Many of you have dedicated a significant part of your working life pursuing the American dream through business ownership. Some of you will pursue succession through family members or key executives and others believe a sale is the best exit strategy option. Selling your business is a viable succession option enabling you to harvest the fruits of your labor and investment as well as to take some chips off of the table. A few years ago, a successful client who is a franchisee in the Midwest chose to sell his business. I had the privilege of working with this couple to help them evaluate their succession alternatives. After considering several options, they ultimately concluded the best decision for them and their family was to sell the business.
Following the sale of the business, the client made the following remark: “For those of us who have been loyal to our brand for most of our adult lives, a sale of this type is very emotionally challenging for ourselves, our key employees, and our families. There are so many questions and uncertainties when you release the gravity of what has held so much together for so long. Personally, I struggled with the decision and my family and associates would not have successfully embraced my actions were it not for support from highly qualified outside consultants.” As you can see, this couple wrestled with many questions as the sale of a business is a major undertaking. Aside from the obvious financial questions and legitimacy of the transaction, those of you planning to sell should consider several additional questions such as:
- What will I do after I sell my business?
- How will I invest my time, talents and treasure?
- How much of the after tax proceeds should be set aside and invested to protect my financial security and to maintain my standard of living? After all, the business typically provides numerous ancillary benefits such as health care, automobile, car insurance, gas etc.
- How much of my liquid net worth do I want to reinvest in new business opportunities?
- How much risk do I want to take at this stage of my career?
- How will my children react to a sale of the business?
- How will my key managers’ and employees’ livelihoods be impacted?
While the sale of your business is a viable succession option, it does not remove the need to continue planning. It simply presents new opportunities and challenges. The next chapter in your life is about to begin. To quote the franchisee in the Midwest again, “I realized there is big time life after selling my business”. Following the sale of your company, you will undoubtedly be approached by family members or people in the community to invest some of your liquid assets in a new business venture or perhaps you will get the itch to start a new business yourself. Developing reasonable answers to the above questions will hopefully help you determine how you will respond to future invitations/requests and ultimately do what is best for you and your family.
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