What’s Next? – Plan For Your Next Act Before Selling Your Business

After selling your business, you might not be looking to “retire.” So, what is your plan for the next act of your life? According to our 2019 Nebraska State of Owner Readiness Report, 41% of business owners have done “no planning at all” when it comes to their life after business. Their only plan is to “retire.” But what does that retirement look like? Retirement is not simply golfing every morning. Will you participate in philanthropic efforts? Maybe you’ll start another business or become a consultant for other owners. Without a proper post-business plan, many business owners regret leaving their business. Don’t let that happen to you.

What Are My Exit Options?

For many entrepreneurs, being a business owner is part of their identity. Many consider their business their life or at least a significant portion of it. Being an entrepreneur is not just a job, but a state of being. In our Exit Planning In Action Webinar: Flight Paths – Lessons Learned About Life After Business, UBS advisors, Christie Olson and James Jack, shared their experiences working with business owners on their exit plans and post-business life. Barbara Roberts, author of the UBS Flight Paths – Selling a Business is Just the Beginning White Paper,  said entrepreneurs “began their business to solve a problem, not to become rich.” Christie Olson says that very few business owners sell their business and “go off to live on the beach.” Business owners have many considerations to make before exiting their business, most importantly: what are you going to do now?

What Type of Business Exit Are You Considering?

Are you transitioning from being the owner and operator of your business to strictly an Owner or Founder and Board Member role? How will this transition look for the future of the company? Planning to exit your business can be stressful, especially for owners who are spending most of their time running their business. An owner’s business is like their child, causing owners to become rightfully stressed at the thought of selling. At EPI, we provide education around eight exit options, four internal and four external.

Internal Exit Options

Intergenerational Transfer
Management Buyout
Sale to Existing Partners
Employee Stock Ownership Plan (ESOP)

External Exit Options

Sale to Third Party
Orderly Liquidation

Learn more about these Exit Options in Walking To Destiny.

How Will You Spend Your Retirement?

Do you plan on traveling and enjoying the traditional “retirement” lifestyle? If so, do you have the personal finances to sustain 20-30 years of this lifestyle? An effective exit plan incorporates your business financial needs as well as your personal and personal financial needs. Chris Snider writes in Walking To Destiny, “Many (owners) wander around for years, wondering what to do with their life. On the contrary, owners who have a written plan for what they want to do next and have taken the steps to position themselves have wonderful next acts.”

According to Laura Tarbox in an article on Market Watch, “Over the years, several of my clients have retired too early, and have then regretted it for years to come.” This, she said, is probably most common among business owners, whose identity is tightly intertwined with their business. “After selling the business, it often seems there is no amount or variety of nonprofit or consulting work that brings them the same satisfaction once derived from running their business.”

Retirement Does Not Mean You Have To Stop Working

Retirement does not mean you have to stop working. In fact, some owners use retirement to begin their passion project, start a new business, or do part-time work. Ron Gonen said in UBS Flight Paths – Selling a Business is Just the Beginning, that he felt lost after the sale of his first business, one that he had founded and worked in for seven years. He recommends to other exited owners to be “patient and focus on what you want to do next. It may take a bit of time, but then you will experience that feeling of doing something new or something substantive again.”

Help Owners Thrive in Business: Become a Business Consultant

Chris Snider writes in Walking To Destiny, “Owners are not the kind of people who sit around much. We are doers, we are busy, we need to be engaged in something.” For this reason, “retired” entrepreneurs often spend their next act working on another business or assisting business owners with their business. 

In our 2019 Nebraska State of Owner Readiness Survey, 21% of owners stated that they planned on becoming a business consultant to help other business owners on their growth journey. Entrepreneurs have a lifetime of experience that can be beneficial for owners who are looking to build value in their own business. 

According to the Harvard Business Review, “The vast majority of senior professionals don’t want to “retire.” They have interesting, fulfilling work that they’d like to continue — just not at the frenetic pace of top corporate jobs. That’s why so many, lured by the promise of flexible hours, higher rates, and location independence, are intrigued by the idea of becoming a consultant or coach when they retire from their ‘official’ career.”

It can be difficult to differentiate yourself from the field of consultants and executive coaches, the majority of which are 50+ years old. We recommend highlighting your specific experience and industry specific credentials. The Certified Exit Planning Advisor (CEPA) Credential is perfect for retired owners looking to be business consultants. CEPA offers business owners with ways to create greater efficiencies within their company, create a greater work/life balance, and build owner independent businesses. 

Charitable Giving: Finding Your Passions and How To Support Them

Charitable giving is a component of retirement planning and exit strategy that most owners agree is important. However, failing to properly plan for the amount you would like to set aside for charitable intent can cause rifts in your financial plan. Before exiting your company, consider what causes are important to you and your family. How would you like to support them?

The UBS Flight Paths Report shared the story of Gary Mendell, the Co-Founder and former CEO of HEI Hotels and Resorts and Former President of Starwood Lodging Trust. Gary left the hotel business after his son died of suicide after battling addiction and began Shatterproof. Shatterproof is a foundation that works to revolutionize addiction treatment, end the stigma of addiction, and empower and educate communities that have been impacted by addiction.

In an article published by Forbes, research shows in the first five years of retirement, the rate of charitable giving remains stable for single women and married couples, whereas single men become less generous overtime. For example, “At retirement, the survey found, about 75% give to charity. But by year five of retirement, only about 40% do.” With a proper plan for contribution to charities or even the creation of your own foundation, your charitable giving can remain consistent.

The Importance of Financial Planning

Financial planning provides comfort for business owners when deciding their next steps. It especially helps owners to determine what is possible for them after liquidating their business. Defining your financial needs in retirement is a different way of thinking about wealth and cash flow.

Steve Parrish, Co-Director of the Retirement Income Center at The American College of Financial Services, says “The age 65 rule of thumb is also losing meaning because retirement has become more of a process than an event. For many, the days of a retirement party, a gold watch, and trip to the rocking chair are gone. Retirement may mean leaving your career job but picking up part-time work.”

James Jack, Executive Director and Head of Business Owners Client Segment at UBS, says that financial planning “is not just about the numbers, it is a psychological experiment. Have an empathetic connection with your clients to have a better relationship and provide better outcomes for your business owner clients.”  

Working with a Certified Exit Planning Advisor (CEPA) will ensure that an owner’s business, personal, and personal financial needs are met. Spend retirement doing something you are passionate about without regret by planning ahead. 

Become better educated about the Exit Planning Process and how to effectively plan for your next act by becoming a Certified Exit Planning Advisor.