Congratulations! You Sold Your Business

January 17, 2022

In this episode of The Bottom Line, Tim Schuster is joined by Lisë Stewart and Alan Wink to discuss what a business owner should do after they sell their business.


Transcript

tim schuster: Hello, and welcome to The bottom Line. This podcast examines the everyday business and finance issues faced by closely held and private businesses. We hope to provide you with news you can use, in what we like to think of as a jargon-free zone.

I'm your host, Tim Schuster, senior manager in private business services. And with us today is Lisa Stewart, partner in charge of center for individual and organization performance, and Alan Wink, managing director of capital markets. This is part of a series of podcasts on selling a business and this topic is about what happens after your company is sold. Lisa, Alan. Great for you both to be here today.
lisë stewart: Thanks for having us, Tim.
alan wink: Tim, great to see you as always.

TS: I'm glad you guys are back, and especially on this subject matter. I mean, congratulations are in order. Hooray, huzzah. You sold your business and you're an owner and you have this windfall. So, what are some things business owners should be considering now that the business is sold? You've been through this crazy process.
AW: Well, probably after you visited the Porsche or Lamborghini dealer, I guess you probably want to think about how you can both invest the proceeds, because you just sold your business, it was the end result of a lifetime of hard work. You've had a windfall because of the great job your professionals do it around you. You're very happy with the amount of cash you walked away with.

So I think you want to both develop an estate planning strategy to protect that money, protect your family's newfound wealth. And also, you want to invest it as you see fit, in terms of your level of risk.

And I think probably the third thing that you want to begin to think about, and hopefully you've thought about this before is, what do I do now? If you don't want to go play golf or sit on the beach, what do you want to do? Whether it's doing volunteer work, being more philanthropic, starting another business, doing consulting. Because of the fact you had a successful exit, probably a lot of doors are going to be open to.
ls: Yeah. It's interesting, there's so many things that can be very positive and very exciting. There are also some things that a lot of business owners are not prepared for that can be a little bit of a disappointing surprise. So, one of those are that people tend to come out of the woodwork now that they know that you've sold the business and they want money.

So, you may find that long lost relatives, brothers, sisters, people start coming and saying they've got an idea they want you to invest in. Or, gosh, they're having a really hard time in life and they know that you've just come into some money. Can you, golly, help them out? And I find that sometimes when people are experiencing and want to be able to enjoy their newfound wealth, this can be just a really rattling experience and they don't know how to handle it.

So, we coach our owners as they're going through this to be prepared for some of those more difficult conversations, to make sure that they put some boundaries around how they're going to utilize their wealth, and that they're prepared to talk to people about their plans. How do you, kindly, say no, in a way that's not going to sever relationships?

We had a client a year ago that sold their business and was very wealthy, and they were so disappointed because one of the church affiliations that they were associated with came and a wanted quite a lot of money, and this did not fit with the way in which the family was planning to allocate. They had a philanthropic plan. And members of the church that had been long time friends started to turn a cold shoulder and started to exclude them.

So, these are the sorts of things that people just for. So, to Alan's point, think about what you want to do later. Think about how you want to be able to use the money that you have, how you might want to be invested, how you might want to be able to look after family that needs that level of help, and prepare your messaging for how you're going to be able to protect your personal boundaries.
AW: Tim, just to add one other thing to what Lisa said. I think also, I've seen a lot of privately held business owners that, once a deal closes, even though they have no legal obligation, none of their other employees have equity in the business, do pay their people a nice bonus at the end, after the deal closes, as a thank you. They're under no obligation to do that, it certainly makes their people feel really well and appreciated, and their people feel like they were an owner of the business, even though they weren't entitled to any equity distribution. So I've seen that happen. A lot of business owners have "shared the wealth" with some of their employees.
TS: I think that's great. Just out of curiosity, just to get some of the... Call it the juices flowing, right? Other than libations around for everyone and all that good stuff, what have some of your clients actually done post sale? Right? Just some examples that you can have our listeners hear on.
AW: I've seen a number of clients who were close to a university get involved with universities, executive in residents kind of thing, teaching entrepreneurial studies because so many of them have had built a successful business, had a successful exit, and have so much to give back.

I actually sit on the board of two angel investment groups, one in New Jersey and one in Philadelphia, and a number of these investors are high net worth individuals who they've all made money in different ways, starting different businesses, but they also feel an obligation to give back to other entrepreneurs. And once again, because of their wealth, they can lose their money on these invest and still pay their mortgages, put food on the table. But they want to give something back to the next generation of entrepreneurs, and I think that's a great virtue to have.
ls: Yeah, I agree. I've seen so many wonderful things; owners just volunteering their time. Score is a wonderful program, the society for, what is it? Retired senior executives, and just coaching other people as really how to be able to do this and through various education programs.

Some, I will say too, that I've seen owners that have worked extremely hard all their lives, and when they sell the business, sometimes they just really want quiet time. They just want time to spend with their families. Many of them have had to sacrifice family relationships to build these successful businesses. And it can be hard because, as Alan was saying, they are in great demand. Everybody wants them to sit on their board, everybody wants them to do this that and the other.

And again, how do you nicely just say no so that you can carve out that quiet time for your families? So, I think that one of the things that we talk to our clients about is, there is no right answer. You don't have to fit anybody else's design of what it means to retire and walk away. This needs to be what is right for you, what is right for your family, what's in alignment with your values, and choose your own path. And if you can do that, then I think that people feel much better about this next stage of their lives.
TS: That's fantastic. And just to wrap up this whole series, Lisa and Alan, do you guys have any parting words for our listeners?
AW: Maybe I'll start it. Tim, first of all, thanks so much for inviting me to participate in this. I think every business owner has the objective of eventually having an exit. And I remember my first class in business school, professor said to the class, "Why does a public corporation exist? It's to maximize shareholder value." That's the sole purpose of a corporation. And when you think about a privately held company that an entrepreneur starts and builds, what's the true value prop? Well, maximizing his or her value in that company. And when you have an exit, you certainly do that and validate it. So, it's all about creating value for yourself and for your company.
ls: Yeah. And I would say that everybody, everybody, exits their business, either by design or by default. And so, what we want to do is to make sure that it's by design. And when it's by design, you have options and you have the opportunity to really contribute to the greater good in a way that makes sense. So take that opportunity, surround yourself with good people, and congratulations to anybody who does this. You've created jobs and opportunities for lots of other people, too.

Tim, thank you so much for inviting me to be here and work with Alan. This has been fantastic, and I certainly want to encourage anybody that's got questions to out because we love to share. So, thank you.
TS: Yes. And to piggyback off that, I encourage any of our listeners to reach out to Alan, Lisa, myself, anyone here, any questions that you guys might have through this due diligent process or any part of selling a business, or just really anything in general. And honestly, Lisa and Alan, can't thank you both enough for sharing this absolutely invaluable information to our listeners. And to our listeners out there, thank you so much for listening to this podcast series.

Transcribed by Rev.com

About Alan Wink

Mr. Wink assists clients with capital budgeting, capital structuring and capital sourcing. He has worked with many tech and life science companies on developing the appropriate capital structure for their position in the business life cycle.

About Lisë Stewart

Lisë Stewart is Partner-in-Charge of the Center for Individual and Organizational Performance and the Center for Family Business Excellence Group, as well as a leader of the firm’s Environmental, Social and Governance Services (“ESG”) practice. Lisë has experience in organizational development, strategic planning and training, and human performance management.

About Tim Schuster

Mr. Schuster is a Senior Manager providing tax compliance services to individual filers, as well as assistance on tax returns for companies in the manufacturing and real estate industries.

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