Minnesota Lawyer
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By: Marcia Urban at BMO Wealth Management
Business owners have likely dreamed for years of the time when they exit the business, whether by sale or gift transfer, and enter the next phase of their lives. Maybe they envision leisurely, restful days in a more temperate climate. They may look forward to spending more time with family and friends. Perhaps they hope to volunteer more or stay active in the business community in an advisory capacity.
Whatever life looks like after selling the business, it all comes down to planning. Planning years in advance to ensure proceeds from the business sale and other wealth building efforts will support their retirement vision. CFOs play an instrumental role in helping business owners plan for their financial health once they hand over the reins of the business to new owners. CFOs can also be instrumental in helping business owners determine what amount of financial assets will be necessary to sustain their post retirement lifestyle, and ultimately bring them joy in retirement.
Plan for Financial Health
In helping a business owner monetize their business, a CFO will need to help them understand how proceeds and streams of income will come in over time, and what they want to do with their financial assets. One of the most important steps business owners should take in advance of a company sale is to determine how they wish to invest prudently and determine a tolerable risk level for their financial portfolio.
It’s helpful to plan with wealth management advisors to conduct a lifestyle/cash flow analysis based on the values and goals a business owner has for their financial assets. These advisors can help the business owner look at their must-haves, the nice-to-have’s and what can be supported by those assets. They can also illustrate how everything will all play out in the ups and downs of markets. In the end, having this valuable analysis provides a trajectory to achieve the business owner’s goals—long before they relinquish ownership. Or it may reveal that the business owner can’t have it all and needs to make adjustments in their expectations.
Aspire to Joy
Boredom should never be the goal in post-sale retirement. According to a recent research survey by Paychex, 52% of respondents said they are considering getting a job in retirement due to boredom. Just like during the years running the company, a business owner needs a purpose during their retirement years. It can be difficult going from a very structured life to completely unstructured.
Most people live well financially after selling their business. Just as important before exiting the business is having a joy plan. A plan that lays out what will bring the business owner joy in retirement and what connections the business owner should start making. If a business owner wants to volunteer, they should reach out to organizations they want to support in advance of retirement. If the business owner wants to teach part time, they should lay the groundwork at a local college or university. If they want a seat on an industry board, those seeds should be planted well in advance. Knowing what the mission will be ahead of time will ease the transition from business owner to a purpose-driven retirement.
Avoid a Feeling of Loss
Selling a business where one has worked so hard at for years can bring a sense of loss for business owners—especially in the beginning. That void can be filled by focusing on the things that make them happy—family, friends, community and activities they enjoy. Business owners need to lay the groundwork before selling the business to live healthy, have an active social life and participate in their communities to make a smooth and happy transition post-sale.
Mesh Financial and Personal Goals
Wealth advisors play an important part in helping CFOs and their business owners plan to protect owners’ financial and personal health when the business sells. The right wealth advisor should be attuned to the business owner’s values and goals. They should also layer on family values and goals. After values and goals and aspirations are understood, then a financial roadmap may be created, well in advance, to help the business owner go down the path they wish to build for their post-professional life.
Marcia Urban, Senior Wealth Planning Strategist, BMO Wealth Management
Urban has 35 years of taxation and wealth management planning experience, helping business owners and their CFOs navigate complex tax requirements and prepare for a post-sale transition. She also serves as an adjunct professor at the University of Minnesota’s Carlson School of Management, teaching fiduciary income tax in the Master of Business Taxation Program.
