing as external advisors. Each month, the internal accountant prepared the necessary reports to present to the board. A standing agenda ensured that each meeting was run at peak efficiency, with all agenda items covered.

The strategic focus on gross margin and profits with generous profit targets allowed the family business to enjoy its best year ever. The business owners told us the key benefits gained from running a board meeting with external advisors were strategic direction, clarity of purpose and attention to detail.

Reducing tax and boosting profits

This business had been established with one shareholder owning a minimal amount of shares. Unfortunately, this did not give the business owner any opportunity for tax planning or the ability to minimise Capital Gains Tax if the business was sold in the future.

This problem was solved with a simple share restructure. We were able to share business profits amongst all family members, utilising their individual tax-free thresholds. By accessing the business franking credits, we were able to produce excellent tax refunds for the individuals involved, reversing the trend of paying additional tax each year. During this process, we also restructured the business owner’s salary, to increase the amount he took home each week while saving on workers compensation and payroll tax. We also worked with the business owner to set profit targets for the year and monitored the business each month to make sure he achieved these goals.

Although the business owner wants to keep the increased value of these changes under wraps, rest assured that he was amazed at the positive effect of such simple changes to his business structure.

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