While much has been written about how to plan a financial planning company and then successfully sell it, there is far less guidance and focus on what happens to shareholders after the sale and what issues need to be addressed and planned. This article attempts to correct that imbalance by offering all business owners reading this some food for thought so that they can enjoy life after selling their business.
Stay or go…
While you may not need to stay in business beyond the customer handover deadline (which can only be said to be six months), other transactions may involve an obligation to stay for the entire deferred period. It is important to be aware of your remaining obligations in life after the sale of your business, the degree of flexibility you have, and the potential impact on your ability to engage in other activities so as not to violate the terms and conditions set out in the sales contract. , as long as payments are deferred.
An important point to keep in mind is that you want to stay engaged, keep up to date with the latest developments, and monitor deferred compensation payments during the handover period. A sales contract is a document that confirms the relevant agreement.
Do what you preach
Financial planning is what you’ve been doing for years as an entrepreneur, but after selling your business, are you really planning your whole life? Did you do some form of cash flow modeling to get started, and do you and your spouse/partner, if any, agree on how much risk you should take, let alone want to take?
If you wanted to invest in another company, do you have a plan on how you would do it, what proportion to your total assets, over what timeframe, and what risks you are willing to take?
What will you do with your time?
It’s easy to believe that there’s a lot you can and want to do after completing a sale, but some planning is desirable for two main reasons.
The first is that if you look at it in detail, you may find that it is impractical. For example, if you want to invest in financial services in the same area (i.e. financial planning or becoming a non-executive director), then the sales contract is likely to have a limited contract, so make sure you don’t violate it.
The second is your family. Do they share your vision of how your post-sales time will be spent and are your plans workable?
Both of these are important after-life considerations for your business. And when in doubt, try the following example to add some color to the points made in the previous paragraph:
The supplier, without seeking confirmation from the buyer or speaking to his attorney, begins investing in the new finance company before the grace period expires, and the company hires an advisor to the company that was just sold. Not surprisingly, the acquirer was dissatisfied and a lawyer was immediately brought in.
Another director of a financial planning firm, who had been out with his wife for several years, got bored and decided to start a new company which he thought was a slightly different part of the financial services market. Buyers are suspicious and want to reassure them that they will not try to accept customers or compete directly, thereby violating the terms of the sales contract. A long (and expensive) correspondence followed.
A seller plans to buy a boat and then sail it around England for the first two years after the purchase period. Her husband was not involved in the project and objected for various reasons. This created a difficult environment during the sales process because he had other interests he didn’t want to change.
“Clear, honest and not misleading”
We are all familiar with this principle from various FCA regulations and it applies to both what the seller wants to do after the sale and what the buyer demands under the purchase agreement.
It is therefore not only desirable but also useful for both the seller and the buyer to know what the seller is doing both after the sale and after the grace period has ended. It’s also important to be clear about what the buyer is expecting/asking for.
Clear planning and communication are important not only between sellers and buyers, but also between sellers and their partners, partners and families. Communication is a consequence of planning, ie. What now needs to be done is to make sure, as much as possible, that there are no surprises and all parties leave the business happy and satisfied and that you can enjoy your life after the sale of your business.