Sooner or later every business owner wants to retire or just sell his business.
For a business owner this is a huge life event. Some are very sure of their decision, while others can be hesitant. They have worked hard for years on their business. Sweating the lean times, and hoping that things would pay off. Eventually creating a thriving and successful business.
As with every life event there will be some complex decisions to be made. There could also be a significant amount of sudden wealth.
First, be clear on the reason for the sale. Why? Well, it's going to be the first question that the buyer will ask. Full disclosure can be a good friend. Here are some common reasons business owners sell:
- Partnership conflicts
- Bored to tears or no challenges
- Make a nice profit
Next, decide what you will do with your life after the sale. If you were successful give yourself a pat on the back. Now comes the hard part. Life after the sale. In my experience business owners with do one the following:
Stay on. Sometimes you want to or have to stay on after the sale. The buyer may want or require that you stay for a certain period. Besides, who knows the business better than you?
Retire. If you are just worn out, or for health reasons it is time to stop. You may be just ready to start a new chapter in life and relax. Try out a few golf courses you didn't have time for when you had the business. Maybe you would like to travel with your family.
Partially retire. If you are not quite ready for golf five days a week, a partial retirement may be for you. It could be a nice transition to eventual full retirement. You might want to work a few days to help out the new owner, take on a part time consulting job, or even volunteer at your church.
Do something new. Sometimes business owners find themselves completely unchallenged. Other times a competitor wants to expand its operations. Whatever the case, you may be looking for a new challenge or opportunity. Particularly if you sold your business while you are young, you may be thinking about a new business.
Finally, you'll need to think about your sudden wealth from the sale. You will need to set aside funds to pay any taxes from the sale, and If you are going to start a new business. That leaves the money left over for retirement. Depending on your financial situation, the assets can be invested for growth, income or even both.
If you are retiring early, you may need to generate income from the proceeds. It will be important to structure your investments accordingly. The bigger question becomes: How do I generate portfolio income in a low-interest rate economy? There are some ways to structure your portfolio for income and total return. Even if your primary investment goal is income, make sure a portion of the portfolio is in growth investments. You'll need them to ensure that your money keeps up with inflation.
The sale of a business can yield a significant sum of money. If you don't need the income, you can invest for growth. You don't necessarily have to take on as much market risk. In fact, you may want to grow your new wealth at a more moderate pace. Finding a balance of growth and income is where an experienced financial advisor can help.
Obviously there is so much to think about if you sold your business. This is not meant to be an exhaustive list of issues, but to give you a general idea of the questions that may come up. If you liked the article, you can subscribe right here for FREE! I'll deliver my articles to you via email every Friday.