Whether it’s director fatigue, feeling trapped in your business or simply the time is right to go, many see the sale of their business as a key step in the process of their financial planning for retirement - the final task in preparing for the next stage of their journey and a leap towards the personal and financial freedom it may bring.
You may have spent years building up your business and now you may be starting to think about the many questions around the sale and beyond. For some, the sale of a business is an objective set many years before the disposal takes place, for others, a direct approach or a life-changing event may lead to an accelerated process. Whatever the timing of the decision, business owners have the opportunity to take steps to maximise the likelihood of a successful sale and improve the value obtained. Our Guide To Selling Your Business has some very useful tips on how to prepare for a sale.
We are often asked a number of questions by clients when they sell their business, such as:
As you would expect, the starting point is establishing a value on your business, then working out what the proceeds would be after tax, however, we also recognise that the sale of the business is not the whole picture.
To support our clients at Armstrong Watson, we have a number of specialist teams who can assist with all parts of this process, from our Corporate Finance Team, who can value a business, to our Tax Team, who go through what reliefs and allowances are available, such as making pension contributions and Business Asset Disposal Relief (formerly Entrepreneurs Relief). This currently allows the first £1m to have a Capital Gains Tax charge of 10%, or even Business Asset Rollover Relief, if applicable, before confirming what the value of the sale is after tax.
Once we can estimate the net proceeds of the sale, the next step is to find out if you can afford to retire or generate your desired income levels to maintain your lifestyle.
This is where our Financial Planning & Wealth Management team can support you. One way to do this is by creating a cashflow model and stress testing your finances based upon your income needs versus your outgoings.
The purpose of this exercise is to give you an indication of whether:
1. You can afford to retire completely, or
2. What actions need to be taken to put you in the right position to meet your objectives.
In both scenarios the stress testing will allow us to show how your finances/income levels could be impacted should we experience any market fluctuations.
Once you are in an informed position, we can then look to actively engage in the various ways to help invest your sale proceeds, should you wish to do so. First from a tax vehicle perspective, such as pensions, then ISAs, through to more specialist options such as Enterprise Investment Schemes and Venture Capital Trusts. As with any type of investing, each investment vehicle has its own tax advantages, reliefs or allowances, however, they come at different risks. It is therefore essential that you take advice on the most appropriate vehicle to meet both your needs and risk comfort levels, whilst also bearing in mind your overall tax position. This needs to be personalised to each client as a one size fits all approach does not work.
Once we have established the most appropriate tax vehicle, we will then look to implement a suitable investment strategy to meet both your immediate income needs, but also longer-term plans such as potentially funding school fees for children/grandchildren, moving house or passing assets down the generations, whilst again taking into account your risk comfort levels.
We will then continue to support clients by undertaking regular reviews of your circumstances to ensure that your portfolio continues to meet your longer-term goals and aspirations.
From pre-sale restructuring to advising vendors on the Earn Out period, from extracting non-business assets to the financial planning surrounding the investment of the proceeds, Armstrong Watson has the skills and experience to advise up to and beyond the completion of your sale.
Armstrong Watson’s Chartered Accountants and Chartered Independent Financial Advisers can advise on all aspects of business and financial planning needs tailored to each individual’s circumstance. Our expertise is under one roof allowing our Corporate Finance, Tax Advisers and Financial Planners to work alongside each other to ensure business owners get all the advice and support they need. Any advice given under our financial planning service is regulated by the Financial Conduct Authority.
This article featured in Insight, our quarterly financial planning and wealth management magazine. To read the latest issue or subscribe to future editions click here.