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Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.

The Planning Business Owners Must do Before Selling Their Business

The Planning Business Owners Must do Before Selling Their Business

After growing a successful business, business owners need to start thinking about transitioning their wealth from their business to a wealth management plan designed to grow and preserve it. The sale of a business is one of the most important events in the life of a business owner, but a lack of preparation for the transition into the next stage of life could negate much of the hard work that went into building it.

With a well-conceived plan for transitioning from life as a business owner, you can concentrate on living your ambition of a good life for the rest of your life. But, it requires detailed planning with a holistic view of your financial situation and what you hope to achieve for your family and your legacy.

Having a Purpose for Your Money

Selling a business can be complicated and daunting, which is why many business owners often neglect the life-changing implications of a such a major liquidity event. It is vitally important to have pre-transfer discussions in critical areas of life planning.

Securing your financial future. There are many financial decisions that should be made prior to a business sale to effect the best possible outcome. For example, whether the property on which the business operates should be should kept in your name so your family can benefit from the rental income.

Planning for major purchases. Before splurging on big purchases after the sale of your business, make sure they are part of your shared vision with your spouse and how it might affect your future retirement cash flow.

Your ambition for a good life. After the sale of your business, what are you new priorities? What will be your purpose in life. How will you use your wealth to achieve your life ambitions? Do you and your spouse share these ambitions? These are discussion that need to begin at home, well before the business is sold.

Maintaining Your Lifestyle

For years, your business was your primary asset and a predictable source of the income you needed to maintain your life style. With the sale of the business, your balance sheet suddenly changes, requiring the careful managing of objectives where income and risk are critical considerations. This can present a challenge to families as they attempt to navigate the changes to not only sustain a desired lifestyle, but to also sustain their wealth across generations.

To be prepared, a comprehensive plan should be developed prior to the sale of the business and include these elements:

  • Clearly define your financial objectives using realistic values and growth assumptions based on risk factors
  • Design an investment and cash flow strategy to support the family’s lifestyle, while providing a safety net
  • Establish aspirational goals and generational intentions that can be achieved within the plan’s framework

Such comprehensive planning typically requires the input and coordination of advisors from multiple disciplines. Your financial advisor acts as the “quarterback” of the team to ensure the plan is fully integrated and implemented based on your vision.

Growing and Preserving Your Assets

For business owners, wealth is built through concentration, but, ultimately, it is preserved through diversification. To ensure your post-sale assets continue to grow and are preserved for future generations, it is essential to have a well-diversified investment strategy based on your specific objectives and risk tolerance. While a diversified investment portfolio may never match the returns generated by your business, it serves the essential purpose of preserving your wealth and providing a backstop for your family’s security.

Planning Your Estate

The sale of a business is a liquidity event that often magnifies wealth, requiring a comprehensive plan for transferring that wealth as efficiently as possible. Whatever estate planning considerations you might have had prior to the sale, must be reconsidered in light of your new circumstances. But don’t wait until after the sale. You may need to have trusts already in place to receive assets if you want to take advantage the tax code.

Don’t Go it Alone

There are few things more life-changing than a liquidity event. It takes extensive preparation – financially and emotionally – to ensure the successful transition of wealth so that it can be preserved and used in the pursuit of new ambitions. There is no more critical time to have a team of trusted advisors with deep experience in working with business owners – pre- and post-sale – to help manage a once-in-a-lifetime transition.


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