Reinvesting the proceeds of the sale
Q: Once my business is sold – what are my options to invest the proceeds and maximise/maintain my new found wealth?
The point at which the sale proceeds finally land in a business owner’s bank account usually marks the end of a very stressful deal process, and it is often wise at this stage to find a secure home for the cash and take a well-earned break.
Ideally, individuals will have considered their personal financial plans in advance of the conclusion of their business sale. Taking personal tax advice at an appropriate early juncture will ensure that proceeds are realised as efficiently as possible, and business owners should strive to design a comprehensive and flexible plan for their personal wealth, in the same way that they developed a strategic plan for their business.
Entrepreneurs will need to ensure that they understand the cash, income and return levels they will require to support their lifestyles, as well as ‘ring-fencing’ funds for further business projects. In addition, they will need to think about the level of involvement they wish to have in the day to day management of their new wealth, whilst also looking much further ahead to consider potential Inheritance Tax implications. This could involve the re-drafting of Wills, the creation of Trusts, the additional funding of pension plans and the use of life policies to ensure that assets can be passed on tax efficiently, and that the originators of the wealth can exert some control over its use by the next generation.
Business owners will need to work with an advisor whom they trust – after all, they have usually spent many years working extremely hard to earn the money that is now available for investment. Many will therefore be cautious with their new wealth, and a well diversified portfolio should include a broad mix of asset classes, currencies and geographical allocations. It also should combine elements of capital protection and easily accessible funds, with longer term investments geared towards capital growth, as well as some holdings that can produce income in a tax efficient manner if required.
Finally, whilst advanced planning is key, it is also very important that regular reviews of personal investments are carried out once portfolios are established. At Kleinwort Benson we have found that the majority of entrepreneurs will always be on the look out for another deal and consequently, they have to ensure that their personal asset base can support them into their next venture.
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