3 out of 4 business owners regretted their decision to sell their business just one year later, according to a study by PriceWaterhouse Coopers. That’s a surprising statistic when you consider that a business owner can receive cash or stock equal to several years’ worth of the company’s revenue. If you didn’t save enough for retirement while working, selling the business could provide more than enough in a single transaction.
It’s also surprising because retirees have learned new ways to remain active and healthy. If you love to golf, there are over 900 courses in California alone. So what’s not to be happy about when selling your business?
It turns out that selling a business brings challenges most owners didn’t plan for. What didn’t they foresee? Before we look at that, let’s consider another fact: business owners are very happy.
Business owners are happy
Survey after survey confirms that there’s a reason why owning your own business is part of the American Dream – the overwhelming majority of business owners are very happy with their business and feel that they’re happier than if they worked for someone else. (Note: if you’re unhappy being a business owner this should be a wakeup call for you to figure out what changes you need to make). It turns out that owners have it so good that it’s hard to find the same level of satisfaction in retirement.
If retiring isn’t as satisfying as working, why is that? Let’s look at some common issues that arise with business owners.
Where’s my money going?
Even if the selling price seemed like a lot of money, their lifestyle can require more money than they expected, especially after a few years of inflation. Once you stop adding to your investments and start withdrawing, you suddenly feel like you have to pinch pennies so you don’t run out of money. This is especially important if the boundary between business and personal bank accounts was fuzzy at times. Knowing how much money you need to retire comfortably is an important consideration in knowing when to sell.
Most of my friends aren’t available
For many owners, their social network includes the people they worked with and industry colleagues. They spent years developing their professional network and many of their colleagues are still working (so much for golfing every day!). This is especially important for women, who are natural social connectors in the community. After building a strong business network, how do you stay connected without the shared challenges and successes of running a business?
How do I keep score?
Business owners are typically achievement- and action-oriented people. The success of their business provides inherent satisfaction to them. Once they sell the business, what drives them?
As part of your plan to sell your business, do some soul-searching to figure out how you’re going to find the same level of satisfaction that you had while running the business. There are many more factors to consider beyond the valuation of the company, and good planning can help ensure your happiness long after the ink is dry on contract.
Gary Alt is co-founder of Monterey Private Wealth in Pleasanton, and is a member of the Exit Planning Institute.