Surveys have shown that up to 75% of business owners deeply regret selling their company within 12 months of the transition. When the sale of a business can serve as a once in a lifetime event and provide generational-level wealth for entrepreneurs, how is it that so many can be disappointed by a transaction that should represent the pinnacle of their success?
The answer lies primarily in three major life changes that come with the transition from business owner to ex-entrepreneur.
REASON 1: LOSS OF IDENTITY
Building a business is often compared to parenthood. Entrepreneurship likely means you have spent years thoughtfully pouring time and energy into growing your company. Many sacrifices were made along the way. There are employees, customers, vendors and a community that rely on you and your business. The journey and the dependency of others creates a sense of pride.
On the first day after your transition, a new challenge arises. People are no longer in need of your guidance and decision-making. Like a parent who enters the empty-nest phase of life, you are left with far more time than you thought was possible to re-evaluate who you are independent of your company. For many, this results in a period of grief and depression. You must come to terms with a new life and a new identity.
REASON 2: A CHANGE IN LIFESTYLE
One of the many benefits of business ownership are the financial perks. In addition to a salary and equity in your company, there are numerous tax advantages and deductible expenses that blur the lines between personal and business finances.
When your role in the company goes away so do many of the fringe benefits. In addition to the loss of salary, perks like business trips, membership dues, and car leases that used to flow through the company suddenly go away. What was once taken for granted must either be eliminated or handled on what may now be a fixed income with no tax advantage.
If you have not planned a post-transition budget, you could very well be in for a rude awakening. We recommend working with an advisor early during the operating years of the company so you are well prepared for the future.
REASON 3: NO CLEAR VISION FOR WHAT IS NEXT
When you are working 60-hour weeks and sacrificing time with family and friends, retirement can sound like a dream. However, when the time comes to move on, some are left with more time and options than they anticipated. After all, there is only so much golf one can play.
It is critical that you spend time regularly determining what drives you. The answer is different for everyone, so it requires deep personal reflection to figure out what should come next. For some it is starting another company, others charitable work, and for others its time to travel the world and spend quality time with family. Whatever your why is, spend the time now envisioning it so when the time comes you feel energized rather than left pondering the question “what now?”
THE BOTTOM LINE
Entrepreneurship is one of the great challenges in life. It certainly isn’t for everyone. If you have chosen the path, it is all too easy to become singularly focused on the company, only to lose sight of yourself. One of the best things you can do as a business owner is develop a comprehensive exit plan including a “life after business” component. In doing so, you will have the luxury of being prepared for transition and become part of the 25% that live the next phase of their life truly enjoying their legacy and what comes next.
At 3C Strategic Advisors we understand the complex topics that business owners face. If you would like to work with a trusted advisor to ensure your personal, financial and business goals are in alignment, contact us and let’s develop your exit plan together.