Financial Advice for Selling Your Business

It is easy to feel overwhelmed by the thought of selling your business. There are so many things to consider at the same time. Things that you might not have had the opportunity to seriously review before.

We’re talking about much more than just the mechanics of the sale, though they are challenging enough. This is also about your future. At Amanda Redman Financial Planning we have been involved in a wide range of business sales in diverse industry sectors so we understand the many issues that you might face.

Experience tells us that every company exit is different, so we take time to understand your business and your needs, tailoring our process just for you. And if we can’t help directly, we can provide contact details of professionals who can. It may not be an easy decision to sell, but with our help, you will be able to move forward with more confidence.

Defining your future

Your sale will run much more smoothly if you are well prepared. And it is important not to leave it too late. It makes sense to start preparations years in advance. Through cashflow modelling, we can help to clarify your goals at different stages of the pre-sale, sale and post-sale process.

Years ahead of the sale – how much is enough?

We can help you to understand your ‘magic number’, the amount of capital you – and other shareholders – would require in order to retire or semi-retire. Knowing your magic number can help focus your thinking, as to whether you can retire sooner than expected or whether more work is needed to get your business sale ready.

Your magic number is usually based on the estimated valuation of your business, plus a plan of how much money you wish to spend each year after you have sold your company.

Our forecasts can help remove a lot of the uncertainty about your future financial security. For instance, we will use cash-flow modelling to calculate the monthly income you need to maintain your lifestyle in real terms for the rest of your life, and what you need to cover your expenditure goals. From this, we can work back to show the net sum you’ll need to achieve that.

Exiting a business is often a significant life transition. As you organise the business and its key assets for sale, we can be on hand to ensure that your finances are in great shape both during and after the sale. 

During selling negotiations

You’ve begun the selling process and identified a preferred buyer. At this stage, a second cashflow model might be necessary to reflect any conditions placed on the sale by the buyer, such as an earn out agreement or take advice from your accountant. It is also a good idea to review how pensions, savings and other assets impact on your forecast. As with all our cashflow forecasts, we will model various ‘what if?’ scenarios so we can explore all the options.

Pensions

We can advise you on making the best use of pension allowances, pre and post-sale. Making pension contributions via your limited company can be very tax-efficient and it’s worth considering how best to optimise this pre-sale.

Protection

Will existing life cover, offered through death-in service or relevant life policies, need to be replaced after the sale? For critical illness cover and private medical insurance, we will check whether the policies are transferable after the sale and that pre-existing health issues are still covered, so you and your family remain protected. If needed, we can source new insurance products, that are personal policies rather than company-funded.

Tax planning

We will consider any tax or trust structures related to your exit and factor these into our advice. You may have a significant Capital Gains Tax (CGT) liability on the sale, and in certain circumstances, you may qualify for Investors’ Relief from CGT on shares.

More relevant for most exiting business owners is the attractive Business Asset Disposal Relief (BADR), worth up to £100,000 for an individual or £200,000 for a husband-and-wife team.

It’s crucial to get advice and plan to make sure you qualify, as rules around these reliefs can be complex and technical. For example, you’ll be disqualified from BADR if the business isn’t a trading company or if you hold too many non-trading assets. But there are ways to remove non-trading assets from the business before the sale.

Amanda Redman Financial Planning is not a tax adviser or accountant so we can’t advise you on the structure of the sale or how to value your business, but we can provide contact details of professionals with the expertise to help.

Investment strategy 

As your sale crosses the finishing line, we can help to build a suitable investment strategy, drawing upon our expert analysis. We will always establish your goals and attitude to risk before making any investment recommendations. We will then be able to build a bespoke portfolio based on your personal circumstances, objectives and attitude to risk.

Building a legacy

After a sale you could find yourself with more than enough money to fulfil your own needs and ambitions. This opens the opportunity to pass on any surplus cash to younger members of your family. Grasping this opportunity and gifting money to relatives could have a transformative effect. It could help to both improve the financial position of your loved ones and reduce your estate for inheritance tax purposes. We can help you consider how to pass on proceeds of your business sale in the most tax efficient way possible. That includes the options of gifting money to children and grandchildren into a pension or an ISA and exploring the benefits of Business Relief.

If you are exploring a sale of your business or are already in negotiations and want to optimise your financial proceeds, please get in touch to arrange a no-obligation consultation.                                 

The value of an investment with St. James's Place may fall as well as rise.  You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time.  Tax relief is dependent on individual circumstances.

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