Many owners ill prepared for retirement

Business owners are being warned that the successful sale of a business doesn’t only lie in zeroes on a cheque but also in the smooth transition to what comes next. The advice space is in the midst of a consolidation period, with businesses looking to improve efficiency through scale, while an aging profession means more business owners are preparing for their retirement.

Growth of mid-size advice groups signals a healthy appetite for M&A activity. However, inadequate time is being spent preparing owners for their next steps, according to Escala.

Preparing for Life After Sale

Despite spending their career helping clients prepare for their financial future, advice practice owners can also fall victim to this tendency. Escala head of advisory, Scott Carmichael, said the sale of a business is not only a big move for the business itself, but also for the owner, but many struggle to see beyond the actual settlement which puts them at risk.

“Settlement of a business sale or transition can affect every aspect of daily life, with the challenges being just as psychological and emotional as they are financial or operational. For this reason, the plan needs to consider the whole of life alongside investment planning,” Carmichael said.

Considering the Whole of Life

“Founders need to understand their liquidity needs, tax position, income requirements, family objectives, retained business interests and long-term investment horizon. That requires careful consideration. The first question should be what the capital needs to achieve, not where to invest.” Alongside the mental considerations of transitioning into a new phase of life, Carmichael said it’s essential to reassess risks, goals and priorities before making a decision about how to deploy newfound capital.

The shift can be confronting, even simple measures, such as establishing a regular ‘salary’, can reduce uncertainty and support better decision-making. Continuity is critical, while founders may have long-standing relationships with accountants, lawyers and other trusted advisers, the wealth adviser is the element that brings these functions together, ensuring they work collectively to formulate a cohesive strategy and a clear vision for the future.

Keeping those relationships aligned is an equally important part of managing risk, Carmichael noted. As the advice space continues to evolve, it’s essential for business owners to prioritize their own preparation for life after sale.

The growth of mid-size advice groups signals a healthy appetite for M&A activity.