Clearing the final hurdle: Astute business owners look up before they sell up

By London & Capital | 25 Nov, 2022

Entrepreneurs tend to be both driven and highly organised. A strong work ethic and a commitment to planning are traits often found in those that strive to build a successful business. The ability to think ahead will always provide an entrepreneur with a competitive advantage over rivals and ensure a healthy future for their firm.

But planning is just as vital when it comes to life after the firm. The goal of building a company is often to at some point sell it and reap the rewards. A lifetime of graft should eventually pay off. Ensuring that post-exit life is just as successful as pre-exit life means that a commitment to planning should be applied equally to both.

The best time to start planning for life after an exit is long before it happens.

If an entrepreneur waits until the proceeds of the sale hit the bank account before thinking about how to deploy them, problems may follow. Building and selling a business is a proud achievement, but subsequent outgoings can quickly erode a windfall and some former business owners may be forced into the unenviable situation of having to return to work. This scenario is not difficult to predict considering a staggering 92% of high-net-worth individuals underestimate how much money they need for retirement.

London & Capital advisers are well-placed to advise on how to ensure your personal financial planning is handled as professionally as your business exit. There are a number of factors to think about when planning for your post-exit life and it is prudent to consider them earlier rather than later.

Cashflow modelling is an important tool for anyone who has a financial windfall.

The model will take an umbrella view of your finances, examining your income and expenditure along with your assets and debt. This analysis will then allow for projections to be made on the state of your finances going forward. Models can act as a strong guide, but it is important to factor in any changes in circumstance and regular updates to the model can ensure predictions are as accurate as possible. A robust cashflow model can lead to peace of mind in later life and therefore a happier retirement.

Arming yourself with a view of the big picture then allows you to focus on deploying your hard-earned wealth in a manner that suits you. A diversified and well-protected investment portfolio is a great way of ensuring your money works hard for you. Your London & Capital adviser can ensure any investments are managed professionally and with your priorities in mind.

Changes in tax status can often be underestimated by those with a fresh injection of wealth so it important to understand how your newfound affluence affects your liability. The more complex your personal finances become, the more vital it will be to receive reliable tax advice. Areas such as capital gains, investment income and inheritance need to be considered carefully so you are as tax efficient as possible. An examination of your existing pension contributions and whether you want to continue building that fund is also advisable.

For those with children, private schooling from the early years through to university can represent a significant cost. Tuition fees are just one part of funding education. The costs can be far higher than expected when expenses such as living allowances and extra-curricular activities are factored in. For those with more than one child, these expenses will multiply accordingly and could spiral out of control if adequate attention is not paid to them.

Business owners that suddenly find themselves with more spare time may be attracted to the philanthropic sector. Charitable giving or the establishment of an organisation to support a cause close to your heart is a worthwhile and enjoyable way to spend your post-exit time, but the financial implications of this activity also need to be considered carefully. Devising a budget and understanding the tax implications of your philanthropy are important and something that your financial adviser can assist with.

At London & Capital, we aim to make sure business owners can enjoy the benefits of their hard work by planning early for their financial future.

To get in contact with London & Capital, please give us a call on +44 (0) 207 396 3388 or click here.

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