Next after selling your business
One of the first things I find my business owners do after listing their business for sale with me is cut back their efforts to grow and maintain their business. Why keep trying to make your business better if you will not experience any of the rewards and the benefit will all go to the buyer?
The reason to keep working the business as you would normally is that it usually takes a long time to sell a business. Prior to the Great Financial Crisis (GFC) starting in 2008 it was thought it took about 6 ½ months to sell a business if it sold. During the GFC it grew to taking about 8 months before a business was sold but that was only if it sold. It’s reckoned only about 25% of businesses ever sell; so the success rate of selling a business is not that high.
Next steps after successfully selling your business
If you successfully sell your business, there is as much energy and effort required with your next steps as running your business and then navigating through the process to get it sold. And yes, selling a business is a demanding and emotional process. What most business owners do not do is put together a solid plan for their future and decide their next steps. Sure you can worry about this after you have sold. Here are 8 suggestions so you can do some planning and do things, as I like to say, from a position of strength.
- Once you close escrow and the sae is therefore final, it’s time to “smell the roses” again. I just spoke with the owner of a medical practice I’d sold for him and he said it took about 4 months to let everything go and feel ready to look for and embrace new opportunities. Bottom line: Be patient with yourself while you adjust to your new reality.
- Relax; it’s now literally in the bank. Prior to closing the sale of your business you had a net worth. After the closing of the sale of your business your net worth hasn’t changed. Simply put, your net worth is now much more secure because it is in a liquid form sitting in your bank account rather than tied up in that asset you had called your business.
- Put a financial summary together. To be successful running your business you had to be organized. Now your primary asset, that is, the money from the sale of your business is now liquid, take the time to organize a summary of your assets and liabilities on a personal balance sheet so you have a starting point.
- Putting a financial summary together will extend to your estate plan. It’s probably been years since you took the time to review and update your estate plan as you kept telling yourself; I don’t have the time. Guess what, you now have that time so dig in and learn more about estate plans and how they are such an important vehicle of good financial planning. Visiting your estate plan will trigger other items to address including life insurance, charitable contributions and your other personal assets and priorities.
- Put your money to work on your new balance sheet. When you owned your business you were not afraid to talk to business coaches, sales and marketing experts, bankers, attorneys and CPAs to name a few. Look for the help of a wealth management professional to manage your new found liquid asset. Yes; you can manage this asset yourself. Why not look for professional advice and take your time doing it. You now want to sleep well at night so make sure you get the advice that suits your personality and fits your risk profile. Don’t forget you may need both a personal balance sheet and one for your estate plan if this has been put together. Balance sheets help identify priorities and what needs to be worked on. Hiring the help of a part-time bookkeeper to keep it all straight may also be a good idea especially at tax time when you have to file all those tax returns.
- As you have no doubt heard, there are only two certainties in life and they are death and taxes. Now let’s not get morbid and worry about death as that will take care of itself. However, as we said in number four above about putting your money to work, let’s try and keep more of what you make by getting the right advice. This should have been looked at when you were selling your business but now is the time to revisit the amount of tax you have to pay and follow professional advice to get it as low as possible. Your assets look much better on your new balance sheet than liabilities to pay taxes. Plus the tax planning you need to do is not just for the current year; it’s for at least the next 5 years and longer depending on those goals you wish to achieve.
- Talk to your family and friends. Now your business is sold, you have that time you never had to talk to your family and friends and really listen to how they are doing. Just as you now are able to listen to what’s happening in their world, tell them about your new reality. It may even mean talking about all those decisions you made during the sale process so you can clean up any misunderstandings that you don’t need to have linger.
- Now your business asset is liquid be prepared for requests for help from family and possibly good friends about a loan. Are you willing to lend to family and friends? If so, are their different amounts for children, grandchildren, extended family members and friends? Does your loan come with paying interest? If so, how much, when and how should it be repaid? Is the loan on a written document and if so, who creates that document and who tracks the repayments? Does the loan have to be covered with a security? You have probably already learned that some people when borrowing money think it’s no big deal for the lender to provide them with a loan; or more importantly with the need to repay the loan either on time or if ever at all. There are lots of complicated issues lending money to family and close friends. Have all your answers before you start as you will probably want to be consistent with all loans you make.
Owning and running a privately held business is demanding with all the moving parts. Eventually selling the business is much more demanding and exhausting especially as most business sellers are not as young as they used to be. Once a business is sold its then time to look at their next career with all the challenges and rewards that come from being able to try something new. Unlike your previous careers, this one you get to plan and enjoy and do on your terms which is probably about as an exciting opportunity you have had in a long time.
Are you thinking about selling your business? Would you like to know the value of your business? If you would like more information please visit my website Business valuation.
For more immediate help you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.