Sell a business, but plan ahead

The aftermath of selling your business can be like a game of musical chairs. What will you do once the music stops? The chair you should be looking for is twofold.

First, you should look to solidify your retirement income unless you do not plan to retire. There is no reason that a well-run business should not be the owner’s most valuable asset that can be used to fund retirement income. Second, you must determine where you will spend your time once you no longer have an enterprise to run. The emotional impact of selling a business is often overlooked by the owner.

We have found many of our business owner clients disappointed that the proceeds from the sale of the business doesn’t come close to generating the type of income they were accustomed to receiving while operating their business. Thus, we feel it is important to work with a certified financial planner prior to selling. This professional will work with the client to determine if they can afford to retire/sell. If so, they will create a retirement income plan of action for the business owner to follow.

This plan should include a complete inventory of the business owner’s assets, liabilities and sources of income such as Social Security and rental properties. In addition, the plan should include a list of the business owner’s spending goals in retirement. These spending goals should be defined in today’s dollars after tax with an inflation rate built into the assumption. It is the planner’s professional responsibility to help the client figure out how much money they will need. We define this as the total amount of money needed to fund retirement. The plan should be tested for its probability of success once assets, liabilities, sources of income and spending goals have been identified.

There are two outcomes that are possible. The first is that the probability of success of the retirement income plan is highly likely. In this scenario, the advisor can model additional goals or higher spending targets for existing goals. We refer to this as the retirement income plan “cushion.” Our most successful clients have confidence knowing a cushion exists in case something unexpected happens. The other is that the probability of success of the retirement income plan is unlikely. In this case, it may not make sense to sell the business — yet. Modifications to the retirement income plan need to be made. The best financial planning tools allow the planner to “play” with the different inputs such as living with less income, working longer, taking more risk with your investments or a combination of the three.

I’m talking about actual people, not a website on the Internet. Many business owners, particularly men, have a hard time recreating their circle of friends after they sell their business. Many of their close friends they met while working at their business. They have a hard time staying in touch once they are gone from the day-to-day operations of their company. Many business owners do not know how to recreate a social network. Human beings were meant to interact with one another. We have met many business owners who did not ask “what’s next?” before selling their business. The lack of a social network is unhealthy and it can have unintended consequences. According to RetireWOW, “the divorce rate of seniors has doubled in the last 20 years.

Today, persons who divorced over 50 increased 25 percent, versus only 8 percent in 1990.” Imagine waking up one day with nothing to do or no one to visit with. This is an even greater problem if the business owner’s spouse is a homemaker. We have found that the homemaker typically doesn’t want to have their once-busy spouse hanging out at home with them all day. It is important for you to have friends outside of work.

What causes do your care about? What charities do you currently support? Community involvement via nonprofit board membership or volunteerism can be the bridge between selling your business and transitioning smoothly into retirement. Retirees with a purpose tend to adjust for the next chapters of their lives as opposed to those that do not. I’d recommend exploring organizations that you have an association. I’d recommend looking through your bank statements over the past 12 months. Who did you financially support? I’d call the nonprofit organization and ask to speak with their chief executive officer. I’ve never met one of these professionals that didn’t love to talk about their organization. You might consider setting up a meeting so that you can gather more information regarding the charity. Do they have a committee that could use the talents of someone like you?

Make sure you interview more than one organization. It might make sense for you to volunteer at both. More importantly, you may discover one organization is a perfect fit for what you do best. It is also very natural for people to build relationships with other people while volunteering. I met many of my closest friends while volunteering. I personally believe that shared values are a big part of why friendships form during volunteer experiences.

What is your handicap? Do you envision chasing a little white ball around after retiring or do you have other aspirations? We find many retirees underestimate the cost of the first few years of retirement because they have time, money and energy. We have found that many retirees, especially retired business owners, enter retirement without any hobbies. Their business was their hobby. They never made time to cultivate other parts of their lives.

We recommend that you start with the hobbies that you have done in the past that you remember enjoying. It does not matter if you are good at the hobby. It is important that you try it again to see if it makes sense to reengage in that particular hobby. If you don’t enjoy it, try something else. Most of our retired business owners love to travel. In addition, many of them bowl, ski, craft, paint, play tennis, etc. The options are endless. It is up to your imagination and willingness to get out of your comfort zone.

Many of our business owners who sell their businesses go back to school after completing the transaction. Is there a line of work that you regret not trying? If so, it might make sense to go back to school so that you are qualified to enter the industry or line of work. Online education has created opportunities that did not exist until recently.

There are many things to consider when planning for life after you sell your business. A retirement income plan is of utmost importance. It is also really important to determine how you will spend your time after you are retired. Start planning today. Don’t get left without a chair when the music stops.

Jim Marren is a certified financial planner with Raymond James Financial Services. He can be reached at


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