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Financial planning for an exit

The time preparing a business for sale and going through the sales process itself can be time consuming, exhilarating and hard work.  A lot of questions are asked of all parties involved in preparation of the asset exchanging hands. So much focus is rightly placed on this transaction but what of the circumstances for those exiting? As Chartered Financial Planners we are often called in to help business owners who have sold their businesses decide what to do with, what can be, life changing amounts of money. However, it can make all the difference, when selling a business, to have invested time in understanding personal objectives to be in the most informed position when negotiating a sale.


Time spent planning for the person, not just the business

One refrain that arises time and again from retired business owners is that they wish they had spent as much time on planning for themselves as they did for their business. The disposal of a business, particularly one where you have invested so much of yourself and your family, will bring about large personal changes. Some of these new  challenges can be as demanding as running a business and so should be planned for accordingly.

Other than the usual tax planning considerations, from a personal financial planning perspective, business owners need to try and take a step back and consider the following:

1)   What might their lives be like without the certainty and purpose that a business brings?

2)   Have they considered how their control over personal income levels might change?

3)   How sustainable will their new income be and how long would it need to last?

4)   How do you think your lifestyle requirements might change once you’ve adapted to living beyond the business?

5)   Selling the business might have broader implications for your family. When do you think the right time is to address these?

6)   Is now the right time to start putting a personal financial forecast and analysis plan together?


Cliff edge of retirement – what next?

Stepping away from a business can be daunting and takes time to adjust. One unexpected consequence that can happen is that life significantly shifts down a gear. After what can be a very intense period preparing a business for sale, undergoing thorough due diligence and robust negotiations, a business owner can suddenly be confronted with the looming question of “what next”? Realising significant value from a business brings fresh challenges other than potential inheritance tax issues.

Other questions often raised by clients include:

  • What happens to the business sale proceeds on early death following the sale?
  • How will loved ones be provided for and how much will they need?
  • How do I make sure the money goes to the right people at the right time?

By working with other fellow professionals, we can arrange certain legal structures to make sure that the proceeds on death go to the right people at the right time. Having this settled as part of your personal plan brings with it a great deal of certainty and comfort leaving you free to enjoy life.


Understanding ‘how much is enough’ can focus business sale negotiations

We will often encourage clients to hold off making any immediate investment decisions until such times that they have settled into their new lifestyle. Often a phased investment strategy can be more appropriate. The question of ‘how much is enough’ is often broached.  Having certainty as to how much you need may afford you flexibility in business sale negotiations. Planning early should give you clarity on helping shape this number.


Whatever the right questions are for you, they should be raised prior to any business sale

A well thought personal financial forecast and analysis plan should do far more than just provide numbers on a spreadsheet. Like anything built to stand the test of time it is the foundations that are important.  Asking the right,

and sometimes difficult, questions is crucial to building a credible plan that has real meaning for you.


Don’t leave planning for the future at the bottom of the priority list. Make sure that you, as a business owner, have a clear understanding of your flight path so that when retirement does take place you glide into the next stage of your life with no unforeseen headwinds.

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