Early into a new year can often be the time when retirement planning starts moving up the agenda for business owners. Over to Joanna Dawson, MD of Dawson Radford Solicitors, who shares her top tips on how to properly prepare and turn the retirement dream into a well-planned reality
We are only a few weeks into 2020 and already I seem to be having more conversations about retirement (not mine, you’ll be relieved to hear!).
As all good business owners know, a goal without a plan is only a dream – so if retirement is on the agenda, the earlier plans can be put in place, the better.
I regularly act for clients who are selling their business after many stressful, but generally successful years. However, all too often I can’t help thinking that just a bit of forward planning might have maximised their return and provided them with more cash to take into retirement.
With this in mind, here are some of my top tips to help get the most out of your retirement sale:
Start with the end in mind
It might sound obvious, but have you thought how much money you actually need to be able to retire? Chat to your accountant or financial planner about the provisions you have for retirement, and also think about what your business is worth now and what it needs to be worth in the future to achieve that for you.
Some of my clients are actively working to create a business worth a certain amount of money because they know that will then give them the return they need.
Get your house in order
So many times, when we embark on a business sale only to find there are problems which haven’t been addressed by the seller. This could be something like an unresolved insurance claim, a dispute with a supplier or even problems with property, such as land not within the right ownership.
I often wonder why a seller wouldn’t deal with these matters prior to bringing their business to the market? Doing a bit of preparation work beforehand and putting these issues to bed generally means a smoother sale process and less opportunity for the buyer to chip away at the price.
It also increases buyer confidence when their due diligence exercise is relatively clean or you can at least provide comprehensive documentation evidencing that the matter is closed.
Your potential buyer might already work for you in the business. We are seeing a rise in management buyout transactions where a senior employee or small group of employees purchase the business they work for.
In the past this has been quite difficult as employees struggled to raise the necessary finance. However, with banks being more open to different funding facilities, and sellers being willing to take the purchase price over a number of years, this type of arrangement is possible.
Your company’s current bank may offer guidance as to whether they would have an appetite to lend to your employees, secured against the existing business.
Will you need/want to work again?
A well-organised handover period is worth its weight in gold to a buyer, and generally sellers are happy to provide this, to ensure that the business has the best possibility of being successful under its new ownership. However, once this time has passed many sellers feel like they still have something to give to their industry.
Recently a client of mine was approached to provide training and trouble-shooting services after the sale of his business. He really wanted to do it, but the buyer said no – end of. To me it seemed a shame that these skills couldn’t be used, when maybe a chat between buyer and seller at the outset about future plans would have allowed a way forward.
Get proper advice!
Obviously, I would say that, but I can’t emphasise this enough. Your business could well be the most valuable asset you ever own, yet some clients just don’t see the value in taking proper advice from professionals, whether it be solicitors, accountants or financial advisors.
Sales of companies, in particular, can contain complex arrangements concerning price adjustments of post-completion accounts and it is so important that the parties instruct professionals with experience of working on such transactions.
I have seen occasions where parties didn’t get the outcome they expected, because they hadn’t been properly advised on the agreement or they realise they have ongoing liabilities they were not aware of.
You don’t need to choose the most expensive advisor, but I would recommend doing your research, seeking recommendations from friends and colleagues, and having an initial chat with the advisor to see whether you’re a good fit for each other.
If you’re thinking of selling your business – or indeed buying – chat to the team at Dawson Radford for straight-forward, practical advice based on experience of corporate transactions.