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Sold your firm?
When you sell your firm, your business assets become personal assets. The question now is what is the best way to structure and invest these assets. Entrepreneurs can find out here in three steps how they might wish to proceed.
The key points at a glance:
When they sell their own firm, entrepreneurs often have a sizable sum of cash at their disposal as well as newly acquired options, as most of their assets are no longer tied up in the company but instead can be invested freely.
We recommend spending enough time planning for this new stage in your life and carefully getting ready for your future role as an investor. This way, an ideal asset structure can be decided on and the right investment strategy can be implemented with care. In practice, we often see people who were once full-blooded entrepreneurs making hasty investment decisions in their new circumstances.
Important: Experience has shown that those who continue to act like entrepreneurs in their new role as investors make mistakes. Often the mistake is investing the newly available cash directly in companies that the entrepreneurs know from their time in business. In doing so they are in danger of succumbing to “familiarity bias” in which they focus on cash investments or markets with which they are already familiar—with an increased level of risk, because their portfolio is not very diversified. With ۶Ƶ Wealth Way, we recommend a systematic approach in order to reduce risks such as these.
۶Ƶ Wealth Way is a global advisory approach from ۶Ƶ, and helps people put their investments in place in three steps: (1) discussion of values, (2) financial planning, estate planning and asset structuring, and (3) a “Liquidity. Longevity. Legacy.” asset strategy.
Are you planning to sell your company? Or are you getting a sum of cash in some other way that you would like to invest? Then we can help you select the ideal investments for your personal circumstances using the three steps of the ۶Ƶ Wealth Way.
It is key for investors to define their values, as they are a key guide to future investment decisions. Therefore, as a first step we recommend clarifying your family’s priorities and defining your own values and goals. You should ask yourself the following five questions:
Investors who see their own values reflected in their investment portfolio often prefer continuity, and in times of crisis are less likely to sell their investment positions at inopportune times or on unfavorable terms.
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When the first step, the discussion of values, has been completed, it is followed by analyzing your present and future financial situation so as to understand it in detail.
This involves drawing up a personal financial plan which sets out your income and expenditure and how your assets will develop over the coming years. This is a matter of gaining an overview of your current financial circumstances, and defining how you wish your assets to develop in the future so as to achieve your personal financial goals. The financial plan serves as a basis for drawing up your investment approach.
In estate planning, the right legal precautions for looking after your family as well as philanthropic considerations become clear. Since entrepreneurs often own stakes in other firms, there is an additional need for coordination in order to clarify dependencies between the personal and the business side and so take account of legal, tax and inheritance aspects.
Asset structuring at ۶Ƶ means the composition of your overall assets. In this step you clarify whether to own real estate, equity interests, investments or works of art, and whether to do so privately or through a company. For this purpose, ۶Ƶ will prepare an overview of the client’s overall asset structure (see the figure below for an example). Based on this overview, options can be highlighted and discussed that reflect your values and goals and ideally also bring legal, tax and inheritance advantages.
Schematic representation of an asset structure overview
Whether just in case or for a well-earned retirement, find out what is involved in passing on your firm.
It is only at this stage that the actual investment approach is developed, once your values and goals have been determined and we have an overview of your financial situation. This is based on the findings from the first two steps. We recommend that entrepreneurs apply the following three strategies to their overall assets:
Maintaining your standard of living in the short term
Securing your standard of living in the long term
Improving life down the generations
As selling your firm often releases large sums for investment, we recommend establishing these three asset strategies at different stages. In practice, it often takes more than 12 months to put a comprehensive investment approach in place. After ۶Ƶ Wealth Way has been fully followed through and your investments have been established, you need to review your decisions on a regular basis and adjust them if necessary.
Selling your firm presents you with a unique opportunity to invest your new sum of cash in accordance with your own values and goals in life. You need to let go of old habits you might have acquired as an entrepreneur, adjust to your new role as an investor and relaunch. You need to allow yourself enough time for this.
۶Ƶ can assist entrepreneurs as a trustworthy partner and apply ۶Ƶ Wealth Way to tailor their investments to their own values, goals and personal risk profile. This means that entrepreneurs can sleep soundly even through turbulent times.
Disclaimer:
۶Ƶ Wealth Way is an approach incorporating “Liquidity. Longevity. Legacy.” strategies that ۶Ƶ and our Advisors can use to assist clients in exploring and pursuing their wealth management needs and goals over different time frames. This approach is not a promise or guarantee that wealth, or any financial results, can or will be achieved. All investments involve the risk of loss, including the risk of loss of the entire investment.
How can I build up my private assets as an entrepreneur?
What are your entrepreneurial goals? And how can you build up your private assets? Talk to us as part of a free consultation during which we will look together at your situation and objectives for the future.
Economist at the Chief Investment Office, ۶Ƶ
Pascal Zumbühl joined ۶Ƶ in October 2023 after working in research at Credit Suisse for four years and producing a number of analyses on Swiss business matters. He has extensive experience in research on start-ups, SMEs, sustainability in the corporate world and succession planning.