Preparing yourself is the first step to successfully transitioning out of your business. While it is important to focus on preparing your business to sell, it is also vital to make sure you are both personally and financially ready to move on. You may not even remember who you were before you dove head first into your company, or know what to do with yourself after you leave it behind.
As we discuss in our book Cashing Out of Your Business -Your Last Great Deal: “Your identity and that of the business may now actually be one and the same.” Could this be keeping you from moving forward? Identifying your fears and concerns and exploring whether these may be keeping you from planning is a huge step toward overcoming them. Defining your goals, both personal and financial, and developing a plan for achieving them will help ensure a successful exit. Let’s look at some of the ways that you can start to get yourself prepared.
Are You Financially Ready To Exit?
An article put out by Morgan Stanley suggests converting the definition of the word “independence” from “working for yourself and enjoying your lifestyle within your business,” to “having work be optional and enjoying the same lifestyle without your business.” When deciding if you are ready to transition, the article suggests you ask two key questions:
- Are your personal financial plans in order for your exit?
- Does this financial plan satisfy your need for income without continuing to rely upon your business?
Tallying up what you have saved outside of your business and determining how much money you will need after the ownership transition is a very important step. The difference between the two numbers is your Wealth Gap or how much will need to get out of your business transition to sustain your lifestyle going forward. While this is likely to be the largest transaction of your life, you want to make sure it will sustain you for the rest of your life, and have your money outlive you, not vice versa. Don’t forget to consider whether you would like to set aside money for family or charity, or other endeavors and work these goals into your financial plan in order to ensure that you will have the income to fund them.
Prepare Yourself Personally and Avoid Seller’s Remorse
Deciding and understanding what you want to accomplish will motivate and guide you in deciding the best way to transition the ownership of your business. Then, you will be able to find the resources to accomplish your transition to others. This will push you forward into your exciting new phase of life as you move away from your business.
It is important to take the time to separate yourself from your business before you transition. Seller’s remorse happens quite often, and the last thing you want to do is regret selling your business too early, and end up bored and depressed because you never took the time to prepare. An article by Lyons Solutions outlines the leading causes of seller’s remorse:
- Continued passion for your former business
- Perceived loss of identity and self-worth
- Concern about leaving money on the table
- Worry about what to do with your life after selling
Don’t jump the gun just because you get a good offer. By taking the time to prepare, you minimize the possibility of seller’s remorse, and increase the chances that you will enjoy your life outside of your business.
Set Specific Goals for Life after Your Business
Take the time to think about your passions, and what is going to come next for you outside of your business. Think about setting goals and objectives for each area of your life and plan for the financial support of each. The Platinum Years suggests these facets of your life to consider:
- Physical Health
- Intellectual Stimulation
- Social Connections
- Income-producing Work
Take the Time to Get Yourself Prepared
Business transition planning can help you craft the next and hopefully the best stage of your life. As we discuss in our book, “This is about remembering your true passions, determining what is most important to you, and what you want to do when you can spend less or no time with your business.”
Take proactive steps now to avoid regrets, disappointment, or financial disaster later:
- Properly prepare yourself for your eventual transition by identifying your personal and financial objectives.
- Plan in advance (at least 3-5 years) before your transition.
- Understand your transition options and the pros and cons of each.
- Be proactive; don’t procrastinate!
A wise person once said, “It is never too early to plan but may certainly be one day too late.” Don’t wait until it’s too late … the stakes are too high!