Over the past 4 weeks we have published two blogs from one of our network partners, Seven Investment Management, on the importance of family business owners having a sound exit strategy. The third article in their ‘business exit’ series talks about the things you need to think about once you’re on the other side…
“If you’ve just sold a business, you’ve probably had a hectic time recently. You’ll have sat through many meetings with accountants and lawyers, and gone through the gruelling process of due diligence and negotiation. All on top of the day job of running the company.
And then it’s over. You’ve done really well out of the sale, and there’s excitement all round. But what happens next?
Your planning timeline
If you sell your business in your 50s or early 60s, then, as the actuaries can determine, you probably have 30 to 40 years of your life ahead. In our extensive experience of people who’ve sold their businesses or retired, this will involve three phases:
1. an active phase, possibly catching up with overdue travel and leisure, perhaps also doing some non-exec work or supporting start-ups
2. a more sedate phase in your 70s or 80s, as you cut down on work commitments and adventures, and potentially gifting to children or grandchildren
3. a less independent phase where you’re in need of long-term care.
Your post-sale financial plan should cater for each of these different phases, with enough flexibility to deal with whatever the future holds. We can model your income flow and requirements, and make a tax-efficient investment plan to meet your needs, whatever the future holds.
We can also help you provide for younger generations (if that’s what you want), and will review your planning regularly to deal with changes to your lifestyle, family situation and the wider tax environment.
The end of the road
As well as thinking about post-sale life, there’s the less attractive subject of death to put on the table. The current inheritance tax (IHT) threshold is £325,000 (£450,000 if you leave your main home to your children or grandchildren). If you’ve just released £30 million from selling a business, a 40% tax bill is going to be eye-watering. So it’s advisable to get specialist help on IHT planning as early as possible.
Back to the present
Returning to more cheerful subjects, we’d also advise a plan to make the most of post-sale life. To be frank, you can’t go from working 50–60 hours a week to doing nothing at all with your time – or not for very long, anyway.
It’s not just a question of having too much time on your hands, but how you define yourself. If you miss the status of running a successful company, you’ll probably need a range of hobbies, causes or new projects to get stuck into.
There’s clearly plenty to think about here – some of it financial, some of it around lifestyle. No two people or families are the same, so you need specialist advice from professionals who’ll listen to what you want next.
Like so much in financial planning, everyone’s individual circumstances are unique, and nothing in this article offers a complete prescription. To discuss your own circumstances give us a call on 020 3823 8678 to find out how we can help you.”