Exiting a business you’ve created is a milestone unlike any other. It’s never easy selling an enterprise you’ve probably spent countless days and sleepless nights nurturing. When it comes time to let go, the liquidity created through the acquisition pales in comparison to the emotional and financial toll of closing an important chapter of your life.
However, what comes after selling your business must be planned meticulous to avoid some of the most common mistakes former entrepreneurs make. Here are some of the things retired business owners and celebrity business leaders recommend sellers do:
1. Be Selective
Selling a small or medium-sized business is likely to create more liquidity than average. Suddenly cash-rich former entrepreneurs find themselves inundated with requests for support and investment offers from friends and family.
Gracefully turning down requests for cash under these circumstances is often difficult. April Masini, an online advice columnist at AskApril.com, told US News (Aug. 27, 2014) that the best way to deal with these requests was to be firm, be polite, clearly explain how much you can afford, and offer time or advice instead of cash.
2. Invest Wisely
After selling his own business and seeing other entrepreneurs exit with hefty payouts, Yuen Yung CEO of Casoro Capital, a private equity firm, says the most successful sellers are the ones who diversify their investments and try to generate steady passive income from their assets. “Those who focused on replacing their income through investments that paid regular dividends without eating into their principal ended up using the exit as a long-term wealth building experience," he told Inc. (25 September, 2017).
Speaking to a professional investment adviser or hiring a money manager is probably a great idea even if you haven’t sold a business.
3. Give Back
Creating a foundation or charitable trust focused on issues near and dear to your heart is an efficient way to channel your newfound wealth. Former entrepreneur Bill Gates presents the best model of generating goodwill and helping the world through generosity. Others, like Jack Ma, the co-founder of e-commerce giant Alibaba and China’s richest man, have also channeled their time and resources into giving back to their community after retiring from their businesses (Henry Chu and Patrick Frater, Variety, September 8, 2018).
With careful planning and a bit of discipline, the transition from business leader to retirement could be easier and more rewarding than you expect.
The value of investments and income from them may go down as well as up and you may not get back the original amount invested.