Are there unexpected problems waiting on the other side of a business sale?

Apr 8, 2019Business Financial Transformation, Business Leadership Transformation

You’ve sold your business. As a business owner, this should be the happiest time of your life. For the first time ever, rather than having a balance sheet with a hypothetical value, you have cash or value of stock inside your account. Unfortunately, for most owners, this is the beginning of a new set of problems no one told them to expect.

What if you knew about these problems beforehand and could anticipate them? You would then be in control and prepared to respond rather than react. So, what are the problems waiting on the other side of your business sale?

The first issue is cash versus value on paper. You’re used to seeing a business you cared for, nurtured, and grew, but was worth simply an arbitrary value on a balance sheet. A balance sheet was important to the bank, but it wasn’t something you could take to the grocery store.

No matter what anyone said you were worth, it was hard to believe. Now, you have the cash to prove its worth. There are a new set of skills required because being an investor is different than running and controlling a business.

It is not uncommon for many families to take six to eight months to begin understanding the new reality of funds in an investment account.  Before your sale, it is important to identify the professionals that you’re going to partner with.

Know your plans and have a strategy for how you are going to deploy your capital. If you don’t, you’re going to be vulnerable to “shiny things”. Many firms, with fancy names, will put on a dog and pony show that looks exciting and enticing.  Unfortunately, their agenda is to sell you high priced products that often benefit them more than they benefit you.

This is not an attempt to keep you from investing.  Investing money is a highly profitable industry and it can benefit you greatly.  The issue is being sure you are informed so you can operate, along with your team, from a position of strength.

The true value lies in having a plan and experienced professionals you trust, before you have the cash is in your account.

The second issue is your original vision versus your new reality. Growing a business required vision. The question is, what is the next vision? It’s going to take time to figure that out.

Much like identifying the right professionals to work alongside you, a plan is important to creating your new vision. Selling your business is a huge life event. In other life events, people are often cautioned to take their time in making decisions.  When someone loses a spouse or loved one, I advise that they don’t make any major decisions for six months to a year. Why should this be any different? Your new reality is going to look different than it does today. You need to take the time to understand where you are and what’s next. Add to this the difficulty of two spouses with different opinions. Many times, a family is made up of a spouse who is a constant visionary and a spouse who has faith in the visionary but wants to feel more secure.

As you get ready to create your new vision, this is a critical time for you and your spouse to come together and communicate what is important to each of you. This is a new adventure. This is a new time. If you’re not on the same page, it could get messy and create problems you didn’t anticipate. This makes it that much more important to work with people who can help you think about what’s next for your new, unified vision.

The third issue is that the people in your life—family, friends, employees, non‑profits—now have new expectations. For the first time ever, you have cash. You’re going to meet plenty of people who now need your cash and have a very good reason as to why you should get behind their cause.

You may have family members you feel obligated to help. It’s important to determine, before any financial needs crop up, what constitutes as a real need or obligation that you should get involved in.

It is not uncommon for some employees to gain a sense of entitlement or a sense of resentment if they were not part of the transaction. Before that happens, make sure you understand how you will address those issues, if they arise.

Many non‑profits will come alongside and ask you to be part of their new project. The key is to have a plan to say no and a plan to say yes. What are you willing to support? What are you not going to support? Knowing your yes’s and knowing your no’s will empower you when asked to donate.

Having someone to help you think through these problems is critical. All three issues will catch you by surprise if you are not prepared. At Paradiem, we’ve walked hundreds of business owners through similar sales. Helping them prepare answers to these questions beforehand is integral to their long‑term success.

Don’t let these issues catch you by surprise. The key is to be prepared. If you would like assistance with preparation, we can help. Give us a call at (985) 727-0770 or email [email protected], and let’s have a conversation.