The process of selling your business can be hectic and all-consuming. In fact, the pace often seems to accelerate as you get closer to the actual sale, leaving little or no time for anything else. But it’s important to try to take the time to reflect before the sale (or early in the process) about the changes it may cause as well as your wishes for the transition and goals for the future.
- Prepare for how long the transition will take. For some transactions, it can be a matter of weeks, while others may involve a transition that lasts months or even years. If you plan to stay on, it’s important to use the time before a sale to chart your future involvement and set your own expectations, as well as those of your team.
- Try to consider how you would like to spend your time and energy after the sale. Think about a framework for the activities you would like to pursue after the transaction. Consider researching philanthropic opportunities, mentoring programs, passion projects or even new entrepreneurial ventures.
- You needn’t obsess over every detail or look too deep into the crystal ball. After all, you want to enjoy your newfound free time and explore opportunities. But a small amount of planning can help mitigate sudden feelings of uncertainty for you, your family and your organization.
Shifting Your Social Network
For many business owners, running a company is a labor of love; they spend large parts of their lives entrenched with colleagues, solving problems and celebrating wins. Employees, clients and board members often become lifelong friends, which can pose a challenge during a transition: Now that the relationship is shifting, how can you stay connected? Will you draw boundaries about discussing matters related to the business? Assessing the social impact of your transition from the business–and having preemptive conversations–can help you move forward and approach new opportunities without uncomfortable or time-consuming entanglements.
You may also want to consider how new or existing networks can help you start pursuing your post-transition goals such as volunteer opportunities, mentorship and new business ventures.
It’s also important to consider the social network within your own home. Selling a business can affect your relationship with a spouse and children—typically for the better. You can take that vacation you’ve been putting off and spend more time with the kids or grandkids. But be cognizant that you may be spending more time in their social networks, so it’s important to discuss expectations and boundaries.
Finally, be mindful that selling a business may change the tenor of your conversation with family members. Naturally, this may bring up questions about the transfer of wealth and estate planning considerations, so be prepared to discuss the impact of the sale on those important topics.
The good news is that successful entrepreneurs bring an invaluable toolset to these transitions and discussions. Being inquisitive, resourceful and determined can lead you to the organizations and people that will support this new phase of your life.
Planning for Your New Financial Picture
With a transaction of this magnitude, you and your family may have an entirely new financial paradigm and level of wealth. Careful pre-transaction estate planning can create a secure future for your family. For those who wish to transfer substantial wealth to descendants, thoughtful pre-transaction planning may reveal significant opportunities to do so with favorable gift tax results. It can also establish and fund significant charitable vehicles for future philanthropy. Before the sale, you may want to establish a target annual spending amount including expenses that were previously covered by the business.
You will also need to consider—and discuss with a Financial Advisor—how this liquidity event affects your investment strategy. With a significant amount of assets identified as long-term or legacy assets, a large portion of your portfolio might consist of alternative investments. Alternatives often have a low correlation with traditional markets, spreading your risk. Of course, due diligence and understanding of these alternatives are key. Your financial planning may also require considerations for tax efficiency that align with a new set of goals.
Even for those who do not wish to transfer substantial wealth to family or make substantial charitable gifts, the increased liquidity that results from a business sale may provide opportunities for meaningful gifts, whether to family members or philanthropic causes. Assets can be used to fund the purchase of a new home or college tuition for children and grandchildren, for example. New assets can also enable you to establish a philanthropic vision—or supercharge an existing one.
As your focus and needs change, it’s important to reengage your Morgan Stanley Financial Advisor so they can adapt your plan to your new reality and goals.
