But, the sale will end, and the future is uncertain. Will you stay in the business? If so, for how long? Will you start a new business? Or will you buy a vacation property? There are countless questions and it usually takes time to think these issues through. Be prepared for this period of transition to sometime take years rather than months. Only you will know when you are ready to return to the fray, if at all.
Research has suggested that fewer than 35 percent of business owners have a solid plan for life after the sale of their business. Simply saying go on a vacation is not a solid plan. As a result, six practical suggestions were developed. They come from two credible sources – entrepreneurs that have already experienced the “sale” and research findings. Here are the six suggestions:
1. Take a breath, a very long breath – The sale of the business can be so time consuming that, after it’s completed, it can create a “void” that will take time to replace. This transition period can take a year or more before you declare yourself “ready” for the next challenge.
2. Recognize your new reality – You are not any wealthier than you were prior to the sale. However, your balance sheet has changed dramatically. And, if you are working for the new owner, your wealth is no longer lodged at your place of work. It is at the bank! How you manage this money will change and requires careful recognition.
3. Talk to your Financial Advisor/Planner – It has been confirmed that a large proportion of business sellers “park” their funds in a checking or savings account for months to a year. In these type of accounts your money isn’t working for you, but rather against you with many times the interest on these accounts being less than inflation. Therefore, don’t wait to seek out the help of a Financial Advisor/Planner.
4. Get organized – Your money may be in several places such as a family trust, a holding company and several family accounts. Many business sellers tell us that they are overwhelmed with the paperwork and it is very difficult to “keep score”. You might want to consider hiring a part-time bookkeeper. They will more than pay for themselves at “tax time”.
5. Get an estimate of the taxes owing and when ¬ – You need to obtain an estimate of your tax liability. It may be due over several years and some may be deferred indefinitely. There are many strategies available, including insurance and philanthropy, and you should understand each. Focusing on these issues may be the best way to increase your net worth in the short term.
6. Do an audit of your current estate plan – It is very likely that your estate plan including your will and insurance do not match your new circumstances. Does your will include provisions dealing with shares of a private company now sold? Are your current executors capable of handling the complexity of your new affairs? You should make the necessary changes so that your current plan works. More sophisticated changes can wait.