Life After Selling Your Business

In the first part of this series, Abacus advisor Dave DeWolf offered his insights into the complex financial and emotional considerations that go into selling a business. What many people don’t realize is once the sale is over, these complexities don’t magically disappear. Many times, the emotional pressures become even more challenging despite a significant increase in financial security. Below are the key questions to ask yourself when contemplating your post-business life.

What Do You Hope to Accomplish with the Sale of Your Business? What Would Make it Successful?

This is a deeply personal question with financial and emotional implications. Is success based on the dollar amount of the sale? Or is who you’re selling to more valuable? The business you’ve built is likely your life’s work and there may be complicated feelings about letting go of that work. There may also be differing opinions among family members or respected employees about what a ‘successful’ sale looks like. 

Besides consulting with your financial advising team, ways you can help clarify what is most valuable to you is to talk with other successful business owners who have gone through the process to glean their insights. Talk with friends and family members whose opinions you respect. Even have them take the opposite position and play Devil’s Advocate about some of your instincts as this can strengthen your arguments in either direction. It can also be helpful to take the long view when considering big decisions – meaning thinking in years and decades instead of weeks, months, or days. Ultimately, you will have to follow your intuition, but exploring as many scenarios as possible will inevitably bring clarity to the process.

What do You Want Your Post-Business Life to Look like?

Do you plan on starting a second career? Will you have the means to transition into a philanthropic arena? Are you content to retire early and enjoy what you worked so hard to create? How will your investment planning and tax implications change because of the sale?

These answers are as unique as the individual. Once you have sold your business, you will likely have some time to reflect on what speaks to you most and decide. Because the sale of a business is often primarily about numbers, taxes, and contractual language, once it’s accomplished, take advantage of this newfound time to emotionally explore a future you may have not have as fully explored before. 

How Will Selling Your Business Affect Your Family & Your Legacy?

If you suddenly come into a large amount of wealth from the sale of your business it can have enormous implications for family life and legacy. Many choices will have to be made about how the family system – both present and future – approaches this new normal. Bringing the family together for regular meetings with your financial advising team can help begin a lifelong education on how to be a good steward of one’s wealth. This planning not only helps strengthen familial bonds and puts everyone on the same page, it can also clarify how much is enough to live on now and how will that evolve in the future.

Regularly scheduled financial planning meetings between family members can foster communication and also help normalize conversations that, all too often, have been taboo in the past. Sensitive topics, such as whether or not one family member should get a larger percentage than another based on their investment and engagement in the business, can be vetted in a collaborative manner that adds helpful context and perspective.

It is also essential to prepare present and future generations for understanding their role in protecting their new familial wealth due to a business sale. No matter the amount of money involved, careful education and planning will maximize mindfulness and intention when it comes to estate planning, while also acting as a check against potential carelessness. 

What’s the Best Way to Invest Your Profits?

A large influx of wealth is gratifying, but it does little good if not invested wisely. Regardless of the sale amount, it will require careful consideration regarding where, how, and when it should be invested. This doesn’t mean all of it must be invested immediately, it simply means there should be a clear plan in place about why you’re investing or not at this time.

For example, it’s reasonable to hold one’s funds in a cash management access account where it earns interest while you decide on an investment strategy with your financial planning team. Some also use a dollar-cost averaging as an investment strategy – meaning, investing smaller amounts over a longer time frame – to protect against volatility in a giant lump sum of new money. There are many thoughtful ways to invest, you just want to ensure your advisor is attuned to these complexities in a way that is meaningful to you.

What if You’re Still Not Sure About Selling Your Business?

Sometimes you don’t want to sell your business. It’s a common and understandable feeling. You love the business you’ve built, it’s become your life’s work, and you don’t want to give it up. This is when it’s critical to evaluate your long-term goals to see if they align with your values

When Abacus has advised clients who have been reluctant to sell their business, we have emphasized what such a sale can potentially solve. For example, would you rather work 50 hours a week earning $400,000 a year in perpetuity? Or would you rather sell your business for $20 million dollars and financially help both younger and older family members so they can accomplish what’s most important to them? Sometimes true financial security or a certain lifestyle will simply never be obtainable without selling your business. The difficulty of letting go is genuine, but understanding those long-term stakes is equally important.

Emotional attachment to your business is absolutely valid, and yet, this also needs to be realistically addressed. What is more important to you, theoretically passing a business onto your children or having lifetime financial security while helping your children pass that wealth onto their children? These are the types of considerations that must be weighed. 

Ultimately, many business owners have a number in the back of their minds; if they can reach that number in a sale, they can do what they’ve always dreamed of doing. Selling a business is not without tradeoffs. In many respects, neither are dreams. For those business owners willing to put in the clear-eyed work of weighing what they truly value, the rewards of a lifestyle after their business is sold can be fulfilling for generations to come. 

If you have any questions, reach out to an Abacus financial advisor and feel supported as you move forward with selling your business. 

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