Baby boomers make up the majority of private business owners and research shows 76%* hope to exit their businesses in the next decade. UBS have created a three-step guide for entrepreneurs who want to plan the next chapter of their lives.
With the day-to-day running of your business, it can be a challenge to find time to consider what comes next. In spare moments, you may be dreaming about retirement, travelling the world, spending more time with family, or even starting a new venture. Putting a plan in place can give you a real sense of excitement for your next chapter, as well as preparing your team for theirs.
After all the time, love and attention you have devoted to your business, you want to feel certain that everything has been taken care of when you leave so that your business will continue to grow and thrive when you sell it. To get to this point, it's important first to prioritise and understand what you need to know.
To help you get there, UBS have created a helpful guide on how to sell your business and what to consider before, during and after the sale. A brief overview is below and the full guide is available to download for future reference as you navigate your new chapter.
Forewarned is forearmed
Knowing the kinds of challenges entrepreneurs commonly overcome in this journey provides a great starting point for the planning process:
Get clear on what you want
As two of these challenges are around clarity, carving out some dedicated time to focus on what matters most to you is really important so that you can identify the outcomes you want. Your next holiday away from your business could provide the time and distance to do this.
Five simple questions can get the ball rolling:
These may not be easy questions for you to answer at first glance and it's likely your priorities have changed over your life. Starting to ask these questions of yourself and noting any thoughts as they emerge over the following days and weeks will give you a sense of your priorities for your next chapter.
Starting this reflective process also gives you the opportunity to open up discussions with others who could be affected - your family members or key employees, for example.
The information that emerges from this process is invaluable for effectively managing your assets pre-sale, structuring the sale optimally and developing a strategy for the proceeds from it. You'll be better prepared for meeting with advisors when you have clear outcomes you're working towards.
With a clear vision of what you would like for the future, it's time to consider the details in more depth. Trusted advisors can help you navigate the various stages of selling your business and make decisions as they arise.
One of the first points to clarify will be the timeframe you can expect to work towards. This will depend on calculating the expected value of your business and whether the proceeds from selling your business will allow you and your family to live the lifestyle you want in the future. It's a bit technical, but extraordinarily clarifying.
Once you calculate this, you will understand when you can expect to sell your business and any steps you may need to take.
If the expected transaction value falls short of what you calculate your family needs, there are a few options to consider:
Ultimately, your decision should harmonise your goals and personal needs.
Look after your assets
Once the sale of your business has completed, looking after your assets alongside enjoying your new chapter will make the transition much smoother. There are two key things to consider at this stage:
You may not need to invest your assets. You may hold them in cash and never run out of money during your lifetime. However, it is worth exploring your options as an all-cash strategy reduces the likelihood the fortune will be sustained over multiple generations, and unexpected high inflation presents a specific risk.
You may also consider investing all of your assets in listed equities and, even with a 50% drawdown, still be okay. An all-equity strategy offers more upside than an all-cash one, though it also runs the risk of a severe bear market markedly impairing the family's net worth.
For many, the optimal portfolio allocation lies somewhere between all-cash and all-equity. A dynamic balance of stability and growth is necessary.
No matter where you are at in your life, whether starting, running, selling or retired from a business, financial decision-making starts with knowing what you want your future to look like. From this point of clarity, you can plan and invest appropriately according to what you want to achieve.
* © 2017 Business Enterprise Institute, Inc. Survey of business owners between 40 and 69 years of age with annual revenues between USD 500k – 500mn.
Our BQ Bulletin emails will land in your inbox at 7.30am, Monday to Friday, with a mix of the latest local business news, national news, and features to inspire you. Sign up here!
Click here to read our privacy statement