We are in a lucky profession – there are not many that allow a level of recurring income to be built up based on previous business transactions. Post-RDR this will change, but the argument remains. I also accept that you make your own luck.
Regardless, the recurring income you build up is your pension. If you are a one-man band and you are at retirement point, the choices are simple – either sell or find a way of continuing to get as much of that recurring income as possible.
I cannot understand why you would possibly go for the sale route when invariably the multiples are low – let us say, for argument’s sake, three times.
First, in discussions I have had with many advisers, they invariably state that the first thing they are going to do is invest the cash sum for income. So, in other words, it goes from income to capital and back to income again.
More importantly, the lump sum never gets paid as one lump (to quote Mr Webb, bang goes the order on the Lamborghini). It is drip-fed over three years for all the obvious reasons from the purchaser’s point of view.
In effect, you purchase a three-year temporary (and probably decreasing) annuity. Poor result. Not for the purchaser, mind, and even more so when they decide to sell everything on as consolidator.
The better annuity is one that says take your current recurring income and ensure you continue to receive as much of it as possible (say, for 10 years).
We have numerous advisers who have retired and worked with Nexus IFA in this manner, and I can tell you that each one will say it is a much better process and a far better result financially.
The situation is simple – if you have a need for income in retirement, do not sell your business.
Ian McIver
Development director
Nexus
Bridgwater
Somerset
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