You’ve worked hard. And now you want to enjoy your rewards after having invested blood, sweat and tears building your business. If you’re lucky you get someone or some company to buy you out. Before you pop the cork off that champagne bottle, you better get your ducks lined up. You sold your business. Now what?
You Sold Your Business. Now What?
Most every business owner and entrepreneur has one dream and one dream only — growing a company and making it big on the “exit.”
They imagine the day when they sell their company for cash or a bazillion shares, and then just… chill. Or buy 5 cars. Or 5 houses. Or… do what exactly?
There’s the obvious answer, which is “who cares what I do, I’m rich!” Which may be true, it is an arrival for so many. But with newfound wealth comes the concerns about who to trust, how to preserve your money, and of course the weird family/friend interactions that can follow. (HBO’s Entourage comes to mind for instance).
Here are 5 things to consider after you’ve sold your business.
1.) Get help. But choose carefully
Just because you sell a company doesn’t mean you know how to handle the money aspects. There are going to be tax considerations. Preferably, you should do this tax planning ahead of inking your deal. There are ways to structure a sale agreement that minimize your taxes that you can only do before the closing.
There may be debts to address, potential stock details, and so on. You’re likely going to need help from a professional wealth manager. Act sooner rather than later on this, but choose carefully who you bring on your team. There have been brilliant technologists and business people of all kinds who have been taken advantage of by investment “professionals.” Choose wisely.
2.) Trust and estate
This step cannot be emphasized enough. Very few people want to think about their will and estate plans because let’s face it, thinking about death is depressing. But with wealth comes responsibility. If you don’t deal with it, it can cause issues for loved ones down the road.
The facts are, your estate plan including your will and insurance, probably do not match your new level of wealth. Don’t worry about getting too deep into the weeds right away, just cover the basics. A good place to start is with an Accredited Estate Planner (www.naepc.org).
3.) Don’t blow it
Coming into money does weird things to people. There are crazy stats about folks who just aren’t prepared and spend it all. Lottery winners and professional sports players are prime examples. On average, 70 percent of lottery winners go through their winnings in several years.1 And a good number end up in bankruptcy.
Similar results occur with professional athletes. Sports Illustrated recently estimated that 80% of retired NFL players go broke in their first three years out of the League.2
Hey, you aren’t a lottery winner and you may not be a famous sports figure, but blowing through a pile of cash in a few years can happen. This is where a an experienced fiduciary wealth manager who is a Certified Financial Planner TM professional can help. With purposeful planning, you can drill down and figure what kind of cash flow you’ll need to sustain your dreams. So before you get caught up in “lifestyle inflation” you’ll want to know if you have enough cash coming in from your big pay day so that you can live the way you want to for as long as you want to.
4.) Family and friends get weird
It happens. You and a bunch of friends are at dinner, do they expect you to buy? Maybe a family member wants a loan to get a business started. Do you give one? If you do, will it set a precedent? Or what if they don’t want to pay it back because, “you have enough.”
Also, it can change how new acquaintances view you. Do they like you just for your money? As one tech millionaire states, “If you aren’t married yet, good luck trying to figure out (and/or always having self-doubt) about whether a partner is into you or your money.”3
After working so long and hard on your business, there can be a loss of purpose after it’s sold. Markus Persson, the 36-year old who sold Minecraft for $2.5 billion tweeted about it. He wrote, “The problem with getting everything, is you run out of reasons to keep trying, and human interaction becomes impossible due to imbalance.”4 Feeling adrift is often part of the process, give yourself time to fall into a new routine and find a new purpose. Playing golf may only fill up so much time and then what?
This is where you may need help in charting a new course and reinventing your “retirement”. You can find comprehensive programs and tools that help you identify in a holistic way the kinds of opportunities and options that will bring you purpose and significance while connecting you to something bigger. (Check out the Successful Transition Planning Institute)
Takeaway After You Sold Your Business
Everyone focuses on the big exit. The day when cold, hard cash starts raining from the skies and you go yacht shopping. Just don’t forget the other side of the equation, that there are realities of sudden wealth, both financial and emotional. The sooner you can make a plan and get some help, the easier it’ll be to relax and take advantage of everything you’ve work so hard to accomplish.