You’ve poured time, money and energy into your business, but have you considered what you’ll do when you exit it? Have you thought about where you’d like to be in the future – career wise, financially and geographically? Without proper planning or thought, you could be plunged into no-man’s land, not knowing which fork in the road leads to success as you discover life after business.
Even when you start a business you should have some idea of the goals you want to achieve, the aspirations you hope to fulfil , the financial rewards you hope to reap and the sort of person you will be at the end of the journey. Are you the sort of person who needs to be busy, who needs to be actively involved in a project? Or do you want to make your money and get out? Are you in this business for life or do you see it as a stepping stone? Of course, the success of your current venture and its sale will greatly influence your future decisions but so will your priorities.
If you can create a map of possible scenarios and plan for life after business, it will help you process the financial, emotional and physical implications of an exit. Whether you choose to leave at a time that suits you, or are forced to walk away from your investment, it’s smart to prepare for this transition.
None of us can fully predict how our motivations will shift, how our finances will fare or how ageing and lifestyle changes will impact our needs and desires. Your business could suddenly and unexpectedly be affected by the launch of a rival company, rapidly changing technology or new rules and regulations.
Likewise, unpredicted unfettered success, an unbridled demand from customers or anticipated large growth could place you in a position where you wish to sell and bank the money, but don’t have an exit strategy.
If you work towards exiting your business as a planned natural event, rather than waiting for external forces to dictate when to sell, you’ll be in the best position to consider your future.
In planning for the future, it’s crucial to understand legal issues that could come into play:
- What are your obligations after the sale of the business?
- Do you need to remain actively or partially involved for a period of time during a handover?
- Would you like to be retained by the business as a consultant or would you prefer to be a minority shareholder?
- Will you be prohibited from trading in a similar business or within the same industry for a certain period of time after exiting?
- Have you given or will you give the buyer any personal guarantees that could impact you financially?
Succession planning includes considering a range of factors within and outside your business that can greatly influence your life and the lives of those important to you.
If you focus on the pie chart illustration below, you can identify major factors that will impact your decisions and you can start prioritising and developing strategies for achieving goals.
To best design the outcomes you want for you and your family, seek professional advice from lawyers, accountants, business brokers and financial planners who specialise in this area.
If you want to ensure that your family is provided for in your Will and/or that of your spouse, it’s important to seek legal advice on how to plan and structure these documents.
Do you need to create a testamentary trust to ensure inheritances destined for infant beneficiaries are protected and their educational and primary needs are met? How will your assets be distributed and to whom?Have you thought about appointing Powers of Attorney to act financially on your behalf?Have you considered appointing an Enduring Guardian who can make health and lifestyle decisions for you if you become incapacitated?
After you achieve the sale of your business, who will manage your funds and investments? Do you have a good financial planner or broker you can turn to for advice?
Will you put your money into property or shares? How will the sale of your business affect your current investments and tax liability structure? Should you be banking funds, spending them or distributing them? Do you have all your assets in one area or spread over several?
You’ve spent your days and nights engrossed in building and developing your business, but how will you occupy yourself when you have exited it? Should you secure another work opportunity before you leave it behind or do you need time out to consider your future? Do you plan to use the sale of your business to launch a new entrepreneurial venture? Can you stay on and work part-time in the business?
In mapping out life after the sale of a business, you should consider whether you need to foster a new hobby or already have one that can be nurtured. Do you have an existing personal interest that could reap financial rewards if time and money were invested into it? Are your interests outside of work sufficiently engaging?
Most of us love to travel and experience new sights. How important is this to you and how will the sale of your business facilitate this? Can you use funds from the sale of your business to achieve the journeys you or your family have only previously dreamed of?
How does your involvement in your business affect your health? Does it drain you and wear your down or does it give you focus and mental stimulation? Are you mentally prepared for the sale? Perhaps life after business will mean working outdoors rather than behind a desk or swapping a pressurised environment for one that gives you real joy.
How happy are you with your current lifestyle? Will it change for better or worse when you on-sell the business? What financial strategies do you have in place for achieving the life you want and deserve? Are your goals realistic and how close are you to reaching them?
Is it not time that you picked the team of advisors to help you transition from your current circumstances to plan for your financial retirement and life-style after the sale of your business.
Do you have Wills, Powers of Attorney and Appointment of Enduring Guardian documents in place to protect you and your family?