Life After an Exit: How do Entrepreneurs Transition to the Next Stage? (1 of a 4 Part Series)
Depending on the statistics you read, the average person changes careers between 4.6 and 11 times in their lifetime and they move their physical residence about once every 5 years. Although these can be significant transitions in our lives, we tend to do them multiple times. As such, we learn from them and tend to improve the process the next time. Unlike career changes and physical moves, most entrepreneurs plan for and exit a business only once in their lifetime. As such, there is no previous experience to pull from. It is an unknown.
With many Baby Boomers and the older Generation "X" entrepreneurs exiting their businesses over the next 10-15 years, there will be significant wealth creation as well as transition for these individuals. Without a roadmap as to what to plan for and expect, many entrepreneurs are unprepared.
As with any transition, there is a process. This process can be broken down into Four Stages:
Stage 1: Before the Sale and the Decision to Sell
Stage 2: The First Year After the Sale
Stage 3: Planting Some New Seeds
Stage 4: In the Flow Once More
Over the next 4 newsletters, I will be breaking these down and providing some insight on how to take the concept of exiting a business and putting in place a personal transition plan that will help you to navigate these waters.
The First Stage is preparing for and deciding to sell. Although there are the financial decisions associated with a decision to sell, there are also many social and psychological aspects to a sale. Some key things to think about are:
Why have you and your business been successful?
What are your true skills?
What is the business model that has led you to success?Is the business model repeatable?
Is your social network totally made up of people connected to the company or industry?How much time do you spend working?
What are the less obvious needs being fulfilled by this intense work? Ego boost? Excitement? Leadership? Recognition? Creativity? Structure?
As you begin to answer these questions, you can begin to take steps to build other social networks, uses of time, and sources of purpose before a sale and exit transition begins. As you think about selling, some things you should actively build are roles in civic, philanthropic, and business institutions, as these other connections can help soften the disorienting impact of a sale.
In addition to the personal aspects, you will now have some significant financial implications from the sale. Accessing professional advisors long before the sale of a company can help in gathering this information and provide options. These advisors can assist with estate and tax planning. Understanding your individual spending needs and expectations of inflation, tax changes, and true returns are things to learn about in this process.
Prior to every making the decision to sell, planning for your own personal and financial needs will begin creating a vision of what's next.
Eugene Lange Entrepreneurship Center. "White Paper 03. Life After an Exit: How Entrepreneurs Transition to the Next Stage." Credit Suisse (2013): 32. Print.
Jayne McQuillan, CPA, MBA, CEPA is a strategic management consultant, and the owner of Journey Consulting, LLC, in Green Bay