‘I Just Sold My Business!!! … So, Um, Now What??’
[EDITOR’S NOTE: Occasionally, we get asked a question from our Vistage Connect executive community that we hand off to one of our resident experts. Today, Vistage member Wayne Slavitt tackles a recent virtual query from a CEO wanting to know what to do next when he’s sold the business…]
It was 11 p.m. the night before my largest transaction to date was set to close. While I was sitting in the office with my client, going over the stack of documents he was to sign the next morning, I looked up and noticed he was crying.
“What’s wrong?” I asked him. The purchase price was 25 percent higher than he was counting on, and all of the other terms were very favorable, as well.
“I started this company,” he told me, “and I just realized that, after tomorrow, I will no longer have a place to go each day. I built this business from scratch. What am I going to do after tomorrow?”
The lesson was clear. From that point on, I made the post-transaction issues as important as the actual exit itself.
Life After the Sale
For most business owners, selling is the easy part. If properly planned and orchestrated, the sale of a business should be a celebration and reward for the many years invested in creating a viable and sought-after enterprise.
But now that the sale has closed, what do you do?
If you’re like my client, the “what next” aspect of a sale is often not adequately considered — many more resources are expended negotiating and consummating the business sale. After all, the philosophy that “most deals don’t happen” requires a focused and concerted effort to close the transaction. And, when you consider just how many issues are involved with most business transactions, it is a wonder that deals ever got done.
So, if you’ve been successful in selling your business, pat yourself on the back, celebrate your success, and then get prepared for what many owners find to be an even more difficult project: Life after the sale.
In my experience, sellers end up doing one of the following four things after the sale:
- Stay On. In many cases, the owner wants to stay on after the sale. After taking a few chips off the table (by selling a percentage of the company), the owner is incented to remain with the company and benefit from the resources of the buyer. Most private equity firms require the active owner to not just invest with the new entity, but to also play a key role in growing the business. After all, who better knows the business than the selling owner? By providing the owner with financial incentives to stay on, the buyer ensures a higher likelihood of success.
- Fully Retire. Many business owners find themselves worn out, with no resources left to continue with the business. Age, health, the desire to travel, etc., all play a role in deciding to end a business career.
- Partially Retire. For those individuals not quite ready to play golf five days a week, a partial retirement scenario provides a viable transition. What fills up the “non-retirement” portion of the day can run the gambit from staying on with the company in a consulting role, to taking on a part-time job, to volunteering at a local non-profit.
- Do Something New. The sale of a business is oftentimes unrelated to the age of the owner. A business could be pursued by an acquisitive company hoping to expand its operations. Or a selling owner in his or her 40s could simply be burned out, having lost the passion to run the business for another season. Whatever the reasons, many selling owners find themselves in need of a new opportunity or a new challenge. Finding the spark that no longer existed in the current business will enable the seller to reinvigorate him- or herself.
So … Now What?
So, regardless of what you plan to do “post close,” what are the important factors to consider to figure out what to do now?
Among the many aspects to study, the most critical one is to determine what your needs really are. For some, the sale of a business does not generate sufficient cash flow to enable immediate retirement. For others, the thought of not working — even part time — is abhorrent. By being honest with yourself, you will identify the deficiencies that will need to be filled in your post-sale life.
Another key factor I suggest to my clients: Consider your family. How will they adjust to you being home a lot more? I’ve often felt that work was created to keep marriages alive!
Unlike the client I mentioned above, begin the evaluation process of what your new life will look like before you’re too far into the sale process. In many cases, your buyer will play a key role in helping you design the perfect scenario.
In my work with business owners contemplating their eventual exits from their companies, I now always discuss the “life after” issues up front. “What will you do after you leave your company?” is one of the top ten questions I ask in my first meeting. After all, as Fleetwood Mac once sang, “Don’t Stop Thinking About Tomorrow.” We all know it will soon be here!
Wayne Slavitt is president and CEO of The PrimeMark Group, Inc., a Southern California-based firm that provides corporate strategy advisory services. Wayne has more than 32 years of experience, with the rare combination as an adviser to and an operator of companies, and has been involved in numerous M&A and corporate finance assignments, as well as starting and running several successful companies. You can e-mail Wayne at email@example.com.