Case study: business sale and beyond

We recently created a financial plan for one of our clients following the sale of her cosmetics business. This client was in her mid-50s, married with two children. Her husband was ready to stop working so last year they decided they wanted to enjoy their retirement together. As a result, she wanted to transition away from running the business.

In the lead up to, and on the successful completion of, the business sale, we met regularly with the couple to discuss their financial plan. During this process, we analysed their current spending, outlined their post-sale objectives in greater depth, and used cashflow forecasting to understand how their spending requirements might change in the future.

Their objectives post-sale included:

• Purchasing their £2 million dream house in Italy
• Gifting £500,000 to each of their children for them to purchase their first property
• Investing £1 million into a friend's business venture
• Enjoy having more free time and slower pace of life

Turning goals into a financial plan

We subsequently built a detailed model for their after-tax sale proceeds of £12 million. This model took into account:

1. Their immediate expenditures
2. The likely cost of their new lifestyle
3. Phasing of funds into a long-term ‘nest egg’ portfolio
4. The projected returns from their investment portfolio with us

Building the nest egg

After taking into account the purchase of the Italian property, gifts to their children of £1 million total and investing into a new business venture, we modelled scenarios where they would put £7.5 million into their nest egg portfolio.

The client wanted to recreate an annual 'income' of £250,000 (versus the £100,000 she had previously paid herself as a salary) in order to cover upgrades to their lifestyle following the sale.

We also recommended that they keep £500,000 in cash (2-3 years’ worth of spending). This cash buffer protects against market volatility while allowing us to look for opportunities to top up this buffer while we monitor their portfolio.

Though the cashflow modelling was certainly not definitive, it gave the family confidence that they could enjoy their lives whilst preserving their wealth.

_{Source: Rothschild & Co, Bloomberg Data from 31 December 2002 to 31 December 2024.}

_{The New Court Fund GBP inception date was 14 July 2015. Performance for periods prior to inception date is the Rothschild & Co Wealth Management UK Ltd GBP Balanced composite, adjusted to reflect the fund's 1% annual management charge and 0.06% operational costs. Performance data is net of fees. Data post 30 September 2007 is net of actual client fees incurred. Data prior is actual gross performance less current average client fees.}

_{Past performance is not a reliable indicator of future performance and the value of investments and the income from them can fall as well as rise.}

_{The above graphs are for illustrative purposes only. The information above is not intended and should not be construed as tax advice. Each investor should seek their own independent tax advice}