Richard Watkins is a family business wealth and investment specialist from Close Brothers Asset Management. Richard has considerable experience of advising family businesses, including his own family business.
We will not dwell on the emotional journey you have to take when contemplating life after work, but it is a very important factor to consider as, in many ways, you will be asking yourself: “What have I done this for?”.
Answering that question will take some time but a useful place to start is working out what your ideal lifestyle would look like. Where do you want to live? Do you want to travel extensively? Or pursue a hobby that you have put off for many years? Do you want out of the rat race?
I have a friend who, after selling his business, bought a boat. He and his wife sailed the world’s oceans for 5 years. Having built a picture of the life you want and laid down some plans, you can cost them very accurately. A good financial planner armed with the relevant skills will be able to construct a detailed cash flow model that can help illustrate your future life in pounds and pence.
Having addressed you desired life you might want to think about the next generation. How do you feel about Inheritance Tax? Do you want to leave your estate to your children or do you have other plans? Are you happy to spend down your fortune?
I strongly recommend that you have this conversation with your children as early as possible. It’s not a conversation that comes to an end during your lifetime. I’ve been having this conversation with my parents about our family business for five years.
For those of us who advise families and their businesses, we often refer to this as the parallel planning process. It is the period leading up to and after the sale of the family business. As the family business is the source of wealth and wealth preservation post-sale is often the key goal. Planning for the future must start early.
Having built a detailed picture of the lifestyle you want and settled on a plan for estate management it is important to contemplate investments and the level of risk you are prepared to tolerate. This also requires a lengthy conversation and almost as important as the previous conversations. In simple terms, assuming that regular and steady income is required together with capital preservation, it is important to find a balance between risk and reward.
To summarise, it is vital that you contemplate post-work early, plan for that day picturing the life you want with appropriately costed plans, evaluate your views about inheritance and construct a plan that has the best chance of success. Having constructed the plan, keep it under review as circumstances often change.
This is the last in the series of articles preparing for the sale of your family business.
Please be aware, the value of investments will go up and down and you may get back less than you invested. Any tax benefits or tax planning opportunities depend on individual circumstances and are subject to change