For many, selling your business is the ultimate reward. Providing the opportunity to secure wealth, time, and capital. For many that dream is having enough capital to comfortably live without concerns about work or business, or at the very least having the freedom to make that choice. Wealth is the freedom to decide.
However, considering recent bouts of high inflation and rapidly rising interest rates, investors may still be reeling, and company sellers might understandably feel nervous about cashing in. Should you however be nervous? With many top economists fearing a recession could be right around the corner and talk of a Labour government raising Capital Gains Tax (source: Guardian) some potential sellers of businesses may believe there are no good investment options available. But extend your investing horizon and this could set you up for good returns later – it is a wise decision to put your money to work for you.
Yield vs inflation – Points to consider when investing your business proceeds for a lifestyle
The planning of a sustainable lifestyle is only possible through robust cash flow modelling.
Consider what your perfect retirement looks like, and what it would cost. Ensure you factor in additional capacity to weather challenging periods. This should include higher costs and inflation, as we are experiencing currently, lower than expected returns, or even periods of significant market falls.
If your financial plan can withstand the challenging periods, the positive times will take care of themselves.
Diversification is a well-known mantra among investors, and it comes in many forms. The most obvious is a mix of different asset classes which can deliver different return profiles over time, smoothing out the highs and lows.
Taking different levels of investment risk within different parts of your portfolio can also offer valuable diversification. For instance, short-term requirements should be held in low-volatility portfolios and cash while long-term, higher-risk portfolios may yield rewards, provided you are able and willing to accept the short-term volatility that goes with this long-term upside potential.
Tax Efficiency and Phased Investment: Strategies for Success
It is not often considered that different investment managers can have different views on the world and different strengths. By utilising different portfolio management styles such as Growth/Value, Active/Passive, and Collectives/Direct Stock you can build a ‘portfolio for all weathers.’ This way you won’t be over-exposed to any one area during the next downturn and will be well placed to take advantage of different opportunities when they arise.
In addition, the correct use of tax wrappers is crucial. By blending your portfolios across multiple tax vehicles – such as income or capital-producing investments, ISAs, or pensions you can create the most tax-efficient standard of living today, while also building in future flexibility and minimising the risks of your wealth becoming trapped in unfavourable future tax legislation.
Lastly, when investing (especially cash), consider the value of phasing your portfolio into the markets over time. Take advantage of the currently attractive cash rates, to get ‘paid while you wait’. Gradually building your investment portfolios can offset some of the tremendous market volatility we have seen and ensure you are not starting at a disadvantage by investing everything in one go during a downturn.
Navigating Economic Shifts and Seizing Opportunities
Last year we saw central bankers start to pull hard on the lever of interest rate rises, to try and stave off the worst impacts of sudden inflation. The effects of these actions have only recently started to be felt by businesses and consumers worldwide and are likely to continue to be felt for some time. However, behind the challenging headlines, opportunities are appearing – most obviously the most attractive interest rates since 2009.
Selling your business remains a leap of faith. Many choose the change with the intention of not working but in this restless age, such a goal is rarely achieved. However, it’s comforting to think that with enough capital you have the choice. The amount of capital required will also depend on your lifestyle. Sadly, to live the life of a millionaire as perhaps defined by the 1980’s era – complete with a house with an in and out driveway, income-generating investments, a classic car, staff, and maybe a small holiday home – may necessitate around £5 million, depending on your location. Increasingly however people opt for more modest lifestyles and choose to rent the finer things. There is far more to life than money; experiences, time, and health are categorically more important. Nonetheless, when selling your business you should take a more measured analysis and talk to wealth managers about their current wealth relative to their age, yield, and desired lifestyle. Many owners painstakingly research for example new initiatives and products but they often overlook conducting a comprehensive analysis of their personal finances.
Investment Independence After Selling Your Business
The benefit of Partners Wealth Management’s award-winning investment independence is they are able to select widely from the most suitable asset managers available, offering clients exceptional diversification and improved long-term financial outcomes, on a truly bespoke basis.
Contact Avondale Corporate
Avondale is a leading Mergers and Acquisitions strategy consultancy. We have been working with the best entrepreneurs and companies operating both locally and globally for more than 20 years. Our firm provides a fully integrated service from selling your business and acquisitions to business growth and strategy to corporate funding opportunities.
This article has been written in collaboration with our wealth management chosen partner David Bull from Partners Wealth Management. If you have any questions about selling your business and investing the proceeds, please give us a call for an exploratory discussion without obligation on +44 (0)1737 240888. Alternatively, view our Contact Us page or email us at av@avondale.co.uk for further information.
