If you’re trying to sell a business in the UK, it helps to turn to experts to make the most of your sale. Alana Davidson, a chartered financial planner at Acumen Financial Planning, talks about the benefits of having a financial planner on your side.
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Selling or exiting a business can be one of the most significant financial transactions of your life, marked by complex financial decisions and emotional transitions. It’s a momentous event that not only marks the conclusion of your hard work but also represents a crucial transition into the next phase of your life.
To ensure a smooth and financially secure business exit, financial planning plays a key, neutral role and there are some straightforward steps that can be taken to increase its value and maximise any sale proceeds.
Five benefits of financial planning during a business exit
1. Clear financial goals
Financial planning helps you define and prioritise your personal and financial objectives for the future, whether it’s retirement, investments, estate planning, or philanthropy.
When considering the sale of a business consider what is important to you. Is your primary concern to maximise business sale proceeds? Are you concerned about existing customers and staff remaining loyal to the business once you have exited? Ideally, who would you want to be the new owner of your business? Furthermore, do any of these aspects matter to you?
You would have had a vision when building up your business, but now picture what a sale will mean to you and your life after exiting the business and then ask yourself some questions.
2. Having a clear roadmap
Consider your short-term needs, such as covering immediate expenses, and your long-term goals. Whatever is driving your intention to sell, it makes sense to have your business ready for sale, so that it can attract a buyer at the right price and at the right time.
Even if selling up is not an immediate priority, having it in good shape will mean that it can be sold at any time in the future, possibly when ill health or a sudden change in circumstance force you to sell up. Get rid of inefficiencies, unnecessary costs and make your business as profitable as it can be. Potential suitors want a profitable business.
The answers to these questions will give you an indication as to how any sale could be structured so you get the result you are looking for.
3. Tax optimisation
Efficient tax planning is essential when exiting a business because the UK has specific tax rules and allowances related to capital gains tax and inheritance tax.
Advice from a financial planner can help you explore tax-efficient strategies, such as capital gains deferral or investment options, to minimise the tax impact of your exit and maximise your after-tax returns.
4. Wealth preservation
Exiting a business will likely lead to a windfall of capital. A financial plan can help you preserve and grow this wealth over time, ensuring that it lasts throughout your retirement and beyond, allowing for a comfortable and secure lifestyle for your next chapter.
Estate planning could help you structure your assets and create a tax-efficient plan for your estate. This ensures that your wealth is passed on to your chosen beneficiaries according to your wishes while minimising inheritance tax where possible.
5. Risk mitigation
A well-thought-out financial plan assesses and mitigates potential risks associated with a business exit. These risks can include tax implications, market fluctuations, and unexpected financial liabilities. By addressing these issues in advance, you can protect your wealth and financial stability.
As you can see, financial planning is not an optional step but a critical part of a successful business exit.
By creating a comprehensive financial plan tailored to your own circumstances, you can navigate the complexities of an exit with confidence. It ensures that the proceeds from your business sale are put to work according to your goals, whether that’s securing your retirement, providing for your family, or leaving a lasting legacy and allowing you to focus on your post-exit endeavours, whether they involve new business ventures, travel, or spending quality time with loved ones.
For information on how to make the most of selling a business in the UK, visit Acumen Financial Planning’s website.
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The information in this article is correct at the time of publishing and should not be regarded as advice.
