If you recently sold you company, congratulations. Selling a business is an emotional and complex process. If selling a business is in your future, start educating yourself. Find advisors that have real transaction experience dealing with companies your size. Try to understand how buyers structure deal terms in your industry and how industry players calculate what a company is worth. The more you know before trying to sell your company, the less you are surprised. Less surprises means a smoother sales process and hopefully, a satisfying transaction. Preparation before selling is necessary but one topic that is often overlooked is life after the sale. For most, life after the sale will last much longer than the sales process so it’s important to figure out how selling your business will help you accomplish the future lifestyle you desire.
Selling a business may be an old hat for serial entrepreneurs but most people are selling for the first time. Life beyond the sale is usually very different from before. Your daily routine changes, most of the employees you frequently mingled with no longer play a major role in your life and you must start figuring out how to fund your lifestyle without business income or an owner’s draw. Suddenly your net worth is no longer in your company. After the sale, your wealth is allocated across several other asset classes that you’re probably less familiar with. Another difficult process is trying to understand the way these assets behave. When your wealth is mostly the Enterprise Value of your private business, you usually do not see the price of your company fluctuate Monday through Friday like publicly traded companies do on an exchange. After the company is sold and your funds are reallocated into marketable securities, you're now able to see your net worth fluctuate daily. This is a big deal and can drive you crazy if there is no clear objective attached to the portfolio. Make sure to work with a Wealth Advisor that values intentional decision making when investing your money. The more we tell our money what to do, the easier it is to allocate it and make decisions when uncertainty floods the markets. We can never be certain about the markets but we can be certain about our goals. This mindset will help you to avoid panic trading which over time, can destroy your investment returns.
If quality control in your company was your highest priority as an entrepreneur, you should shift your mindset to quality control in your life. As a Wealth Planner and sell-side M&A Advisor, I regularly work with many talented and brilliant business owners. One common characteristic I see in my business owner clients is their ability to delegate efficiently. With great vision, they can define a business goal or objective and delegate certain tasks to a team of competent employees that execute and get the job done. Just because you sell your company doesn’t mean this skillset should go away. Rather than defining goals for your business, I encourage you to define your goals for life after the sale.
Cashing out of your business brings challenges that you may have never thought of before. You should prepare for a sudden influx of wealth with proper tax planning, estate planning, and strategic income and investment planning. To execute these complex planning procedures requires an understanding of your goals and values. Once you’ve determined what life for you and your family looks like now and after you’re gone, it’s easier to delegate these planning procedures to a team of competent advisors that you trust. Life is too short to avoid proper planning. Step into retirement with confidence and delegate what happens to your wealth while you're still able to.
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