Whether preparing for retirement or looking to transition out of an ownership role, selling your business may be one of the most impactful financial decisions you make. In addition, this can be a bittersweet moment for a business owner. You have spent a good portion of your life building something valuable, and likely feel reluctance at the prospect of letting it go regardless of how lucrative and life-changing it may be.

Much of this uncertainty can be alleviated with a strong understanding of the process leading up to your liquidity event. Taking the time to commit to the necessary planning, understanding the tax implications and finding a professional who has your best interests in mind will help ensure you receive significant reward for your dedication and hard work.

Maximise Your Planning Before the Event

There are various ways an entrepreneur can convert their stake in a business into a liquid asset. It’s critical, however, that appropriate planning is undertaken long before the particulars are outlined and the transaction occurs.

Ask yourself: what are my goals and how is my current plan situated to meet those goals? Remember; while you want to benefit financially, that doesn’t mean the highest offer you receive is necessarily the best. There are other elements that factor into the ultimate success of your arrangement.

Think carefully about your emotional stake in the business. If you aren’t ready to cut ties completely, what are your most important objectives and considerations as they relate to the overall future of your company and its employees? Do you want to remain involved in some capacity? Are there certain outcomes that need to be realised even if you aren’t directly involved?

Consider the Future Implications

The tax implications of the transaction will likely be top-of-mind, but there are other aspects you should consider as well:

• Investment strategy – The sale of your business is likely to generate a significant sum of money and the destination for that lump sum should be carefully considered. Ask your financial adviser about investment strategies available to you in advance of the sale of your business to ensure you’re well-prepared when the time comes.
• Asset allocation – Having built considerable wealth through the concentration on a single asset (your business), now is the time to consider how best to protect that wealth through proper diversification and asset allocation. Proper risk management will help ensure your portfolio is appropriately positioned to weather market cycles and be there to fund your lifestyle over the long term.
• Estate planning – Revisit your estate planning goals prior to the sale of your business. With these in mind you may have the option to pass more on to your heirs with some advanced planning.
• Philanthropy – Business sales offer a great opportunity to play to your philanthropic legacy as well. Pre-liquidity is an opportune time to consider different trust strategies and gifting circumstances as they relate to your overall estate and legacy plan.

As with most things, timing is important. Leaving decisions to the last minute is likely to narrow your choices. It’s best to start your planning early and involve the right specialist expertise.

Identify your Team

The transition from a business owner to a manager of significant wealth can be difficult. The skills, knowledge and expertise required to achieve a successful outcome are entirely different. Expert guidance can ensure you extract maximum financial benefit and also maximum enjoyment – the goal is to reduce stress, not increase it. Your Morgan Stanley financial adviser can provide access to a wealth of resources and a team of experienced professionals across investment strategy, financial planning and tax advice, estate planning and philanthropy, to ensure you start your new life on the right track.