How to Exit Well: Aligning the Sale of Your Business With Your Personal Financial Plans

Written by Josh Reidinger, CPA and Justin Russell, CIMA on October 23, 2019

A multitude of factors go into a single business transaction. When it’s time to sell their company, some business owners spend years preparing—and rightly so. A deal requires strategic and meticulous work. But what does all of this work mean for a business owner when the deal is complete?

The transition from owning a business to life after selling that business can be a challenging one to navigate in many different ways. Because many business owners often pour their life’s energy into a company’s growth and success, the topic of selling the business can be a hard one to approach, especially when it comes to what priorities, investments, time and resources look like post-transaction.

So, if you’re planning on selling your business, what can you do in order to exit well? Below, we’ve outlined three recommendations for when business owners are considering selling.

Access additional recommendations for making strategic decisions about your personal finances when selling your business in Warren Averett’s podcast episode: Don’t Let the Sell Run Dry.

1.     Start Planning Early.

Unfortunately, many business owners don’t begin planning their financial strategies early enough, which may prevent them from taking advantage of certain opportunities. We recommend that a business owner begin planning at least five years before an anticipated transaction in order to ensure everything is in order and to get the highest valuation for his or her business.

Planning early can help you strategically position yourself and optimize your financial life post-transaction. For example, some transactions are higher than owners had previously anticipated, and without the proper planning, this seemingly good news can present challenges—especially when it comes to estate planning. Those who plan far enough in advance may be able to transfer a portion of their business several years before a transaction at a substantially lower amount, ultimately reducing their estate taxes.

2.     Evaluate Your Investment Risk Tolerance and Risk Capacity.

Because many business owners are so deeply involved in their company’s operations and strategies, they may not objectively consider the risk associated with their business. However, when it comes to considering your finances post-transaction, you should begin evaluating the risk and return characteristics of your business just like you would with any other investment.

It’s important to consider ahead of time how much entrepreneurial risk you’ll want to continue to take after you sell your business in comparison to how you much you will want to allocate to more traditional liquid investments. (Serial entrepreneurs—those who begin businesses and sell businesses regularly—in particular may not consider when it’s an appropriate time to take some risk off of the table.)

This decision about how and where to invest after selling your own business is typically best made, and options are best evaluated, with a trusted financial advisor to help guide you in regard to your individual preferences and goals—especially for those business owners who have had all of their wealth concentrated in their business. The most important objective is to understand the balance that is appropriate while considering your goals and objectives.

Learn more as the authors of this piece discuss selling a business and evaluating risk in this episode of Warren Averett’s podcast: Don’t Let the Sell Run Dry.

3.     Consider Your Charitable Giving in a New Light.

Selling your business is an opportune time to consider, evaluate and act on your personal philanthropic values. While many business owners are already engaged in some form of charitable giving before a transactions occurs, we see that business transactions often present owners with unique opportunities to accomplish new things through their charitable giving.

For example, as part of the process of selling a business, we recommend that business owners talk to an advisor about the possibility of initiating a donor advised fund or a foundation as a vehicle for their charitable activity. Donor advised funds in particular can make it easy to create a charitable fund for your family; they come without the tax-reporting requirements and public records that are associated with foundations, and they can provide an effective avenue to coordinate your philanthropic giving.

Navigating What Selling Your Business Means for Your Personal Finances

The above recommendations for creating personal financial strategies when selling a business are among the most common pieces of advice that we give to clients, but it’s important to remember that selling a business is different for each business owner, and every situation is unique. We also recommend that you find an advisor who can help you circumvent obstacles and weigh options as you make strategic decisions that impact your future investments, giving and financial legacy.

Click here to connect with a Warren Averett advisor who can help you start the conversation.

Disclosure

The Wrap Season 1, Episode 10

Back to Resources
Top