Selling a business? Avoid these common mistakes…
17 December 2021
Speak to a Saltus expert...
Please fill in your details to arrange a financial review with one of our financial planning or investment experts.
How it works:
- We will call you back to find out more about your aims and requirements
- We will arrange a meeting with one of our team at a convenient time, either over the phone, on video, at your home or workplace, or at one of our offices
- You will be able to ask any questions you have and find out more about managing your wealth with Saltus
- Your review will be at our cost and there is no obligation to work with us afterwards
Who we work with:
- Individuals with £250,000 or more in investable assets. This includes pensions, ISAs, other tax-wrappers and cash available for investment.
You’ve spent years building your business, working towards an exit and now the time has finally come. Someone has made you an offer you can’t refuse… But, without fail, nearly every business owner that has been through a sale event would approach things differently if they were able to repeat it. So, I am sharing some of the most common mistakes made when selling a business, to ensure you’re financially prepared for sale.
1. Plan ahead
Most business owners calculate the potential sale price of their business by using a multiple of profits. There are a number of other questions you should ask in addition to this though:
- How much do you actually need to live on?
- Is it going to be enough?
- Could the figure be more than you’ll ever need?
If it is the latter, you can emphasise other standards that the purchaser needs to meet rather than solely focusing on price.
There are countless considerations prior to sale, which is why cashflow modelling ahead of the event can be extremely useful. It can offer a clear concept of the level of income the proceeds of a sale might provide and the impact that any other capital expenditures or gifts you want to make might have on your long-term plan. That can then influence your understanding of exactly how much you will require from the sale to meet your personal needs. This should significantly enhance your negotiating ground as you’ll know your bottom line and you will be operating from an informed position.
2. Be mindful of inheritance tax
Remember that the shares in your business may currently benefit from business relief but the sale proceeds will form part of your estate on sale. However, there are a number of options available if IHT is important to you. Harnessing the company pension effectively and structuring the business’s shares carefully prior to sale could be vital. All too commonly these adjustments are an afterthought, which results in many entrepreneurs unnecessarily missing out.
How much do you need to retire and more…
How much income do you need to be comfortable, how much do you need invested and how to pay less tax...
Meet your financial needs and objectives…
Speak to an expert3. Take time to work out what’s next
Most business owners seem to believe that, once they have sold their business, they’ll sail off into the sunset for forty years and enjoy life. Often though, ‘life after sale’ might come as a shock to the system. It’s going to require a significant mindset shift. For years, you’ve been working tirelessly towards something and now you’ll be drawing your money down. This is often an unwelcome reality but to enjoy your proceeds effectively this is something you may have accept.
It’s not just a financial mindset shift though – you will need to carefully consider what you’re going to spend your time doing after the sale. You’re likely a high energy individual who will want to ensure that the period after sale is liberating and enjoyable, rather than slightly disconcerting and lacklustre.
Successful entrepreneurs are also typically risk-takers. That’s usually why they’ve got to where they are and how they’ve reached a successful sale event. As a result, the first thing they often want to do is invest in another small, high-risk business. But remember, if you’ve sold (or are about to sell) your business, you’re the exception not the norm. Seventy businesses are formed every hour in the UK, but half of them will completely fail in the first five years and 99.6% will never make £10 million in turnover.
If you do want to get involved with small ventures (great!) avoid doing so with every penny you have. Ensure that at least 80% of your sale proceeds can provide for all of your spending requirements (until death) and entrust this to a professional. That way you’ll know the core of your money is in safe hands, so you can go and take as much risk as you like with the remaining 20%. If it goes wrong, it won’t materially impact your lifestyle.
So, if you’re about to sell your business, or have just sold it, don’t fall into these common traps and if you’re concerned, seek advice.
Article sources
Editorial policy
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Arrange a financial review...
Book a reviewSaltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
About Saltus?
Find out more about our award-winning wealth management services…
Finalist
Financial Advisory Firm of the Year
Finalist
Client Relationships Award
Winner
Financial Services, Banking and Insurance Firm of the Year
Finalist
Investment Performance Cautious Portfolios
Finalist
Best Medium Firm
Finalist
Investment Performance: Cautious Portfolios
Finalist
Investment Performance: Balanced Portfolios
Finalist
Financial Planning Firm of the Year: Small to Medium Firm
£3.1bn+
assets under management
19
years working with clients
200+
employees
98%
client retention rate
Discover more
Financial planning
Financial planning can help you reach your goals in life, whether you want to determine when you can retire comfortably, bring organisation to your financial world or pass on your wealth effectively.
Pensions and retirement planning
Deciding when to retire is a challenging decision and can feel like a leap of faith. At Saltus, we gather information on all of your existing assets and then use our technology and expertise to show you exactly how to achieve the retirement you’re after.
Reducing your tax burden
How to structure your wealth and access income should be approached in a sophisticated way. A detailed financial plan may use pensions, ISAs, general investment accounts, offshore bonds and other tax wrappers to ensure you can draw your money in a tax-efficient manner.
Consolidating your wealth
Holding multiple investment accounts and pensions can mean they’re hard to keep track of and administer. We’ll help you overcome this by consolidating your accounts into a single plan so that you can understand your financial position with ease.
Protecting you and your assets
We protect our cars and houses without much thought yet you might be the most valuable asset in your family. Whatever your situation, we can provide advice to ensure you have the right level of insurance in place to keep your finances protected.
Passing on your wealth
Estate planning is more important than just having a Will. We’ll work closely with you to understand how estate planning, which has emotional as well as financial consequences, can impact your overall financial plan.
Significant life events
Significant life events can present great opportunities but also considerable challenges. Whether you are going through a business sale, divorce or are receiving a lump sum, we’ll help build a financial plan to meet your changing lifestyle.
