COMPLETION - SPEND OR REINVEST?
The end of the business seller’s journey marks the start of a new phase in the individuals’ or partners' lives. The choice of how best to use the hard earned money resulting from a business sale is clearly very specific and personal to the individual, depending upon the amount raised, their age, stage in life and their own unique plans and aspirations.
To maximize on the amount of money you walk away with and the end result on your lifestyle it is important at an early stage to carefully consider your motives prior to selling to allow you to take the appropriate taxation and business advice and to ensure that you will have an adequate income stream to support your planned lifestyle, post-sale.
Typically business sellers fit into one of the following:-
1. Parties Selling Due to Retirement – some or all of the proceeds of the sale of a business may be used to:-
- Invest in a pension top up or other income producing asset such as buy-to-let property, ISAs, bonds etc.
- Pay off outstanding debts and mortgages.
- Buy a second/holiday home.
- Fulfill a lifetime ambition such as the purchase of a dream holiday, vintage car, canal barge or a boat.
- Set up a trust or structured form of inheritance for family or loved ones (depending upon your personal relationships and attitude towards inheritance, see quotes below!)
“It ruins people not having to earn money” Nigella Lawson talking about her plans to leave her children nothing.
“I have no intention of leaving my children destitute and starving” Nigella Lawson clarifying her previous statement, in the Sunday Telegraph.
2. Younger Parties Selling For Lifestyle Reasons - (frequently as per 1 above) but often these parties may go onto buy another smaller, less stressful ‘lifestyle’ business often in more suburban or picturesque surrounding. Alternatively some ex-business owners prefer to return to the security of the steady, less stressful world of the employee.
3. Parties rationalizing their businesses – parties owning more than one business or trading branch often sell of one or more branches to allow them to concentrate on their core business post-sale. Sale proceeds are often re-invested in the core business. Reinvesting money may often save a significant short-term tax bill.
4. Traders AKA serial entrepreneurs – there are a surprisingly large number of people in the UK who make money out of taking underperforming businesses and turning them around for resale at a profit. These parties may need to start looking for a new business to acquire whilst selling their existing business. Again, reinvesting money may often save a significant short-term tax bill.
Whatever your personal goals and objectives, it pays to plan ahead and take professional advice as appropriate. Paying a few hundred pounds to a business advisor or taxation expert may save you many thousands or tens of thousands of pounds.
Further help & resources
We hope that you have found this guide to be to be a useful ‘high level’ starting point as you begin to think about selling your business.
Further, more detailed help and assistance in various formats will soon be made available on our resources page and via our online shop.
Please send us a quick email via mail@buyandsellbusiness.co.uk to register your interest and we will automatically notify you of updates and new resources as they become available.
