Life after Selling Your Business

In this post we look at how life after selling your business can take on new meaning, for better or for worse. We look at three clients who each approached retirement, and the transition to retirement, differently. We also touch on the importance of legacy and filling time in retirement. 

It is common practice to see business owners invest 100% of their life into their business. Their blood, sweat and tears go into their business and it can make a up large part of their life and their identity.

Given this, it can be unfortunate that many business owners do not consider the non-financial side of retirement and selling their business. Some move into retirement seamlessly, while others experience more of a bumpy ride while they try to find themselves, without their business.

We were in the unique situation to work with two brothers, Tom & Steve, who negotiated the sale of their business  (prior to meeting us).

They had both worked to build their business to annual revenue of $3 million dollars. They held equal shares and were of similar age and both decided they would like to sell their business and make the move into retirement.

The difference between these two brothers was that Tom was adamant he would not work for more than 6 months as part of the transition, whereas Steve was flexible and didn’t really mind if he worked for a number of years, post-sale of the business.

Once the sale of the business was complete, Tom was charged with handing over his role to a new employee, whereas Steve was kept on and worked as Manager of Operations in the business he had built over twenty years.

6 months passed, Tom left and started retirement immediately.

Unfortunately for Steve, this is when things started to go sour.

Steve was head of operations for the business and was in charge of implementing a variety of strategies he did not necessarily agree with. The new business owners were making decisions that were not ideal, in Steve’s eyes, and even worse he had to implement them.

The issue for Steve is that his exit was linked to him staying in the role for another 2 and a half years and he had very little room to manoeuvre. He hadn’t considered the non-financial side of the contract and was now in a difficult position.

This can be a hard thing for a business owner to come to grips with, especially when they have gone from owner and making all the decisions, to an employee who has little say in changes.

Unfortunately, the picture for Tom wasn’t as smooth as it appeared on the outset either.

Yes, he received the payment he was looking for and he got out of the business quickly, but he effectively went ‘cold-turkey’. Toms wife would complain that she now had another shadow, as he would follow her around the house, asking her what she was up to and if he could be of assistance.

Tom had given up his business and suffered from a void. He had no hobbies, his mates were not yet retired and there is only so much time you can spend with one person – day in, day out.

While Tom had managed to avoid the politics of change in his previous business, he had jumped into retirement to quickly, with little plans of what to do.

On the other hand we have a client, Luke, who used the sale of his business to his advantage.

He was in the real estate business and sold his agency to another agent, within the same licensee. As part of his sale contact, he was to stay on for 1 year full-time, to maintain continuity of the business while the new owners brought in a replacement. After one year, he would go part-time, and transition to the new employee. In his final year, his role was not to sell real-estate, but to mentor the existing agents as they came on board.

Luke had no involvement in the business at a management level and as he was handing over his sales targets reduced. He still got to share his knowledge, and for him, this was important, as it helped him to define his legacy.

The other benefit was that he didn’t have to find a hobby or venture that took up his whole week. He played golf three days a week and started working on restoring cars. He took weekends off (something most real estate agents don’t have the luxury of doing) and spent time with his grandchildren and daughter.

When he retired fully he maintained contact with the agency he had built and sold, and was still invited to social events and also provided a few mentoring sessions to new agents, on an ad-hoc basis.

While every retirement is different and every retiree has different plans, there are a few commonalities we see for business owners who retire.

Firstly, make sure the contract you sign, for the sale of your business, is in line with both your financial goals and lifestyle goals. Often, many business owners are so focused on getting the most for their business they forget to think about themselves.

If you are going to stay on in a transitional role, get a better understanding of where the new owners will likely want to take the business. This isn’t a foolproof strategy, but at least it will give you an idea of where the business is headed.

Business owners are a busy bunch – they often work long hours and are extremely dedicated to their work. Their work is part of their identity. As a result, many owners do not have hobbies or interests, as they have had neither the time, nor the desire to know about anything else.

A sudden cessation of work can be disastrous – free time with nothing to do can be a nightmare for the previously busy business owner.

The key is to start to explore a few extra-curricular activities prior to retirement. The aim is not to necessarily throw yourself into these activities, but start to explore the different things that might interest you.

It can be beneficial as well, if you enjoy your work, to taper back the number of hours you work, rather than to cease everything in one go. As seen with Luke above, he had time to take up new activities, as he slowly wound down his work commitments over a number of years.

One other consideration is that of legacy. Many business owners enjoy the responsibility and stature that comes with being a business leader, and losing this can feel like a partial loss of one’s identity.

Luke managed to overcome this by mentoring younger agents and staying connected to the agency he built up. He felt that even though he was not working in the industry on a daily basis, he still had a lot of knowledge and wisdom he could give and share with younger agents. He understood how difficult the industry could be and was always happy to share his insights. He took pride in seeing newer agents progress and develop their careers.

Moving into retirement is a process that is unique to every individual. Some people can’t wait to retire and never work again. For many business owners though, their work represents more than a pay cheque and the unique balancing act of selling the business, while moving into retirement creates an added set of complications.

It is important then to make sure that when you are selling your business, you consider the non-financial side of the transaction, to ensure your happiness and well-being is not compromised.

Contact Us

At Insight IRS we offer all prospective clients a complimentary initial meeting.
Call 1300 551 267 or Email great.advice@insight-irs.com.au

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