The Entrepreneur’s Guide to Post-Exit Planning (3 Steps for Success)
As a business owner, you’ve spent years crafting meaningful, profitable and strategic plans to ensure your organization’s success. But what happens when it’s time to step away?
After a career of entrepreneurship, transitioning from a business-centric mindset to lifestyle-centric living can be a dramatic shift—but it can also be incredibly fulfilling. Creating a plan that’s right for you and your unique goals is the key to success.
Whether your exit is imminent, or you plan to retire decades from now, consider these three essential steps to plan well for life post-exit.
1. Establish Your Priorities
After exiting a business, it’s critical to intentionally consider what’s important to you in this new season. You wouldn’t run a business without a clear plan and specific objectives. Your personal life after an exit should have defined priorities too.
Is traveling the world a life-long dream you’d like to follow? Are you looking forward to spending more time with your family? Is there a charitable cause you’re planning to dedicate your time to? Or are you most looking forward to simply having freedom from a schedule?
If you’ve had a liquidating event like a sale of a company, you may even have opportunities to invest that capital in new ventures—whether you’re involved in the actual day-to-day operations of that venture or serve as an angel investor.
Regardless of what your specific aspirations are, an exit may provide unique opportunities to follow a passion or pursue a change that weren’t available to you before, and it can be helpful to spend some time officially defining your personal goals and desires.
No matter what you choose to do or how you wish to spend your time after an exit, being able to articulate your priorities for this new stage can ultimately help you design a new scenario to effectively support them.
2. Create Financial Balance with a Practical Plan
Typically, business owners receive regular paychecks or draws from their business without touching the equity or principal of their estate. However, after exiting the business, you have the freedom to access the principal, allowing you to live off more than just your earnings.
This can understandably be a challenging shift to make for many exiting owners. Individuals who have been accustomed to closely monitoring a business’s financial health may naturally be concerned about their own financial resources after an exit.
But, with the right approach, you can resolve anxiety and foster stability. The key is to create a financial plan that can balance maintaining your lifestyle and reaching your goals with preserving your capital—whether it’s in cash or other assets.
Of course, planning of this type isn’t one-size-fits-all; it should be largely based on the unique, personal priorities you’ve already identified. You’ll want to plan well for charitable contributions, gifts to family members (including education funding), your projected expenses, your necessary liquidity and several other factors unique to your situation.
Make conservative cash flow projections to ensure you have ample funds to support your future needs in any situation.
It’s also important to remember that your financial plan isn’t complete after you’ve created it. Because financial markets, business environments and personal dynamics are always changing, it’s important to constantly be reassessing your plan so you can make adjustments as needed.
3. Protect Your Legacy for the Long Term
Most business owners want to pass along a legacy to their family, but generational wealth doesn’t happen on its own—even with good personal financial planning. To be successful, protecting a legacy requires a proactive effort and an appropriate legacy plan.
Assemble a team of qualified advisors who can help you understand the technical aspects of estate tax planning, plan for appropriate life insurance coverage and execute the essential legal documents for your estate.
And while it’s essential to implement the proper planning vehicles and tools, don’t neglect the relational and educational aspects of a legacy plan. Navigating financial education for your heirs and coordinating dynamics within your family can be just as important in the long term when it comes to successfully preserving wealth throughout generations.
Family businesses that are experiencing an intergenerational transfer of ownership have an added layer of complexity. If your direct heirs are assuming the business you are exiting, it’s also important to have intentional discussions about the transition, succession planning and legacy preservation within the business itself.
Learn More about Navigating Life After a Business Exit With Estate Planning
Whether you’ve just exited your business or if you’re considering exiting many years from now, it’s important to prioritize the planning. Planning early, and including a full team of advisors in the process of creating that plan, can help ensure that your strategies reflect your goals and best interests.
To learn more about effective estate planning and preserving generational wealth, connect with your Warren Averett advisor directly, or ask a member of our team to reach out to you to get the conversation started.
