Getting ahead of the curve: Why you should start thinking about wealth management before you sell your business

Business owners may occasionally indulge in imagining what life will be like after they sell their firm. The aspirations could be very specific or perhaps purposefully vague. They may revolve around material luxury or simply focus in on the greater freedom that financial security can provide. Every individual has different goals. But regardless of what that future looks like, planning for it early is vital.

The best time to start thinking about wealth management is before that wealth comes into your life. For business owners that can see an exit somewhere on the horizon, getting sensible advice on financial planning early will increase the chances of achieving their aims. After all, why leave things to chance when you have worked so hard to put yourself in a good position in the first place?

Financial planning takes in a variety of considerations. Early conversations should include areas such as investing, cashflow modelling, risk appetite, pension provisions and taxes. Then there are intentions around potential philanthropic ventures. Often when people have achieved success, they like to give back. Devising a plan for this early ensures the funds are used wisely.

Investing for the future

Investing is a central component of wealth management. When you receive a windfall from your business exit, putting that money to work through investing it smartly is likely to be high on the agenda. W1M’s advisers can guide you through the various options that are available to you.

Investors should always consider their risk appetite. Securities such as stocks and bonds have a wide variety of investment formats and levels of risk. You can invest in them individually or through an index, which is a group of securities. Assets such as commodities and private equity funds can also be considered. It is important to equip yourself with a good understanding of the attributes of different investment instruments before you push forward with setting up a portfolio.

Business owners can plan ahead by using cashflow modelling in advance of selling their firm. Cashflow models examine your assets and debt along with income and expenditure. Projections can then be created on your future finances. Mapping out these details early ensures that when it comes to selling up, you can focus fully on the transaction instead of fretting about personal issues such as mortgages or family finances.

Those that consult a wealth manager early can also gain a better view of their potential tax liabilities post-exit. The significant windfall that is likely to come your way from a sale is likely to change your tax status in a variety of ways and needs to be anticipated. Areas such as income tax, capital gains tax and inheritance tax can be discussed with an adviser and plans put in place to manage them effectively. Pension provisions also need to be considered. The sale of a business makes someone significantly wealthier, but ensuring you have an additional safety net for retirement is always a good idea.

What comes next?

Entrepreneurs by nature tend to enjoy building businesses and many will be thinking early about their next commercial venture. This is likely to add a further layer of complexity to someone’s personal finances and laying out the plans with a financial adviser could prove fruitful. Investigating the services offered by offshore financial centres may indicate that there are advantages both commercially and personally to more of a connection to overseas jurisdictions. And if you plan on expanding your property portfolio in other countries, expert advice will be necessary. Alternatively, a move into philanthropy may be next on the to-do list once a business sale has gone through. Charitable giving is often a passion, but planning ahead to make sure it is organised and affordable is sensible.

Financial planning is a key part of wealth management. Business owners expend a lot of effort planning for the success of their firm so putting an equal amount of time into planning their own financial future is a good idea. Getting started on this course as early as possible gives business owners the best possible chance of managing their wealth effectively.

At W1M, we take pride in supporting business owners throughout the life of their company and ensuring that their hard work pays off. When it comes to wealth management, it pays to be prepared.