7 Things Business Owners Should Consider After Selling Their Business
The process of selling a business can be all consuming and it can be very easy to overlook your personal finances during this time. However, once the sale has gone through what are the things you should consider? In this article we look at seven areas that you might want to take into account.
Take Some Time Out
As a business owner you would have experienced the highs and lows of running your business over many years. You may have started from scratch and in the early days you would have taken on all of the risks and responsibilities. Over time your business became part of your identity, after all, you were the leader that your employees turned to for direction and you were the person that acquired the clients or sold the products. Once the business is sold, however, that part of you is no longer there and for many business owners this can come as a real shock.
Taking some time out to reflect on what the next stage of life might look like is incredibly important and may help you identify a new purpose going forward. This may be retirement, a new business challenge or to pursue something you’ve always dreamed of doing.
Review Your Existing Financial Situation
It is important to take stock as to where you are financially. When your focus was on the business, you may have taken out a few pension policies along the way or you may have acquired pension benefits from before you started your business. You may have a few investment or savings plans and a few protection policies dotted around.
Now would be a good time to find out exactly what you have, how much they are worth, where they are invested and whether they remain fit-for-purpose.
Describe Your Ideal Lifestyle
Having sold your business, hopefully for a significant sum, now is the time to enjoy the fruits of your labour and to start living your ideal lifestyle. Does this involve buying a larger property or a second property somewhere overseas? Does your ideal lifestyle involve more travel, spending more time with the family or getting involved in charitable causes? Does it mean mentoring other entrepreneurs or working on projects that are of interest to you?
Taking the time to explore your desired lifestyle can help you determine whether you have the financial resources to live your dreams and do all of the things you want to do. Cash flow modelling is key and different scenarios can be modelled depending on your lifestyle goals. For example, can you afford to buy that holiday home or how much can you invest into a new business venture whilst still ensuring that your family remains financially comfortable?
Put in Place a Long-Term Investment Strategy
This is the implementation stage to help you achieve your desired lifestyle. This may involve designing an appropriate long-term investment strategy for the sale proceeds. This would ensure that you and your spouse utilise all available tax reliefs and ensure that tax is minimised where possible. If your plan is to retire, it is important to consider a decumulation strategy to ensure that you draw down a sufficient level of income to meet your lifestyle needs without depleting your overall capital.
Review Your Protection Needs
You may have sold your business for a significant sum, however, if you are still relatively young or have a young family, it is important to consider what would happen in the event of death or disability. This area is so often overlooked especially where most protection policies were set up through the business.
Estate Planning
Owning your business may have been great from an Inheritance Tax perspective, however, now it is sold and the cash is in your bank account, it may be sensible to consider putting in place a suitable estate planning strategy. There are a number of options to consider such as insurance, gifting into Trust or investing into Business Property Relief (BPR) qualifying investments. For those with significant sums a Family Investment Company or similar arrangement could be considered.
Any estate planning strategy should form part of the overall financial planning strategy.
Create a Team of Trusted Advisers
When you prepared the business for sale, you probably worked with an Accountant and Solicitor who advised you on ways to make the transaction as tax efficient as possible.
Similarly, following the sale of the business, you should create a team of trusted advisers. This should include a Lifestyle Financial Planner to help you identify and achieve your desired lifestyle. In addition you may want to appoint an Accountant to ensure that all tax is properly accounted for and a Solicitor to ensure that Wills are drafted in line with your wishes and regularly reviewed, Powers of Attorney are in place and Trusts, where applicable, are correctly set up.
Contact Us
Selling a business is a huge step and for many business owners it is the culmination of many years of hard work. Too often, the emphasis is on investing the money as quickly as possible without focusing on the bigger picture. Working with a Lifestyle Financial Planner can help you design your ideal lifestyle and achieve financial independence.
If you are a business owner looking to sell your business or have just sold your business, please do get in touch to discuss how we can help you achieve your ideal lifestyle.
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