Building a business is one thing. Building wealth is another.

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Speaker 1

Your entrepreneurial spirit is about to pay off, but are you ready for what happens next?

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Speaker 2

We are bespoke when we work with a founder or an entrepreneur because they all have different family situations, wants, needs.

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Speaker 3

What I find fascinating about them is just how creative they are. Their perception of risk really differs. I think where we can also add value at that stage is our network for those entrepreneurs to meet like-minded individuals.

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Speaker 2

We always say to clients, "Over-egg everything." So we start from a lower point and then everything that then happens can feel better.

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Speaker 1

Welcome to the power of good advice, a series built on a simple belief. Good advice shouldn't be kept behind closed doors. Everyone deserves to have clarity, to feel confident, to build a prosperous future and to unlock the good advice that can lead you there. I'm Katie Derham and I'm joined by two leading experts from Evelyn Partners, Head of Entrepreneurs Anne-Marie Atkins and Investment Management Partner Andrew Lewin. Hello to you both. If you're the kind of person who is full of ideas and passion and drive and wants to do things your way, this is an episode for you. Whether you're scaling up fast or exiting a business you've nurtured and now sold or anywhere in between, this episode is full of advice for entrepreneurs of all shapes and sizes. And I have to say, they're a particular breed, aren't they, entrepreneurs? I know a few quite well. My husband.

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Speaker 1

So, you know, we can be frank, we can be candid. Listen, Anne-Marie, tell us what kind of challenges and opportunities you see with these kind of clients.

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Speaker 2

Generally, the entrepreneurs that we deal with are very fast paced. They think creatively. They'll create structures at the outset that maybe aren't growing or moving with their business in the way that they might need or want it to. And they have little time to maybe spend with their trusted advisors to think about, should I change this? Is this going to impact me? What's happening over this trading year? Is it impacted by a tax year? There's so many things thrown at them that they don't often have the time to think strategically and carefully about how they might work with other people so they can get a better outcome longer term. So we see them want the very demanding. They're upbeat. They want, you know, they want answers now. They want fast results. But they also are really keen to make sure that they're maximising the growth opportunities that they're in touch with the right people. And they want to work with people that can provide that to them.

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Speaker 1

And are you finding that you're advising them on their business affairs as well as their personal financial affairs? Or do the two inevitably merge?

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Speaker 2

It's really important to understand that everything that you do through your business interlinks with what it is you're trying to achieve personally. So we look to apply the foresight to different actions and make sure that they're thinking about how they're transferring their business wealth into personal wealth over short, medium and long time frame. So we like to challenge them on what that means to them and how personal is it. And are they thinking differently? Are they working with the right people to make them think differently?

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Speaker 3

And that's really key. Just I'd say at the beginning of the early stages of their business as well, they might not have the right network to help support them along the way, which is certainly something that we have access to and can help them grow their business and help that transfer into their personal name along the natural.

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Speaker 1

It's a really interesting conundrum, isn't it? They might be all over the numbers of their business, but when it comes to their own personal setup at home and what's going to actually affect them long, long term, they might either not have the headspace or the interest or they need definitely need your help, I guess.

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Speaker 2

Yeah, I mean, I think it's knowledge. I think a lot of the time they're not thinking about the foundations of where they're starting from or they've done a low touch structure setup, if there's a partnership or how they've set their company up, if there's a shareholder agreement, what the articles say that are attached to their business. All of those things that you give a light touch to at the start. And then as things progress, actually, we talk about longer term plans, actually sometimes short term, what if your key person is not well? What if you're thinking that the exit of your business is in five years time and all of that value is going to help your family have this wonderful retirement or help your kids to education?

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Speaker 2

They don't think about the things that maybe could come in an impact on that or make that not work. So it's really important that we talk to those founders and help them understand if they have got these concerns or worries, what things that they can think about to put in place that could actually give them some comfort around that time sensibly. And if they aren't keen to think about those things, we're also like, great, well, we've talked about it. We're going to keep maybe touching base on it. We want to make sure they're understanding why they might discount a course of action as opposed to why they might take one. So it's very much an evolving plan that moves over time.

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Speaker 1

What kind of things are we talking about here? What kind of things are you talking about? When you say, you know, the sorts of things that could really impact their futures.

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Speaker 2

I'll give you a couple of examples. I've got a really good example where, you know, I've got a client who is on a scale up. It's going to be fantastic. And he's probably going to ramp up in the next three years and to a point where he would want to sell that business. He's a very key person to the integral part of the growth of that business. He's just got married, got a very young child and hasn't actually thought about, well, what if you got ill? What if you die prematurely? What would that mean for the business? What would that mean for his family? Hasn't looked at any forms of protection. You know, he'll ensure his mobile phone, but he won't think about how he's ensuring his income, how he's ensuring him being a fundamental integral part of the growth to that business or how he might be replaced if he's unwell. So scary things to think about, but really important. And we've seen it happen where somebody can take ill and it does impact then on the sale of a business or can actually stop the sale of a business at certain times. There's no cover in place or they haven't thought about it in the right way. The articles aren't kind. It can impact somebody. What someone's thought or plan is going to be can totally change.

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Speaker 1

I can see how very, very useful you are. My goodness. I mean, Andrew, we just heard Amary describe entrepreneurs as upbeat, demanding. What's your view? How do they differ from your other sort of clients?

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Speaker 3

Yeah, I'd agree with that. Demanding time poor as well. But I would say what I find fascinating about them is just how creative they are. And their perception of risk really differs as well.

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Speaker 1

I was going to say, I bet their risk profile is very different.

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Speaker 3

Yeah, absolutely. And within that entrepreneurs community as well, it varies. We've got clients who I think a lot of them feel as though that their business, they feel as though in actual fact, it's quite low risk because they are right at the cold face of that. They understand it completely. And so they know what's going on. Whereas what we can help out with and how we invest money, that might be a slightly alien world to them. And so they might see that as high risk. And we've got clients within that who say who have who might have liquidity outside of their business, who might say, listen, I've worked really hard to generate this money in the first place. Therefore, I want to protect it and not take any risk for this money going forward. Whereas other entrepreneurs say, well, actually, compared to a private business, which is scaling up and on a fast growth trajectory, investing it in in public markets, in the stock market, in actual fact, I can take as much risk as I want with that. So I think everyone is is very is different. And that's what I find so fascinating.

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Speaker 1

I mean, you must both meet some fascinating people. I mean, what kind of sectors are we talking about here? Can you give us any examples?

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Speaker 2

Well, tech clearly at the moment, it's huge, isn't it? But manufacturing,

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Speaker 2

automotive, telecom. There's so every sector, there's not any one sector that's same. There's no founder that's the same. Every founder is different because they all have different family situations, wants, needs. So we really we are bespoke when we work with a founder or an entrepreneur. We want to really ask them the questions, not just about the business, but their personal life, too. And then maybe bring that risk together in the middle so they understand the pros and cons of different courses of action. And they're all different, aren't they?

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Speaker 3

Yeah. Yeah. You know, the types of industries that that my entrepreneurs work in can vary from farming. I've got one that runs a family owned abattoir to a fintech business, which is expanding rapidly overseas as well. And so it's really across the spectrum. And that's the enjoyable part of it.

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Speaker 1

It's interesting what you were saying about people who've made their money and then, you know, advise them on what they're going to do with it. I mean, do you find that because of that basic sort of entrepreneurial nature, which has led them to this great success when they are exiting, that they then kind of almost can't help themselves? You know, what I might want to do again, I might want to invest in a in another potentially risky business afterwards.

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Speaker 3

Yeah, absolutely. And they will have their own community network. It's a very, you know, I feel as though that that a lot of business owners know each other as well. And so they will know other other companies, the management teams of those companies as well might want to invest into those. And we don't want to curtail that. We want to encourage that as well with those people who have been successful along the way. But it's a it's important to have the right planning in place to make sure you don't put all of your eggs into one basket, going into the new business again, making sure that there's enough to meet your your your family's long term needs as well.

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Speaker 1

I remember somebody once put it to me that entrepreneurs need to have a sandpit to play in. They need to have a little financial, you know, like pot that they can just do their entrepreneurial thing with, but then leave the rest safe and secure. I don't know. Does that sound familiar?

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Speaker 2

It doesn't mean the word that I tend to use with clients is let's make sure you've got a fund fund. Yes. And that we are careful with that fund fund as to if you're going to invest into other businesses, you're doing it correctly. So if you're going to make a lot of if you can make more growth, it's in the right environment. If you're going to create a loss that we're able to reclaim that loss. So there's lots of ways we want to make sure that they're thinking of these actions to be entrepreneurial to say, go and have your phone. But if there's a positive or negative attached to it, let's make sure that we might understand how that impacts a tax position going forward. So that's the exciting bit as well. And, you know, of all different ages, we see a lot of the youth that are coming through be really much more aggressive about wanting to invest into other businesses. They've got more capacity. They're using AI to do research that, you know, at the other end of the spectrum, sort of long term entrepreneurs, they're actually at the point where they're looking more preservation of capital succession planning. How do they pass on wealth to their family or maybe be more philanthropic? You know, how can they do more and give back? So there's quite a vast array. And I think making sure that they don't just go all in and make big decisions quickly at the point where they come into a, you know, when they've come to a transaction is to give them that flexibility so they can be agile, so they can make decisions freely without thinking that they might have to do something somewhere else. So we'd rather take that course of action softly and slowly to make sure that they've got choice and views.

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Speaker 1

And one thing I'm intrigued about, though, is again, having, you know, sort of, we've all read the stories in the papers. I've lived through some of this as well myself is, you know, when you're approaching an exit, things can get a bit heated, can't they? These big moments in a business's life,

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Speaker 1

the personalities involved, they're under a lot of stress. So how do you help them at that point?

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Speaker 2

Well, we see a lot of often if corporate finance are involved, you see a lot of the sort of transaction comes in and the blinkers come on. Often that can be too late to make choices or decisions that might actually have been better for you. So the sooner that you start to open your eyes, you know, two, three years before a transaction and start to be talking around what it is that you're thinking of doing and making sure that you've got the right D.D. and you're not pressurised at that future point, that's really important. It's so important. I think that when you get to a transaction and it's maybe we get introduced to people very near to a point where there's a transaction. And we know that there's not an opportunity to do something. We need to then make sure that we're thinking of the other things that we can do post transaction that's still going to help them or help what they want to do for them and their family. So like what? Investing a big lump sum, that kind of thing? That sounds sounds wonderful, doesn't it? Investing a big lump sum. But, you know, if taxes have a concern to them, if inheritance taxes have a concern to them, if they want to have other limited company structures, if they want to bring their children in or the family members, if they want to protect bloodline family wealth differently instead of making outright gifts, there's lots of things that we can do or introduce or discuss with them around what that might mean for them.

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Speaker 3

I think the key message that you probably hear throughout this conversation is to plan well in advance and to plan accordingly. And I think if you are in the midst of that transaction, as you say, as a as a as a founder, as an entrepreneur, you're so laser focused on that. If you've had the conversations beforehand about, well, what what's our what's the purpose of any sales proceeds afterwards? What do we wish to do with that money going forward? Then we they would have had that conversation with us of how that would look like, how that money should be structured. And it also helped those conversations help determine what the exit number should be. You should be aiming towards as well. And that makes your negotiations a lot easier, too, if you already know to say, I need X amount for us to for my family to to live our our best lifestyle going forward and to pass down to the generations. Well, then that makes the those discussions about about exit figures a lot easier for you.

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Speaker 1

Give us some examples of when things have gone really right, when things have gone really wrong, because I bet there's been some moments where people have you know, this suddenly the dream has happened. They've worked really hard for years and years and years. They've sold. They've got all this money. But I bet some mistakes have been made that I think useful to our viewers and listeners to hear about those.

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Speaker 3

Yeah, I think I look at businesses that have been really successful. So we've got we've got a client that works in the travel industry and that has been phenomenally successful. But then they've had to experience external hurdles along the way, such as a covid outbreak, which has massively affected the trajectory of that business. And they've had to sort of pivot accordingly and adjust accordingly. That's really tricky when you have those discussions about what's it mean for them personally? Well, it's about making sure that that that plans in place that, you know, whereas evaluation might be through the roof beforehand, might, you know, might have them be downgraded. And they need to might have a longer period before they can can exit. You know, we want to make sure that that plans in place and they can they can cater for that. So I think that's a sort of example of of when things not necessarily go wrong, but there's more there's more challenges along the way.

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Speaker 1

What pitfalls have you seen?

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Speaker 2

I mean, I've seen a couple recently where business founder thought his business was worth X after due diligence and a number of other things. It was worth Y. But he was so far down the path that he definitely wants to exit and had lots of fingers in lots of other pies. Interesting, you know, creative, possibly fun, fun, you know, lots of things like that. And he went through the transaction. There was lots of other things possibly that ended up coming out the woodwork that meant that he had less access to capital. He was having a house built that ended up costing twice as much as he's anticipated. He put some of his structures into things that we would call illiquid. Great opportunities long term, but he not left himself with enough liquidity.

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Speaker 2

And, you know, you've really got to almost act like I mean, I feel like his financial mom. I'm saying to him, no, please, you've got to not do that. You really need to make sure that you're holding enough back here so that you can conduct the life that you want. You know, you've got a certain lifestyle. We need to make sure that that's maintained because everything that you're doing over there is really risky. And it's not something that's going to give you flexibility. And that's really important. And often we'll use cash flow tools with clients. We'll use what if scenarios and we use catastrophe planning or what if the stock market drops or what if you invest why into another company structure and it fails? What could that mean for you? And we try and always sort of we always say to clients over everything. So we start from a lower point and then basically everything that then happens can feel better. Don't underestimate. Do it the other way around. We try and encourage them to do that. And I think from experience, we've seen that that does work. It is important to share our experience and give clients scenarios of, well, this is what happened over here. And you need to think like that. You actually need to have a really challenging conversation or directive conversation to say, I understand what you're thinking, but these are the things that could really catch you out. It's almost it's uncomfortable conversation sometimes to have. But we take a lot of pride in making sure I've highlighted the good, the bad, the ugly and it's important.

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Speaker 3

And I think that part of the conversation then dictates when there is money out of the out of the business, how much risk they should take investing that money going forward as well. Because what we want to make sure is that they don't take any unnecessary risks with the money that they've worked so hard to accumulate in the first place. And if they've gone through that financial forecasting in the first place, they've seen it all. They've seen that that, as you say, that that sort of scenario planning of what if the stock market far by 20 percent? What if you want to help the kids along the way of giving them some money for property deposits, et cetera, et cetera? If you want to buy that holiday home down in the south of France, who factor all of that in, will you still have enough money left over to live off? And how much risk should we take with that with that liquid money for you to achieve those financial goals as well?

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Speaker 1

Do you find that especially with the successful entrepreneurs that you must be dealing with a lot? I mean, is there a kind of I mean, I'm not asking you to sort of, you know, dish the dirt on anybody, but I mean, do you sometimes find that they think they know best?

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Speaker 2

Do you know, I think there are certain there are certain maybe entrepreneurs at first that definitely think like that. But if you if you've got the right relationship and you are trusted and you are really working towards a greater good, I actually think that they will come to, you know, they'll come to us and they'll seek, can I ask what you think of this? And that's built up over time. And I do think we have most of those relationships with our clients that very rarely do. I now feel that I've got an entrepreneur that would just be I think they're paying for us, aren't they? They're working with us. And the whole point is that we're all collectively bringing our experience together. So I do think they trust us to give them ideas and hopefully better outcomes.

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Speaker 3

I think some of it is an education piece. It's certainly on my side about investment management into the stock markets. It might not be something that they've done before previously because all of their wealth is tied up in their business.

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Speaker 3

So along the way, as their business grows, we want to make sure they they also get comfortable with with what we do. And so I'm not sure if that answers the question.

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Speaker 1

I guess it must be a question of trying to shift their mindset a bit.

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Speaker 3

That's it. Yeah, I think, you know, and I think that their mindset might might well be that they are wealth generators within their business and then post transaction, they might well then be custodians of their family capital going down generations. And that's quite a big mindset difference for them to change along the way as well.

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Speaker 1

It must be exciting to witness, though, that moment when one of your clients sort of twigs that they are moving into that next phase. And that they, you know, the dream, the fortune is about to come true, really, isn't it?

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Speaker 2

I think it's an interesting one that because I often don't think a lot of them remember to really enjoy it. It's absolutely amazing what they've achieved and the pressures that they've gone through that people, we're employees, aren't we? You know, we haven't seen that pain if they've had to cash things in to pay people the stress they've gone through, if they've got work members who aren't well, all of those things that are really, you know, they build up over time, don't they? I think sometimes they forget and then they come to this point and they've got all of these other decisions that they need to start thinking about. It can often be quite scary. And a lot of the time when we work with entrepreneurs, I think you also see you only get their attention for a span of time. They'll only give you a certain time on the focus whether I'm switched on and with you. This is what we're discussing now. So you've got to work at pace with them to make sure that you're not missing a trick, that you are helping them make good decisions, that you're opening their eyes to other things. And that's a fine art to get right. And it's something that I think comes with time because you can read people and then you have, you don't have the odd one that takes a long time to understand or be confident in what we're giving them as ideas. Once they've got that nailed down, they're really part of the team and it's I think they trust us implicitly. We form part of that collective group of people that they trust.

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Speaker 1

I mean, in making that transition from being just focused on the business and then being focused on what happens after the business, as you say, custodians of the family's wealth, makes me think, do you ever bring in other members of the family at that point? Yeah, asking for a friend to get their perspective on perhaps the psychology of the entrepreneur, on the sort of like the communal desires, if you like, of what that big, that big sort of windfall might mean.

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Speaker 2

I mean, I've got many clients who have got different age ranges of children, actually. You know, children are my age and they've come to a point where they've sold the business and these are grown adults, you know, of certain age. So they need education too. The sooner that we start to involve them in family discussions, sometimes it might be that they're going to pass the business on to their children or other family members. But often it's generally that's more rare nowadays, isn't it? You tend to see more that this capital value is coming to a number of different structures. There can be wider family groups, not just children. And we want to take them through the whole education piece of understanding the sort of, it's almost like a family charter, you know, because the founders view is the view that sort of leads through and feeds through all of the decisions that might then build into this financial plan. So the sooner they all understand what those are and then how that impacts them, we can start to think about bringing in grandchildren. It's really intergenerational planning. It's best when you can get everybody in a room, but your language has to change. Some of these people haven't been entrepreneurs. It's the first time they've been introduced to certain aspects of risk or things, you know, tax. So you've got to be really mindful about getting the right language and knowledge in a room and playing to your audience, really, making sure that you're giving them what they need in a language that they understand.

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Speaker 3

I'd agree with that. Yeah, I think as well from from my perspective,

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Speaker 3

as the money flows down the generations, their attitudes to investing, their attitudes to risk will completely change as well. They all have completely different needs compared to, say, the the ultimate wealth generator further up the further up the family tree. And as Anne-Marie says, it's down to us to cater and and communicate them accordingly. You've got to be a bit like a chameleon, really, in those in those meetings, you know, compared to speaking to the older generation, to the younger generation will be completely different conversations.

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Speaker 2

And there are elements of for older generations where they're fearful of, you know, the capital value being eroded or the children making poor decisions or they've really decided that they're in crypto and Bitcoin. And, you know, or they've lost a lot of money somewhere else, you know, so it's important that they start to understand what the family view is and how that's all built into a wider plan.

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Speaker 3

And I would just say, along that that that team of trusted advisers around that is also really important to act as that impartial voice that they might not listen to their parents or whatever it may be. But if you've got an adviser as well who is giving some guidance,

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Speaker 3

then then hopefully that that

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Speaker 1

will a neutral voice as well. From from an emotional perspective, I think in those conversations, I'm sure is really important. So for people watching or listening to this now, if there was just one piece of advice you wanted to give to an entrepreneur who's thinking, oh, hello, maybe I could do with a bit of this advice. What would your message be to them?

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Speaker 2

I always talk about structure and strategy. So are your structures fit for purpose? Are they moving with you? You should review those before you're starting to think of going down the pathway of transaction because you might miss absolutely gold opportunities to make changes that are going to benefit you and your family longer, longer term.

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Speaker 3

Yeah, I'd say it's never too early to have those initial conversations. Plan accordingly. If you approach if you were to approach us six months before a potential transaction, it's too late. You want to be having those conversations two, three years in advance, which then leads on to Anne-Marie's point of making sure those those structures are in place. And then afterwards to review on a regular basis as well, because we also understand that everybody's wants, desires, needs will will change post transaction as well. So you want to make sure you continue to review.

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Speaker 1

It's been fascinating, chef. Thank you so much. It's been great. And Andrew, Anne-Marie, lovely to have you here.

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Speaker 3

Thank you.

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Speaker 1

Thank you so much for joining me for today's conversation. And thank you to my guests, head of entrepreneurs, Anne-Marie Atkins and investment management partner, Andrew Lewin from Evelyn Partners. If you'd like personalized guidance or want to explore your own wealth management plans in more detail, then the team at Evelyn Partners are here to help. Just follow the link in the description below. Thank you for watching and goodbye.