Business Owners - Why You Should Hire a Financial Planner Before and After the Sale of Your Business
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For most business owners, the sale of their business is likely to only happen once and typically this is part of their retirement plan.
The sale of a business can be extremely challenging and time-consuming. A business owner has to not only deal with preparing the business for sale but often has to do so whilst also maintaining the day-to-day running of the business. In addition, the business owner needs to navigate both the financial and emotional challenges of selling the business.
It is incredibly important that you have the right team around you, a team that you can trust to achieve a satisfactory exit. This team is likely to include your accountant, a corporate lawyer and a corporate finance specialist as well others as and when required.
Also on the team should be a trusted financial planner who can be involved both before and after the sale of the business.
Financial Planning Before the Sale
A financial planner can help you identify how much money you need in order to live the lifestyle you want following the sale of your business. Various scenarios can be built into your financial plan and it is likely to involve several iterations which is why is makes sense to start the planning process several years before the intended sale of the business.
You can then benchmark this number against the sale value of your business.
If there is a shortfall, it can help you to identify what needs to happen to improve the sale value of your business.
A financial planner, working with your accountant, can help you extract cash out of the business in a tax efficient manner, for example, by paying significant employer pension contributions where applicable. Trusts can also be set up where appropriate.
By knowing how much money you need to live the rest of your life, you are in a better position to know when to accept an offer for your business. Some business owners may hold out for a higher number which may never come. Also, the danger of holding out is that things can change quite quickly, for example, the economic or political landscape might change or a new technology could disrupt your industry.
Financial Planning After The Sale
Great news, you’ve just sold your business but now what? Hopefully, by having a financial plan in place you know that you are now financially independent and have enough money in order to live the rest of your life. Now is the time to re-visit your financial plan.
Many people who have just sold their business find that this is the trickiest time emotionally as they have now lost the one thing that gave them a purpose and an identity and that they have been intrinsically part of for the past 20 or 30 years or more. They may also be anxious at having a large amount of cash sitting in their bank account.
Having a trusted financial planner is therefore vital as now is the time to implement the long-term investment strategy. This is designed to achieve above inflation returns and to generate sufficient income to enable you to live your desired lifestyle.
The financial plan can also demonstrate that you can now afford to spend money on the things you want to do, for example, you can take that extended holiday, replace the company car and help the children on to the property ladder without compromising your future lifestyle.
Summary
As a business owner you are probably incredibly busy running your business and finding the time to engage with a financial planner is going to be difficult. However, the pay-off can be significant when the time comes to sell your business. Knowing your ‘number’ and how much you need to sell your business for to be financially comfortable for the rest of your life is extremely powerful when negotiating the sale of your business.
When the sale is complete, having a financial plan in place provides you with the peace of mind that your and your family’s lifestyle can be met whatever happens. The financial plan will provide clarity over what needs to happen next and prevent paralysis and leaving large sums in cash to be eaten away by inflation.
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If you want to start your financial planning journey, please do contact us.
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