Life After Selling a Business

Author

TIGER 21

Published On

October 15, 2021

Life After Selling a Business

Insights from High-Net-Worth Entrepreneurs on What to Expect, What You Might Not Expect, and What’s Next

For some, the year 2020 will always be remembered as the year of the global pandemic. For others, 2020 will be recalled as a year in which a striking amount of IPO capital was raised: $331 billion, a 42% increase from the previous year.[i] Although the number of IPOs has been trending downward since the dot-com boom of the 1990s, the amount of capital raised through public offerings has risen steadily.[ii] 2020’s numbers continue to bear out that trend.

In addition to public offerings, a significant number of businesses have also been bought and sold privately. One indicator of that trend, BizBuySell’s Annual Insight Report, revealed that 7,612 small businesses were sold in 2020. Although that number represents fewer than the 9,746 small business sales reported for 2019, the median cash flow of sold businesses grew 10.7% and revenue increased by 8.2%.[iii] In other words, as with IPOs, while the number of sales has dropped, the financials of those sold businesses have increased.

Numbers like these have gotten their fair share of attention. However, the impact on the entrepreneurs and owners behind the sales has gotten relatively little visibility. Life leading up to the sale is often scrutinized, especially in the case of an IPO. However, life after selling a business tends to fall through the cracks.

A business preparing for a sale or an IPO occupies a massive role in the lives of its owners and executives. As a result, it’s inevitable that a sale will represent a significant change for them. This goes both for the financial impact of these sales and the ripple effects on relationships, family, community, identity, future plans, and overall well-being.

As a peer membership organization of high-net-worth entrepreneurs, investors, and executives, TIGER 21 has a number of Members who have found themselves in this unique position. Through Membership in small, intimate Groups led by Chair facilitators, TIGER 21 gives post-sale entrepreneurs a place to learn about preserving and growing their wealth. TIGER 21 also offers a forum for unbiased insight from fellow Members who understand the challenges and opportunities these high-net-worth individuals might experience.

Through our Members’ insights, we’ll take a closer look into what a business owner or executive can expect after the sale of their business. Broadly, these challenges fall in two overall categories:

  • Financial: How to manage, preserve, and grow new-found wealth, as well as establish professional financial partnerships, such as those with a money manager or wealth manager.
  • Personal: How to navigate the psychological and interpersonal issues that arise, such as a shift in personal relationships, a loss of identity, potential crises of trust, and the transformation of one’s lifestyle and goals.

Download the full insights report to learn more about the personal challenges Members have faced after selling their business.  

We’ll also offer recommended next steps to assist wealth creators in transitioning to their next chapter. First, we’ll begin by laying the groundwork for what might lie ahead.

What to Expect After the Sale of Your Business—and What You Might Not Expect

Everyone’s experience selling their business will be uniquely their own. Several TIGER 21 Members shared that they came out of their experience with no regrets whatsoever. Others expressed desires that they had done things differently. Despite the diversity of viewpoints and experiences, many after-the-sale challenges fall into four broad categories. While you may have anticipated some of these, others may come as a surprise.

Financial Implications

This is one of the first items that comes to many people’s minds—the monetary windfall that often results from the sale of a business. Some end up with life-changing money. Others may not receive a dramatic payout but still walk away with significantly more wealth than they previously managed.

The change in finances can create a significant positive impact in many business owners’ lives. Many Members develop a new or revise their investment strategy.

TIGER 21 Member Kara Trott has done several recapitalizations of Quantum Health, the consumer healthcare navigation and care coordination company she founded, including the most recent one in December 2020. Over the last several years, she has been shifting her focus from day-to-day management in order to enable the next generation of leaders take on the execution challenge of a high growth company, and has instead been focusing on leading more from her position as Chair of the Board of Directors.

Where her life after selling a business was concerned, Trott had nothing but positive things to say. She was particularly enthusiastic about the ability her new schedule has given her to pursue other interests.

“I’ve been able to rebalance my time which has allowed me to take on two board positions at two different universities,” she shared. “I’m a governing board member for a regional Make-A-Wish chapter.  I can actually get involved in things that I have a personal passion behind.”

After the sale of his education software company, Wireless Generation, Inc., to News Corporation in 2010, TIGER 21 Member Greg Gunn also saw his quality of life go up significantly.

“Travel has been more fun and more frequent. I’ve been able to take my extended family on some amazing trips,” he said. “But the more transformative stuff—once I paid off all of my parents’ debts, their health improved and their quality of life got better. The best thing that the money granted was extending my family’s quality of life.”

However, life after selling a business can include some uncertainty. Substantial wealth comes with substantial responsibility, and many post-sale entrepreneurs and business owners feel the weight of it. Some TIGER 21 Members recognized the careful consideration their next steps in life would require. Others felt a significant shift in the way they managed their money and their investment strategy, which moved from the familiar task of creating wealth to the unfamiliar job of preserving it. Some business owners might even feel paralyzed by their new-found wealth, fearful of making mistakes in future financial transactions.

For successful entrepreneurs, coming into significant wealth can also be a startling moment about the limitations of their knowledge. While founders may have significant experience around building a company from the ground up, they may be relatively new to developing an investment strategy. Some realize that there is not much overlap between the skill set of running a business and selecting the right investing opportunities—or becoming a successful steward of their own wealth.

TIGER 21 Member Charlie Tillett was the CFO of NetScout Systems, a company that developed network monitoring and diagnostic tools, which went through a successful public offering. Despite some previous investing experience, he still found himself worried by the possibility of financial mis-steps. “I had my little IRA that I was happy to play around with, but I realized I had some life-changing money that I really didn’t want to screw up.”

In fact, like other TIGER 21 Members, Tillett hired a money manager to help navigate his financial future.

He recalled: “I met with a money manager who had been introduced to us through our attorney, and the discussions we had were kind of mind-numbing. I just kept saying, ‘I’m not used to talking about this. I’m used to talking about these kinds of numbers when it deals with a company [not my personal wealth].'”

Tillett also found himself frustrated with his money managers’ limitations for taking his wealth to the next level, especially as it came to their appetite for risk. Whereas Tillett, like many entrepreneurs, was comfortable with taking risks, he struggled to find a money manager who shared this viewpoint. “The big money managers are excellent at holding on to wealth, but they’re not very good at growing wealth,” he noted. “They were unwilling to take the risks that I was willing to take.”

It is clear that the sale of a business creates significant financial implications for the entrepreneurs involved. However, a sale also creates ripple effects that stretch far beyond bank balances. Download the insights report to learn how TIGER 21 Members navigated personal challenges and made critical business and financial decisions during the transition into life after selling a business.

[i] Baker McKenzie December 16, 2020. “Historic Year Sees Highest Global IPO Activity in a Decade with Surge in Domestic Listings and Continued Growth Predicted for 2021.” Accessed June 11, 2021. https://www.bakermckenzie.com/en/newsroom/2020/12/ipo-report-2020

[ii] Bloomberg Law January 9, 2020. “ANALYSIS: Three Decades of IPO Deals (1990-2019).” Accessed June 11, 2021. https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-three-decades-of-ipo-deals-1990-2019

[iii] BizBuySell January 17, 2020. “2019 Small Business Market: Uncertainty Creates Opportunity and Risk.” BizBuySell. Accessed June 4, 2021. https://www.bizbuysell.com/news/bizbuysell-2019-fourth-quarter-insight-report/ and BizBuySell January 21, 2021. “Small Business Acquisitions Drop 22% in 2020, Thriving Businesses Sell at Record Prices as COVID-19 Pandemic Reshapes Economy.” BizBuySell. Accessed June 4, 2021. https://www.bizbuysell.com/news/bizbuysell-2020-fourth-quarter-insight-report/

[i] Baker McKenzie December 16, 2020. “Historic Year Sees Highest Global IPO Activity in a Decade with Surge in Domestic Listings and Continued Growth Predicted for 2021.” Accessed June 11, 2021. https://www.bakermckenzie.com/en/newsroom/2020/12/ipo-report-2020

[ii] Bloomberg Law January 9, 2020. “ANALYSIS: Three Decades of IPO Deals (1990-2019).” Accessed June 11, 2021. https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-three-decades-of-ipo-deals-1990-2019

[iii] BizBuySell January 17, 2020. “2019 Small Business Market: Uncertainty Creates Opportunity and Risk.” BizBuySell. Accessed June 4, 2021. https://www.bizbuysell.com/news/bizbuysell-2019-fourth-quarter-insight-report/ and BizBuySell January 21, 2021. “Small Business Acquisitions Drop 22% in 2020, Thriving Businesses Sell at Record Prices as COVID-19 Pandemic Reshapes Economy.” BizBuySell. Accessed June 4, 2021. https://www.bizbuysell.com/news/bizbuysell-2020-fourth-quarter-insight-report/

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