The Bluebox Blog

Contributions from our professional team

 How to Sell your Business and Secure your Future Wealth

November 23, 2023

Find out how financial planning can help maximise your wealth when the time comes to sell your business

Selling your company is a big moment. You’ve invested time, blood, sweat, tears and your own money into building it. According to our recent survey, 40% of business owners are planning to exit their company within the next year.

When the moment to sell arrives, you need to ensure that your profits secure the future you’ve worked so hard for. The earlier you start planning for a business exit, the more options you’ll have and the better prepared you’ll be.

 

How to Maximise your Pension

Pensions are a big part of our financial plans. But too often we see that entrepreneurs have not made the most of their pension allowances, or have no pension. This could be because you are remunerated by dividends, not a salary, and reinvest your money back into the company.

The good news is that during the pre-sale stage of your business exit, it is possible to maximise your pension contributions. This can form a vital part of not just your retirement plans, but also your business exit strategy. If you are a company director, you can make personal contributions to a pension scheme. You can contribute and receive tax relief on payments up to £60,000 a year, or 100% of your earnings (whichever is less). You can also “carry forward” any unused contribution allowances from the previous three years and receive tax relief on a contribution of £40,000 per annum, making an additional possible maximum of £120,000, assuming earnings levels are sufficient. An individual can make additional contributions in excess of the annual allowance plus any available carry forward, but it is important to note that this action will incur an annual allowance charge.

If you are a company director, your company can also make employer contributions to your pension, utilising the pension annual allowance and by using pension carry forward.

Additionally, providing the employer contributions qualify under HMRC’s ‘wholly and exclusively’ rules, employer pension contributions can exceed the above £180,000 figure and are theoretically unlimited. These contributions could be deemed as a business expense and deducted from the business’s gross profits. Not only could this boost your retirement savings, but it could also lower your company’s corporation tax liability. Please note, while an employer pension contribution is unlimited, any contributions in excess of the annual allowance plus any available carry forward will incur an annual allowance charge.

An accountant or tax adviser should always be consulted in these circumstances to ensure you fully comply with HMRC’s rules.

Pensions can hold your wealth tax-efficiently over the long term and create opportunities for succession planning. You can pass them on outside of your estate for inheritance tax purposes, potentially lowering any liability you leave behind.

 

 

Why Cashflow Modelling Matters

Cashflow modelling gives a picture of what your financial future could look like after you’ve sold your business.  It can help you make important decisions before the sale completes.

We use cashflow modelling to forecast your future income needs, taking into account the proceeds from the business sale as well as other assets and expenditures. This shows if you are on track to achieve your lifestyle and retirement goals, how much money you need to save, or how long you need to work for.

Cashflow modelling can also show you how much you need to sell your company for. This amount is often different to what you want to receive. By looking at the figures in context, you might be able to sell earlier than you think.

Cashflow modelling also helps you understand if you can or should consider giving shares away before agreeing to any binding contract of sale. You can consider other options linked to your overall financial objectives and views on tax.

 

Using your Business for Estate Planning

You should know that your heirs could lose 40% of your business proceeds to inheritance tax (IHT) in the event of your death. Effective IHT and estate planning can help to mitigate this.

There are many ways to reduce your IHT bill, including making lifetime gifts, and passing on a pension or using trusts. Another common method for entrepreneurs is the use of business relief qualifying investments. Following the successful sale of your business, you have a three-year window to reinvest the proceeds into an appropriate business relief scheme, which then benefits from immediate inheritance tax relief.

If an asset that qualifies for business relief is sold, relief can be maintained if the asset is replaced by the purchase of a new business asset. The two-year ownership period is not reset if the sale proceeds are used to purchase a replacement asset within three years of the sale of the original asset.

Business relief is available if the combined ownership period of the original property and any qualifying replacement property covers at least two of the five years immediately before a transfer or death. Placing business relief qualifying assets into a discretionary trust following the two-year qualifying period means they are not counted in the calculations for residential nil rate band relief, which begins to reduce when an estate is valued above £2 million.

However, if you die before the replacement asset is purchased, business relief will be lost, and the proceeds could be liable to inheritance tax at a rate of up to 40%. You should consider having a back-up plan in place, such as insurance cover.

While the IHT benefits of business relief are significant, there is a high level of risk associated with business relief schemes and they should be seen as longer term and less liquid investments. It is therefore extremely important to seek professional advice before making these investments.

 

Speak to us about your Business Exit Strategy

There are many different things to consider when it comes to selling your business. Financial planning is one of them. By working with your other advisors, we ensure that advice in one area does not adversely affect another. We call this our 360° approach.

To see how we can help turn your business wealth into personal wealth get in touch for a complimentary planning session.

By necessity, this article can only provide a short overview and it is essential to seek professional advice before applying the contents. It does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

The value of an investment may go down as well as up and you may get back less than you originally invested.

Prevailing tax rates and reliefs depend on your individual circumstances and are subject to change.

Evelyn Partners Financial Planning Limited is authorised and regulated by the Financial Conduct Authority.

 

Get in Touch

For more information, please contact Craig Dowsett, Director of Financial Planning at Evelyn Partners.

If you’re interested in further information on a share sale, get in touch with us here.

Categories

  • Articles
  • Blog
  • Interview
  • News
  • Partner Piece
  • Podcast
  • Success story
    • quote marks icon

    Testimonials

    “We were delighted with the services that Bluebox offered us. Bluebox’s attention to detail through their Diamond Programme ensured that we were well prepared for when the business was taken to market and that the sale process itself was managed expertly.

    We challenged Bluebox with finding the right strategic buyer and thereafter negotiating a deal that met our requirements. In helping initially to identify and to secure the deal with Mountville Mills they accomplished just that. Communication throughout was excellent and professional, managing each stage of the process. I would have no hesitation in recommending Bluebox to any corporate shareholder or private business owner looking to divest their business.”

    Richard Millward, Former Client

    “We were delighted with the services that Bluebox offered us. Bluebox were challenged with finding us the right strategic investor and, thereafter, negotiating a deal that met our complex requirements. In identifying and securing the deal with LGC they have done exactly that. The process itself was efficient and smooth, largely due to the excellent communication from the Bluebox team, who also demonstrated excellent experience at managing a very engaging auction process. I would be delighted to recommend Bluebox to any corporate shareholder or private business owner looking to divest a business.”

    Helen Dickinson, Former Client

    It has been a real privilege working with the team at Bluebox over this last year or so. Bluebox’s attention to detail ensured that we were well prepared for when the business was taken to market and the sale process itself was managed expertly. Starting the process, I had no idea exactly what this would entail and the volume of work that has been produced by everyone and the result reached today is nothing short of brilliant.

    Hugh Morris, Former Client

    We are delighted with the services that Bluebox was able to offer. They showed an intimate knowledge of a deal cycle, managed a tight auction process and were highly communicative from the start. I would happily recommend Paul and his team to business owners contemplating a sale of their business in the next 24 months. Experience is key and this has paid off for us.

    Laurence Seward, Former Client

    Aligning ourselves early with Bluebox, and entrusting the team to guide us through their process proved to be a highly rewarding investment from all viewpoints. Bluebox’s support significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years. The earlier the engagement the better so far as I am concerned.

    Mike Minett, Former Client

    We began working with Bluebox in early 2015 through their Blue Diamond Programme, as we were contemplating an exit. We found that the process focussed our minds on the key areas of growth in the business, and prepared us well for the inevitable rigours of due diligence. During the sale process itself, the advice offered by the Bluebox team was invaluable. We found them to be helpful, straightforward and honest.

    David Stokes, Former Client

    When selecting our adviser, it was extremely important that they had access to international buyers and were experienced in cross-border M&A. The team at Bluebox proved to be invaluable by identifying a strategic acquirer from America who was not known to us and by negotiating an excellent deal for all parties. I was also impressed with the process management from Bluebox, which ensured that the deal was closed in a timely fashion.

    Jeff Weinstein, Former Client

    When I first engaged with Bluebox, I was hesitant as to the benefits of using an advisor to firstly, find a buyer for my business and secondly, to get a deal over the line. However, now that the deal has completed with KPM, I can honestly say that the finer negotiation points handled by Bluebox and their overall management of this process has been nothing short of first class. I would be delighted to recommend Bluebox’s services to any entrepreneur contemplating the sale of their business.

    Bill Ballard, Former Client

    Bluebox worked closely with us over the following six months and helped us to implement some key initiatives which made InferMed a more attractive acquisition target. Once we decided to sell the business, the Bluebox team were very diligent in ensuring that no stone was left unturned. They negotiated expertly on our behalf to ensure we got the best deal possible.

    Alan Montgomery, Former Client

    The pre-sale planning programme that we signed up for with Bluebox made us develop our strategies and focus on the bigger picture. It proved to be a very rewarding investment from all viewpoints and significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years.

    Nigel Parsons, Former Client

    I have experienced first hand the value that can be created through highly structured pre-sale planning. It amazes me that it is not something that everyone does. It is so disappointing to see around 90% of transactions collapse before they complete and pre-sale planning will not only enhance your price, but also significantly enhance your chance of a closed deal.

    James Caan, Investor

    We worked incredibly closely with our advisers who provided expert knowledge of the sale process with which we were not familiar. We were truly delighted with the results.

    Marten Nielson, Former Client

    We appointed advisers to manage the sales process after we had received a number of unsolicited approaches for the business. I was incredibly impressed by the immense value that could be created by expertly negotiating with a group of already interested parties.

    Paul Duckworth, Former Client

    I was delighted with the service that the team offered and their real attention to detail. The deal was not without its complexities and it was reassuring to have such experienced advisers assisting me throughout the negotiations.

    Peter Bennett, Former Client

    Truly delighted with the way my sale process was managed. The fact that the team I worked with achieved such a great multiple is testament to their experience and their ability to create some true competitive tension.

    James Averdieck, Gü, Former Client

    The team at Bluebox provided invaluable support in negotiating this complex transaction. Their access to international purchasers, and exceptional knowledge of cross border M&A ensured that the deal was concluded efficiently, achieving a highly successful outcome for us all.

    Jon Parslow, Former Client

    “We selected Bluebox after a fairly long round of evaluating potential advisors because of their scientific, yet challenging approach to maximising value. During our initial meetings they showed us how far short of “ready” we were and consequently we completed more preparation in the early stages which meant we were equipped for what was to come. We were delighted with our choice of Corporate Finance partner. I do not hesitate in recommending Bluebox for any SME to consider.”

    Simon English, Former Client

    Bluebox provided invaluable advice in managing the negotiations with incoming investors. Their skills in handling these discussions were evident from the outset and the vital interface that they provided between the incumbent team and the incoming investors was truly beneficial.

    Henry Braham, Former Client

    Bluebox have a professional, dynamic and experienced team that is greatly assisting me with my focus on my exit within the next 24 months. Their structured approach is very refreshing and their ‘Blue Diamond’ programme is adding immense value.

    Matt Evans, Former Client

    The team at Bluebox provided me with a seamless service from the start of the engagement until our deal was completed. Attention to detail was commendable and their understanding of corporate M&A very impressive. I could not recommend them highly enough.

    Victor Lewis, Former client

    Having tried to sell my business previously – and failed – I was only too aware of the importance of pre-sale planning. This is a talented team offering a service that most people find out about, but too late.

    Simon Hulme, Former Client

    Bluebox are a quality outfit. Their access to International acquirers and relationships with the highest quality domestic investors was impressive. My shareholders and I received excellent service from start to finish and it was refreshing to be dealing with a senior team throughout the sale exercise.

    Michael Clapper, Former Client

    I cannot recommend the team at Bluebox highly enough. Their expert guidance throughout the entire sale exercise resulted in my shareholders securing an excellent deal with which the entire team was delighted.

    Mark Rodol, Former Client

    I’m really pleased with the service Bluebox provided. The team demonstrated excellent knowledge of the process to follow and led negotiations for the hospital in a way that allowed us to ensure we received appropriate value whilst focusing on reputational risk. Communication and service were of a very high standard.

    Steven Davies, Former Client

    With Bluebox’s expert advice we were able to find the right buyer that will benefit our business strategically. We’re delighted with the outcome and look forward to starting our new chapter

    Clive Hillier, Former Client

    The advice offered by the Bluebox team throughout the process was invaluable to the shareholders. We strongly believe that participating in Bluebox’s pre-sale planning programme was a significant driver behind the success of the deal. Their project management and negotiation skills throughout the sale process itself resulted in an exceptional deal being delivered to all parties involved.

    Harpal Singh, Former Client

    I chose Bluebox because they were the only CFA we considered who were a real ‘solution sales’ organisation rather than a team of accountants and/or ex-bankers! Selling a business is a solution sell and therefore a sell-side CFA requires this skill at its core.

    Jeremy Harford, Former Client

    Bluebox were a full solution in every respect. As an example, I never spoke with any of the potential or actual buyers directly. This separation allowed Bluebox to do what they do best which is to sell companies for the best price and on the most favourable terms.

    Jeremy Harford, Former Client