You have spent your whole career working in and on your business.  You have seen it grow from just a seed to now, a full-grown tree.  But some part of you knows you can’t work forever and you have this niggling feeling in the back of your mind that you need to start thinking about what comes next.

You are not alone.  What follows are some helpful considerations as you find your path forward in your life after business.

 

How will you spend your time?

This is a big one for many people, not just business owners but for anyone staring down the face of retirement. Once you step away from the rhythm of your day, the challenges and the joys, how will you fill your time?  Do you have hobbies you enjoy or are there things you have been wanting to do but haven’t had the time to do while running and working in your business?  You will want to seriously think about how you will spend your days.  Maybe even come up with a schedule for yourself or take a week off and try a practice retirement to see how you feel.  You don’t want to wake up and have nothing to do, because if you don’t, you’ll be back to work the next week.  For some people, that idea sounds great, but for many, the idle abyss is scary.

 

Partial or complete break from business?

Do you think you would like to work part-time in the business if possible? Great, but you need to know this before starting to negotiate with any potential buyers.  The better you know when you are expecting, and in what areas you are willing to concede, the better and more fruitful your sale negotiations will be.

 

Revaluate your cash-flow.

Have you ever really gone through your accounts to figure out how much you spend per year?  What does your lifestyle cost?  It’s challenging to do this on an ongoing basis for a few reasons.  First is, you just don’t have the time.  Also, when you can pay all your bills easily, and there is no financial stress, we tend not to pay attention to where it is all going.  Everything is getting paid, we have no debts, we are saving a little—great! Let’s not worry too much about it.  But once you sell your business and the cash in-flow stops, it’s a good idea to know exactly what your monthly nut is going to be.

People ask me all the time “How much do I need to retire?” and my answer is always the same, “Tell me how much you spend”.  No one ever thinks they spend a lot by the way, but I have found, as a rule, we all underestimate how much we are actually spending.  This isn’t a bad thing, unless you are in debt and have trouble paying your bills.  But for planning purposes, we just want to know what the actual numbers are.

While you are taking a look at that, consider if there are things your business paid, as legitimate business expenses, that you may have to pay yourself now.  This will add to your cash out-flow.  Additionally, the increased activity in your social life: travel, family, hobbies etc. will cost more.  Be sure to include some estimate of what you will be spending even if you are not spending money on it right now.

Lastly, there may be things you are spending money on that you won’t need anymore.  Disability insurance and certain types of life insurance may no longer be necessary once you leave your business behind.  Does it make sense to keep paying for these things when your life may be very different?

 

What do you want your legacy to be?

Selling your business may give you the opportunity to unlock the equity in that business.  What does this mean? Well, you may have more wealth than you imagined – wealth you can use because it’s not tied up in the business.  Here are a few things you may want to think about:

  • Do you have charitable intentions, and if so, how is the best way to give to charity? Donor advised funds, family foundations, direct giving – what will work best for you?
  • Do you want to be able to give to your family? How to best employ gifting strategies is something you will want to discuss with your wealth and tax advisors. It could be help with buying a home or helping with education costs. Maybe creating memories is important to you.  How about an annual family vacation or a vacation home in another state where everyone can gather?  Family will remember the great times you spend together and hopefully they can continue gathering long after you are gone.
  • You will want to understand current estate tax considerations. If the value of your total estate is below a certain threshold, you generally don’t have to worry about federal estate tax (currently the rate is 40%).  However, that threshold changes, sometimes quickly.  You will want to keep in touch with your advisors to see if any additional planning needs to happen to try to maximize what you can leave to your heirs.

 

Are you prepared and organized?

Now that you have extra time on your hands, it is important to focus on getting prepared and organized for the next stage of your life and simplify your financial life. If you were to pass away tomorrow, would your family know where all of your accounts are? How about your insurances or Will? If you have money scattered between different banks, investment accounts and insurance policies, now is the time to consolidate what you can and officially document where your assets are. Send a copy of this along with your Will and power of attorney to your children, and financial advisors.

 

Make sure to enjoy the ride.

Often when you think you’re at the end of something, you’re at the beginning of something else. Transitioning from a lifetime of work to the unknown of retirement will be a leap of faith, but before you know it, you’ll be wondering how you ever had so much time to dedicate to business.

 

Should you have any questions with regards to exit planning, feel free to reach out to your Sax Advisor for guidance.  For more information on this topic, feel free to watch our recently recorded webinar, “The Impact of COVID-19 on Exit Planning”.

 

About the Author

Marie DeCaprio, CFA®, CFP® is a Partner and Wealth Advisor at Sax Wealth Advisors and has been managing portfolios, developing financial plans, offering investment advice and providing other wealth management services for more than 30 years. She can be reached at mdecaprio@saxwa.com.