This blog post is an excerpt from the Trelus Transition Readiness Webinar Series. To access this webinar and the full library of Trelus resources, create your free account here.
The sale of your business affects more than just you and your employees. It can have a huge impact on your spouse, children, grandchildren, and any other heirs or close family members who are a regular part of your life. It’s important to think of their needs during the selling process.
But you may not even know which needs to anticipate and what pitfalls to guard your family from.
Eric Dunavant, president and CEO of advisory group Paradiem, advises families on how to manage finances and wealth in ways that align with their values. He has helped many business owners through the sales process and all the family strains that can come along with it—including simmering resentments, differing ideas on how to use wealth, disappointment at the ultimate sale price of a business, and more.
Here are three things Dunavant says your family needs you to realize about selling your business and how it will affect them.
1. Selling your business may impact you mentally and emotionally.
Dunavant has observed that owners tend to put more thought into the financial side of the sale and much less thought into how they will feel once it’s done.
Obviously, your financial situation is important and requires careful planning. But owners who sell are often blindsided by the emotional and psychological adjustments they must make, and that can have a trickle-down effect on the family.
“I would just encourage you to not underestimate how difficult that change in identity might become,” Dunavant says.
You’ve spent a significant amount of your waking hours caring for the business. You have occupied the role of owner and boss and accepted the responsibilities that come with that. When that aspect of your life no longer exists, what will you do with your time? What will your daily habits look like, and how will they blend with the established routines of your loved ones? If you struggle with that transition, your family will be affected emotionally, too.
Usually, says Dunavant, business owners adopt one of three postures toward post-sale life.
- They retire. They plan to lead a life of leisure and hobbies.
- They rehire. They go to work for someone else.
- They “re-tire.” The Paradiem team coined this term to describe former owners who intentionally take off the old proverbial “tires” they were using to travel the road of their former business, and put on “new tires” to prepare for a new journey.
In Dunavant’s experience, those who retire eventually get bored, and those who rehire may be less-than-satisfied with life on the “other side” of the desk. Those who “re-tire” tend to have the best post-sale experience. They might be moving on to a new business idea, a life of volunteerism or service, or some other endeavor that makes them feel purposeful.
So plan ahead for what your post-sale purpose will be. Don’t wait around to see how life shakes out after you step away from the business. Even if you decide to retire from full-time work, make a plan that will keep you moving forward. You, and your family, will be glad you did.
2. Unexpected challenges may crop up in family relationships.
Business owners approaching a sale frequently look forward to the increased time and energy they’ll have for their families—as well they should! Having more time for loved ones is a wonderful gift.
But all that “togetherness” can turn rocky if there are unresolved issues lurking in family relationships.
In the thick of owning and running a business, disagreements and misunderstandings with loved ones may have been pushed to the back burner. You might not notice them simmering quietly in the background when you’re being pulled in every direction by work. But when the business no longer demands your time and attention, those rifts can suddenly become dominant in your life and demand resolution.
Money is often the catalyst. If there are disagreements about how much you need to live comfortably, how you will spend it, or what values your family will prioritize, money will make those disagreements more apparent.
“Money doesn’t cause problems, but money reveals and magnifies the smallest little things that we don’t even realize are going on,” Dunavant says. That’s why you need to confront the problems before you come home from your last day at the business. “The families who navigate that successfully are the families who get in front of that, who start thinking and having conversations about how we might talk through that.”
But how to do that? Dunavant has his clients sit down with family members for frank discussions periodically throughout the sale process. Each person gets the opportunity to talk through what they’re feeling and what they need and want, including expectations about how money will be used. Dunavant suggests including your spouse, your adult children, and other adult family members who are a major part of your daily life. School-aged children and younger teens may not be ready for these adult-level family meetings, but parents can still encourage open communication with their children so they can understand their perspective.
3. You can minimize the cost of selling with the right plan in place.
The money gained from the sale of your business will affect your loved ones in tangible ways. Your entire family has a vested interest in trying to minimize the cost of selling.
Admittedly, the tax considerations involved can be confusing. That is why it’s crucial to get a knowledgeable, experienced tax advisor on your side. They can look at your unique business situation and suggest strategies to minimize taxes and make sure that as much money as possible is directed to your goals and values rather than toward the IRS.
Dunavant urges business owners not to “go it alone” when it comes to taxes. There is no one-size-fits-all advice for how to optimize your tax situation when selling. You don’t know what you don’t know, and what you don’t know can hurt the bottom line.
Any money that could have been protected with the right steps, but wasn’t, is now money that will not benefit your family or your heirs. It will not go toward the charitable cause of your choosing. Every dollar paid in taxes can never be used for your benefit and values again.
Care for Your Family With A Plan
Arming yourself with information and a plan of action is the best way to meet your family’s needs as you exit your business. Decide what you want post-sale life to look like, how you will nurture your relationships during tense moments, and how you can maximize the financial benefit to your family. Laying the groundwork well in advance of your exit will ensure your ability to do these things.
With these elements in place, you can enjoy the wonderful advantages that the sale of your business will bring to your family.
Trelus is a digital, subscription-based platform designed to equip business owners to have a more holistic and human-centered exit journey. Start your journey here or schedule a demo and confidential 1:1 goals discussion here.