In many cases, exiting a business is the culmination of a lifetime’s work, so it is vital to get it right to ensure that you receive the maximum financial reward. It is also important to start planning early, as you can take more action and increase the chances of a successful transition.
To find out more about how financial planners can help entrepreneurs to sell their businesses, we sat down with Ann-Marie Atkins, a Chartered Financial Planner in our North West region, and two of her clients.
Frazer Bradley runs a Manchester-based business, supplying children’s clothing to high-end British stores while Andrew Murray sold his previous company and now specialises in refurbishing and building GP surgeries and pharmacies. Ann-Marie has been helping Frazer restructure the company so it will be ready for selling in the future and has advised Andrew on selling his previous business.
How can a financial planner help when exiting your business?
Ann-Marie: Building a solid financial planning structure can help you effectively and tax-efficiently transfer business wealth back into personal wealth. Your business is likely to be your biggest asset and you have probably invested not only your personal funds into the company but also your blood, sweat and tears, so the pressure to maximise the return is immense.
To formulate a plan, I consider where the client and their business are currently. This could be anywhere between building up the business to preparing for a future exit or at the exit stage itself. When I start to construct this plan, I make sure that my clients don’t miss out on their available tax allowances, such as pension carry forward.
I also restructure their income and dividends and ensure that they have used tax-efficient wrappers including ISAs. These can be overlooked or their long-term benefits can be misunderstood. It’s really important not to lose sight of them as many of these wrappers can help to create tax-efficient income in retirement. These are just a few of the numerous issues a good financial planner would consider.
Andrew: Before selling my business, I hadn’t received any professional financial planning advice, purely because everything I had was invested in my company. Ann-Marie looked at all the things we needed to do to get us ready and in the best position for when the sale went through. We started to make pension contributions, used available allowances and set up robust insurance policies. We also restructured the income strategy between myself and my wife to make the most of our income allowances before the exit. As soon as the exit happened, we were in the office with Ann-Marie and continued to work on my financial plan with the increased amount of capital available and the structuring of further investments to make sure they provided the level of income we needed to maintain our lifestyle and preserve the capital growth going forward.
Why did you choose Tilney?
Frazer: I chose to work with Tilney on my accountant’s recommendation who is a valued, trusted friend and professional who I have worked with since I started my business – I respect her opinion. She said that Ann-Marie was very good at what she does and recommended that I see her. That was good enough for me! I’ve got to know Ann-Marie and I like her. To me, that’s half the battle.
Andrew: I was introduced to Ann-Marie through a business colleague a few years ago. I met with two other advisers from different firms as well as Ann-Marie, but I really wanted to work with someone who just ‘got’ what we were trying to do. I got a sense with Ann-Marie that she had our best interests at heart so I decided that we would work with her and we’ve never looked back!
Frazer: The products and services offered by Tilney are great. This is helped in no small part by the likes of Stefan (Palenski, Director of Investment Management in Leeds), another very solid character. I feel comfortable with Stefan and Ann-Marie looking after my money.
Ann-Marie: We’re able to offer such a great service because we are used to working with entrepreneurs. We understand business structures and work closely with accountants to understand a client’s needs. To make a business exit successful for a client, we know that this is a joint effort between us, the accountant and other professionals involved. When we sit down together we can talk with confidence about the experiences we’ve had with clients and can instil this confidence in the clients themselves.
Andrew: This experience has been particularly key for me. One of the main things that Ann-Marie has done for me is talk me down in terms of my attitude to risk. Being an entrepreneur, my tolerance to risk is pretty high – I’m open to taking a higher level of risk on the basis of getting a higher level of return with the risk of losing a proportion, or even everything. Ann-Marie has helped me to see sense. I’m married with three children and putting everything at risk is not a particularly wise choice! The money I have invested has been spread across high and lower risk funds. This way, I have the security I need for my family, but at the same time, my appetite for some risk is satisfied.
Is it still important to receive advice even if a business is being passed on and not sold?
Ann-Marie: Absolutely. There are many ways to pass on wealth or shares in the business with the help of a financial planner and an accountant. The company structure can be altered to make sure there are long-term benefits for everyone involved and the business is protected from unforeseen circumstances.
If you have any questions about how we can help you exit your business, please speak to your usual Tilney contact or get in touch by calling 020 7189 2400, emailing firstname.lastname@example.org or request a call back.
We also have a guide to exiting your business for more information on converting your business wealth into personal wealth.
This article was previously published on Tilney prior to the launch of Evelyn Partners.