Selling your business is not only a financial decision but also an emotional one, which is something that can sometimes overwhelm a seasoned entrepreneur. When you start and run a business of your own, it becomes a part of your identity and there can be difficulty trying to separate it from everything else in your life.
So, when you’re thinking of selling your business, it also feels like you’re also giving away a part of yourself.
All of a sudden, a huge part of the net worth that once was a single possession and under your control-becomes a varied, liquid collection of possessions, which you have to invest in the market.
If such is the case with you, then you need to prepare yourself to take on those financial outcomes of selling your company. This mainly comprises of comprehending your tax liability coupled with your sale, settling for well-structured agreements, exiting your business on favorable conditions, and preparing your business for the change of proprietorship.
Nonetheless, you also need to pay keen attention to the impact it could have on your personal life. Having spent years being a business owner, you ought to think really hard about your future. Do you intend to look for a new job or business opportunity? Or is the plan to retire? Have you put some serious thought into how you’ll be investing your assets yet?
One of the most crucial aspects to consider is how the sale of your business will impact your loved ones, especially if you have family or friends tied to the company. It can be particularly tricky if you have children or partners working within the company.
Other things to consider – do you need to place a governance plan in order to secure your family? Whilst it might seem that the number of possibilities is never-ending, a carefully executed plan would make the entire process smoother, so it’s more than worth putting some time and thought into it.
Here’s how you can prepare yourself for such a huge financial windfall:
Prepare The Family For Money
The best way to prepare your family for the possible implications of selling the business is by creating a cash management plan – this should contain clearly defined steps and instruction so that your loved ones understand why cash management is so crucial at this point.
One of the best ways to make sure that your kids are able to handle money is by involving them in doing so at an early stage.
Ideally, before you begin with the sale of your business, you must address some vital questions, like:
- How much money do you require to maintain the lifestyle you plan on leading?
- How much money would be sufficient for your kids and grandchildren?
- Would your children be able to manage the money in your absence?
- How much money needs to be spent elsewhere, such as charity donations and so on?
The answers to these form the basis of your cash management strategy and knowing the answers to these important questions will ensure you end up with a deal that works well for you.
Finally, you must never forget to discuss the importance of dealing with money sensibly and make sure everyone is aware of the implications of things that are not handled as they should be.
Prepare a proper strategy that follows a set timeline so that you’re sure your family is more than well prepared for when you do eventually decide to sell up. It may take a little time to get the right plan together, but doing the legwork in advance will make things far easier when the time finally arrives.
Keeping both yours and your family’s desires in mind, you can start making decisions regarding when and how to move ahead with your business sale and of course, how you’re going to spend the money you get from doing so.
Whilst your intuitions might be telling you to invest your windfall immediately and put it to work, it might not be the right thing to do.
Remember that what you make from the sale of your business could be a representation of everything you’ve worked for your entire life, so spend it wisely!
Due to the fact, the market is constantly fluctuating, you may see the value of your money rise and fall, which can be a little traumatic at times.
One way to address this would be to ease into the market with the help of a pound-cost typical strategy, putting in fixed amounts of money on a daily schedule over a particular period of time and then spreading the investment to lessen the impact. This way, you’re less likely to take a financial hit should things go wrong.
To begin, you could simply place your finances into a bank an account as a way to build interest from your money. You can do this whilst your deciding on what the next step may be.
It might be worth appointing a wealth manager at this point – they will be able to assist you in achieving your financial goals and can advise you on how to deal with the complicated transition process.
However, if you’re feeling ambitious and don’t mind dabbling with a little risk, you can set aside 5-10% of your business capital in order to invest, whilst keeping a bulk of funds with the wealth manager.
Another option is to start your own family office – that way, everyone can get involved.
This office would let you have control over all the important decisions, whilst you delegate the complexities of handling wealth to some investment experts. If you don’t want to devote all of your money to settling up shop in an office, there is the option of property finance.
There are several worldwide wealth managers who can offer multi-family office services. They can provide you various services that are cost-effective, such as co-ordination of guidance, trust and estate planning, and investment management, amongst other things.
Plan Carefully
The sale of a business must be approached with the same care that was required all those years ago when you were first starting off. You can seek the help of your family, create a complete plan guiding the actions and decisions you take, and list the assistance of experienced advisors.
Even your skills, which helped in expanding the business, can and should be used to manage processes leading up to and after the sale occurs.
Conclusion
Ultimately, what you do after you sell your business is entirely up to you, but there is certainly no one shoe fits all option to run with.
The first thing you should do before moving forward is to create a well thought out plan that has the answers to all the questions you might have. And if you can’t answer them, find someone who can.
That way, your decision can be tailored to meet specific requirements, which will hopefully ensure you don’t make any knee-jerk reactions.
Moving gradually and diligently will mean there is little to no chance of making any big errors, which is exactly what you’ll be aiming for regarding the future of you and your family.