4 financial planning questions when selling your business

May 10th, 2011 by

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Dan Woodruff

Dan Woodruff

Certified Financial Planner & Chartered Wealth Manager at Woodruff Financial Planning
Financial Planning helps you to navigate and anticipate significant life changes. I want to help you to ensure your money is managed wisely to give you the financial security that will fund the future and lifestyle that is important to you.
Dan Woodruff

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Many business owners greet us with the refrain that ‘my business is my pension.’  This of course may be true, but in many cases, the business owner in question does not have any idea either how much the business is worth, or more importantly, how much it needs to be worth to achieve the lifestyle they want.

  1. How much is my business worth now?
    If you are a business owner, you may visit your accountant or business coach for advice on this issue.  They can help you to value the business in financial terms, although it must always be remembered that a business is only worth what someone else is prepared to pay for it.
  2. What options do I have?
    Selling the business might not be the only option on the table.  You should take to specialists advisers about other options such as family taking over or a management buy out.
  3. How do I sell my business?
    If you want to sell your business you will need to develop it into an asset that someone else might want to buy.  There are many ways to arrange this, but what is usually common is that it will take time to get your business into the shape to be sold.  In some cases, this can take up to 5 years of planning to arrange the deal.  You will need to make the proposition attractive to a buyer, and this involves many aspects such as getting the financial aspects right, and dealing with the staff in the right way.
  4. How much is enough?
    With some financial planning you can do a fundamental analysis, which should really be done in advance of preparing the business for sale.  We help clients to work out how much they need to sell their business for to achieve the future lifestyle they want, and never run out of money.  This will very much depend on your circumstances.The amount you actually need is more important than what is on offer
    For example, you might have been offered £1 million for your business shares.  This might sound good, but you can only be sure of taking the offer if you know that this will mean that after paying tax, you will have enough to live the lifestyle you want.  Is £1 million enough? Financial planning can help you to work out the figure you need before you begin negotiations.  If our analysis shows you that £2 million is needed then more work needs to be done on making the business more saleable (or you should look at other aspects such as increasing your income from the business).  If you need £500,000 then if you get that offer of £1 million then you can take it (provided you think that’s a fair offer).  Financial planning when selling a business is about entering into certainty in your negotiations.You should consider the different needs of your partners
    If you own a business with other people, the exit strategy will be determined by many factors.  for example, the shareholding directors could have different personal assets and be of different ages.  Therefore the funds you need to release will be different for each decision maker.  In practice this could cause conflicts where one director wants to move at a different pace to the other(s).Live your life while you can still enjoy it
    It is a fact of life that we are only moving in one direction (towards death), so we should always aim to make the most of our lives while we are still fit enough to do so.  If you can sell your business earlier rather than later, then you will be able to enjoy the proceeds to a greater extent.  It does not mean that you need to stop altogether, but at least you can plan to have options for your future based on financial independence, sure in the knowledge that you have enough never to run out of money.

To find out more about how financial planning can help when selling your business see our business sale case study.


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