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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.

You want your family to benefit financially from the sale of your business. But did you know that if you only focus on the financial aspects of the sale, you’re less likely to be satisfied with how the sale affects your loved ones?

Eric Dunavant, president and CEO of financial advisory group Paradiem, has seen this effect. Paradiem advises clients on how to align their finances and wealth management with their values. Most people, Dunavant says, assume that if they build a strong financial strategy, their sale will automatically be a net positive for the family.

In contrast, says Dunavant, “eighty-five percent of the time, they discover that the current strategies, tactics, and tools [they’re using] don’t deliver the long-term vision they had for their family.”

That’s an uncomfortably large percentage of well-meaning business owners who find their envisioned outcome slipping away because they didn’t put their focus in the right place.

It’s an understandable dilemma, says Dunavant, because the system is set up to direct business owners toward financial strategy. Tax specialists, investment bankers, and other advisers are paid to help you realize the highest bottom line possible from your sale, commonly referred to as ROI or return on investment.

Dunavant advises that instead of focusing on traditional ROI when selling a business, you should think about return on intention. This strategy blends finances and family values in a way that leaves everyone happier.

What Is “Return on Intention”?

Dunavant defines return on intention as reaching a state where “the things that we are doing for the family align with the things we are doing financially.”

He encourages his clients to ask how they want the sale of this business to impact their immediate heirs and the generations that come after them, and whether the tools and strategies in place for the sale are actually serving that purpose.

In other words, answer questions about your family’s desired experience first, before you decide what strategies to use for the sale process.

This may seem like a simple answer, but return on intention involves deep discovery about your family and your values.

The Four Elements of Return on Intention

Return on intention requires you to evaluate four elements in your family’s life:

  • Values—Just as your workplace needs values and a mission statement, your family needs values to rally around. All adult members of the family who will be largely impacted by the sale should be involved in deciding the values you want to uphold as a family during the sale process and beyond.
  • Vision—It helps to cast a vision for each heir. This might include grandchildren as well as children. Through one-on-one time, family conversations, or even talking things out through letters and email, begin to get a picture of each individual’s potential and how they want to impact the world. Make plenty of space to listen as they describe their vision for their lives.
  • Voice—Although you are the ultimate decision-maker in how to conduct the sale of your business and how the money will be used, it is proper and healthy for your family members to have a voice in the process. They may not want the outcomes that you assume they want, and clearing up that misunderstanding may save you from spending time and effort on something that won’t benefit them. It can also open opportunities to serve them in ways you hadn’t considered.
  • Venture—Bring the family together around a common purpose for post-sale life. This common purpose might be volunteering for a chosen cause, charitable giving with wealth generated from the sale, establishing a new business or organization with a meaningful mission, etc. Multi-generational engagement with this venture can create powerful family bonds and teach younger family members about the importance of looking beyond themselves.

How to Ask the Right Questions

You probably agree that it’s important for you and your family to decide what you want from the sale of your business. But how do you arrive at those answers? How do you get clarity on everyone’s needs?

You start by asking the right questions in the right order. The answer to each question will reveal which question to ask next.

Start the entire process with one foundational question: “How much money do I need to live comfortably?” Whether you live alone or have a partner and dependent children in the home, figure out how much money your immediate household would need to be comfortable.

Why start here? Because if your immediate needs aren’t met, you have fewer resources with which to help others.

“If you’re not feeling taken care of, trying to take care of heirs or trying to increase generosity…is foolish,” Dunavant says.

Once you’ve established the amount that your immediate household needs, the next logical question is, “How much is too much?” What amount of money would constitute living in excess?

The answers to these two questions will be different for everyone. They will also give a context out of which to answer further questions, like:

  • How much money is enough for your heirs?
  • How much would be “too much” for them?
  • At what point in their lives should they receive this money?

After these questions are sorted, you can then move on to calculating how much you do or don’t have for charitable giving and other things.

What About Traditional ROI?

Dunavant explains that you need not entirely abandon your interest in return on investment. In fact, he says, “Our experience is that really good ROI comes from a really good return on intention.”

Once you know what you and your family want, you have some direction regarding how to structure the sale. Knowing how you will structure the sale can tell you what strategies to use to reduce the tax burden and put as much money a possible toward your own goals.

The results may surprise you. “Many families have the capacity to increase their generosity three to ten times without changing anything about their lifestyle or their inheritance. It’s just that no one’s ever asked them those questions,” Dunavant says.

Looking Toward Tomorrow

Planning for life after the sale is one of the most important steps you can take as you begin the selling process. Don’t wait until the sale is imminent to start asking what you want the money to accomplish and what life will look like for you and your family after you turn in the keys to the company.

If you want to explore what your post-sale life could look like, and/or what strategies and tools will help you get there, Trelus can help. Trelus is a digital, subscription-based platform designed to equip and empower business owners to navigate the many aspects of selling a business, whether you already have a buyer in mind or are just starting to consider the possibilities.

Get started here or schedule a confidential 1:1 goals discussion here.

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