Business owners: preparing for life after you sell

Entrepreneurs who poured their hearts and souls into their businesses eventually find themselves near retirement, realizing they should sell before health problems or other matters force the issue. Although many are well-prepared for the sale itself, few are ready for the next step: managing a large sum of money from the proceeds. Most don’t want to “jinx” the deal before it’s final or are still are too busy running the business. But the reality is, this will be one of the owner’s most critical – and emotional – business decisions.
Here are steps business owners can take to manage emotions while making important financial decisions:

  • Be prepared for the fact that the sale process may get emotional.
  • Evaluate health insurance options and sign up before your company coverage ends.
  • Determine your monthly living expenses.
  • Decide how much risk you can tolerate, as you might be living off an investment portfolio that can fluctuate more than the value of your business did.
  • Don’t celebrate the sale by rushing into big purchases. Instead, plan what you can afford to spend and still maintain your desired lifestyle.
  • Prepare for tax implications: The lump sum should be set aside immediately so as not to be surprised when taxes are due.
  • Update estate plans, taking into account your lifetime income needs, along with opportunities to transfer wealth across multiple generations.
  • Staying on with the company for a time? This could be a joy or a challenge, so prepare for the consequences, both emotionally and financially.
  • Determine in advance where the lump sum should be wired once the deal closes so you are not left scrambling.

Having a plan in advance will help you deal with the emotions of selling your business – emotions that can be more complicated than many other financial transactions. Taking a little time to think things through can ease the transition to your post-sale life and how you will manage the proceeds from the business you built and nurtured.
-Bruce Laning, CFA, is a principal at Bronfman E.L. Rothschild in Milwaukee.

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