You sold your business. What now?
Most every business owner and entrepreneur has one dream and one dream only — growing a company and making it big on the “exit.”
They imagine the day when they sell their company for cash or a bazillion shares, and then just… chill. Or buy 5 cars. Or 5 houses. Or… do what exactly?
There’s the obvious answer, which is “who cares what I do, I’m rich!” Which may be true, it is an arrival for so many. But with newfound wealth comes the concerns about who to trust, how to preserve your money, and of course, the weird family/friend interactions that can follow.
Here are 5 things to consider after you’ve sold your business.
1.) Get help. But choose carefully
Just because you sell a company doesn’t mean you know how to handle the money aspects. There are going to be tax considerations, there may be debts to address, potential stock details, and so on. You’re likely going to need help from a professional wealth manager. Act sooner than later on this, but choose carefully who you work with. There have been brilliant technologists and businesspeople of all kinds who have been taken advantage of by investment “professionals.” Choose wisely. I suggest you hire a Fiduciary. A Fiduciary is someone that MUST put the client’s interest ahead of their own. To find a fiduciary, go to NAPFA.org.
2.) Trust and estate
This step cannot be emphasized enough. Very few people want to think about their will and estate plans because let’s face it, thinking about death is depressing. But with wealth comes responsibility. If you don’t deal with it, it can cause issues for loved ones down the road.
The facts are, your estate plan including your will and insurance probably do not match your new level of wealth. Don’t worry about getting too deep into the details right away, just cover off on the basics. Make sure your estate plan takes into consideration your new wealth.
3.) Don’t blow it
Coming into money does weird things to people. There are crazy stats about folks who just aren’t prepared and spend it all. Lottery winners and professional sports players are prime examples. On average, 70 percent of lottery winners go through their winnings in several years.1
Similar results occur with professional athletes. Sports Illustrated recently estimated that 80% of retired NFL players go broke in their first three years out of the League.2
Hey, you aren’t a lottery winner and you may not be a famous sports figure, but blowing through a pile of cash in a few years can happen. Sometimes it’s because we feel liberated to not hold back on those toys we’ve always wanted. Other times it’s because we’re use to living at a certain wealth level and unconsciously the windfall is uncomfortable so you spend it. This is where a wealth manager can help.
4.) Family and friends get weird
It happens. You and a bunch of friends are at dinner, do they expect you to buy? Maybe a family member wants a loan to get a business started. Do you give one? If you do, will it set a precedent? Or what if they don’t want to pay it back because “you have enough.”
Also, it can change how new acquaintances view you. Do they like you just for your money? As one tech millionaire states, “If you aren’t married yet, good luck trying to figure out (and/or always having self-doubt) about whether a partner is into you or your money.”3
After working so long and hard on your business, there can be a loss of purpose after it’s sold. Markus Persson, the 36-year old who sold Minecraft for $2.5 billion tweeted about it; he wrote, “The problem with getting everything, is you run out of reasons to keep trying, and human interaction becomes impossible due to imbalance.”4 Feeling adrift is often part of the process, give yourself time to fall into a new routine and find a new purpose.
Everyone focuses on the big exit. The day when cold, hard cash starts raining from the skies and you go yacht shopping. Just don’t forget the other side of the equation, that there are realities of sudden wealth. Both financial and emotional. The sooner you can make a plan and get some help, the easier it’ll be to relax and take advantage of everything you’ve work so hard to accomplish.