Countless articles exist about selling your business—we’ve written several, ourselves—and most address the financial aspects of that transaction. However, much more is at stake than the valuations, financing and other economic details.
In short, for anyone who has worked hard to build, then sell, a business, considering the emotional as well as financial aspects of the event is key—and will yield a more successful result.
Here are four observations we’ve learned from helping owners that can help ease the transition from business owner to semi-retired business guru.
FINDING A NEW FOCUS
We’ve all seen the images of retired people sitting on a beach and traveling nonstop. However, for most retired business owners, that’s not the typical experience. These are talented people who are used to working hard. Many have also tied their self-worth and sense of purpose to their business, and that mentality doesn’t stop just because they’ve sold their business.
Indeed, former business owners frequently rechannel that drive by finding new projects to consume their time. Others pour time and resources into charities and religious institutions. Whatever they choose, the important thing is finding something enjoyable that allows for a gradual transition into “retired” life.
REALIGNING HOME LIFE
Once removed from the office, a retired business owner’s home life can be interesting in itself. Married retirees now share more time with their spouses. Understand, however, that it’s not unusual to want your own work area. So, both parties will have to adjust to each other’s evolving schedules.
UNTYING PREVIOUS FINANCIAL ENTITIES
Many new retirees spend time unraveling the things they’ve done during their working years. This includes the complex entities they’ve built, to save on income taxes or protect assets from business liability.
Often, it is prudent in retirement to start dissolving those entities, in order to pay taxes in a lower bracket and simplify estate plans for other family members. Yet this unravelling can be a multiyear project that is much more than just a financial exercise. The paperwork and filings require mental and physical energy, and often a team of advisors that includes a financial planner, CPA and attorney.
From our experience, people who have retired from running larger businesses generally have little trouble with this concept of forming a team to manage complex issues. They have been doing that for much of their careers and usually are quite adept at assembling a good, professional team and delegating job assignments as necessary.
Smaller business owners, on the other hand, often try to take on too much alone. These owners, unlike their counterparts at larger companies, are used to doing things themselves. Once they have moved on from their companies, they feel that because they have extra time, they may as well keep operating, post-career, with that philosophy.
However, these tricky financial maneuvers require professional expertise to realize the best results. Your investments, taxes and estate planning is not a hobby.
FALLING INTO FINANCIAL TUNNEL VISION
Another phenomenon with some business sellers is concentrating their investments. Typically, they have accumulated sizable wealth from what they see as a single investment, and they consequently view that single-investment mentality as the proper methodology—finding something good and putting a lot of resources into it.
However, some portion of the returns in their business were actually unpaid wages. For example, if an owner also served as CEO, his or her wages for that position were saved.
Additionally, owners will have had much more control in their business than they do in most other investment situations. That’s why diversification is the better course.
For all these reasons, a reputable wealth management advisor can help you prepare for not only the financial ramifications of selling your business, but also the critical nonmonetary considerations, as well.