Most business owners have dedicated a large portion of their lives towards growing their businesses. They have made countless sacrifices along the way. Even though many also get caught up in the day-to-day stresses of their companies and get burned out, their ventures usually start out as a labor of love. Because of the intent focus required to keep the business operational and growing, business owners often forget to check in with themselves to see if the business still aligns with their personal goals. Consequently, they are often not prepared for the next stage of their lives when it’s time to exit their businesses. Properly planning the next phase of your life is a crucial part of exit planning that you must start several years in advance.
Avoiding Seller’s Remorse
Business owners typically experience seller’s remorse when they don’t have a solid plan for what to do with themselves after the sale. The financial impact of selling a business is important, of course, but usually remorse comes from the inability to manage newfound freedom. Sellers also often feel a loss of identity once they are no longer running a company.
A very small percentage of business owners actually have a formal “life after business” plan. Many lack the time to engage in outside hobbies and interests. According to a Small Business Time Management Survey conducted by the National Federation of Independent Business, the largest small business association in the U.S., 71.1% of members take less than 10 days of vacation per year, despite the ability to set their own schedules. As you start to gradually separate yourself from your business and prepare for your exit, dedicate one day a week towards experimenting with new hobbies, spending time with family or connecting with friends. If you have a few years before you’re ready to sell your business, use this time to develop your personal life so you don’t miss the business as much after you leave it.
Figuring Out the Next Stage
It might be tough for you to see it now, but you are more than just your business and need to consider how to develop multiple aspects of your life. Leaving your business is a process that doesn’t begin or end with the day you close the sale. You must allow sufficient time to develop your transition plan. Ideally, you would want to take a few years to do this, while you also prepare to list the business for sale. While considering both personal and financial aspects of your life, you can begin the process with the following steps:
- Identify your goals and objectives for each area of your life
- Know your options and document the pros and cons of each
- Identify any fears, concerns, or other barriers and work to address them
- Outline the criteria for a successful ownership transition
- Determine a budget and financial plan to sustain your lifestyle after selling
You’ve gotten used to being in charge and dealing with the ups and downs of running a business. When it’s time to walk away you won’t be able to do any of those things anymore. This can be a difficult thing to deal with, so do not overlook these steps. It could take time, but by gradually spending more time away from your business and planning for your transition, it will be easier to envision yourself without it.
Without a business to cover your regular salary, you must budget for the next phase of your life as well. Determine how much you need from your exit to meet your financial goals. Most business owners are looking for financial freedom post-sale, so work becomes a choice, not a necessity. Consider how much you will need to maintain the lifestyle that you want to have after selling. Be sure to include the various lifestyle subsidies that your business currently provides. Relying solely on the sale of the business to meet your financial goals is a risky strategy. Make sure you meet with a financial advisor to help you find the most efficient, tax-favorable way to build wealth outside of the business. The earlier you begin the better. Take advantage of the time you have if you don’t plan on leaving the business for a few years.
It’s important to give proper attention to every facet of our lives. In order to stay fulfilled and enjoy yourself, focus on how you can re-balance your life with your business out of the picture. You need something to redirect your energy towards without having to commit to the daily grind. Some ideas to consider include:
- Focusing more on your physical health
- Seeking intellectual stimulation
- Volunteer or philanthropic works
- Spending more time with your partner, spouse, family, or friends
- Pursuing a new passion
- Moving to a new city
Take this opportunity to craft your ideal life. You may not be able to do it all at once, but you’ll have contingencies in place in case something doesn’t work out. Much like financial planning, time is on your side. Plan and begin working on these objectives well in advance of your exit and you’ll have a smoother transition.
The First Steps
One of the most important and necessary things you can do to kick-start your exit plan is to find out how much your business is worth. An experienced business broker can help you to determine the true market value of your business. This will give you an idea of how much preparation is needed and establish a timeline for your exit. Whether you are looking to sell, or transfer ownership to a family member, the process can be lengthy, so be prepared for some long-term planning. Once you have established a timeline and know where your business stands, you can start setting your personal and financial goals. A good broker can help you to set attainable goals and assist you in guiding the business towards them.
After working so hard to achieve business goals, you deserve to meet your personal goals as well. Preparing for life after selling your business is about determining what is most important to you, rediscovering your passions, and redirecting your focus to those things. This preparation helps to reduce the potential for seller’s remorse and improves your chances for a positive outcome.
Are you looking to sell your business in the next few years and need some assistance with exit planning? Corporate Investment Business Brokers (CIBB) has been helping Southwest Florida business owners plan for the next phase of their lives since 1986. Our experienced brokers will advise you through the process of preparing to sell your business, no matter how much advance planning it takes. Our process begins with a free business valuation and no-obligation consultation. Contact us to get started.
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