The Next Step: What To Do After You Sell Your Business
A thorough transition plan will focus on keeping business consistent and employees confident during this time.
Managing The Handoff of Day-To-Day Operations
Selling your business is a complicated undertaking and requires a lot of time and energy. It can be difficult to manage day-to-day operations through the sale process. Once the sale is final, you’ll need to find a way to transition your company’s daily operations.
If possible, start thinking about handoff well before the sale is finalized. Make sure you have processes in place to drive revenue growth and retain customers. Also, be sure to address any issues such as inefficient procedures or employees who aren’t a good fit. Taking care of these matters won’t just make handoff easier; it’ll help you get the best sale price.
In addition, put your plans for the handoff in writing. That way, you and the buyer can both identify and avoid any gaps.
Appoint an individual or team to take over daily operations. A trusted employee is a great option since they’re already familiar with how your business runs. Also, make sure the rest of your team can manage operations without relying on you for support.
Discussing Goals of Existing Employees
Consider your employees’ future. First, make sure they learn about the sale directly from you, not from gossip or rumors. If your buyer isn’t planning to retain current employees, try to give them a reasonable amount of notice so they can begin planning. Also, consider your legal obligations as far as employment contracts and severance.
When you’re getting ready to sell, talk to your employees about their goals. Find out if they plan to stay with the business after you leave. If you have any workers who don’t seem happy, now is a good time to address the issue.
How To Ensure Customer Retention Remains
Once you decide to sell, proactively communicate with your customers. While they may react negatively, it’s better that they hear the news from you. Reassure them that the business will run as usual during the sale, but be honest. If big changes are coming, don’t try to pretend otherwise.
Having plans in place for the handoff of day-to-day operations will help you avoid problems that impact customers. Your plans should cover tasks like sales, shipping, website maintenance, and customer service. If any of these operations will be delayed, let customers know right away.
Consider creating a growth plan to provide to the buyer. You know your customers and your business better than anyone. If you have ideas for how to keep customers coming back or attract new ones, share them now.
Pass along customer details to your buyer, but be careful with confidential information. Make sure you have an NDA in place before any customer records change hands.
Diversification Of Your Influx Of Income
As soon as you’re ready to sell, work to create diversified sources of income. Sources that generate passive income are ideal. In other words, look for ways to earn money with minimal hands-on effort. You’re already busy running your business, and you’ll only get busier during the sale process.
Examples of passive income sources include real estate investments and affiliate marketing.
If you’re not ready to retire, having various income streams will help you avoid withdrawing from your retirement fund. Early withdrawals involve costly tax penalties and fees. If you are retiring, the extra income will help you make the most of your savings.
When you decide how to diversify, consider your interests, the current economy, and the amount you’re able to spend.
You may be planning on substantial profits from selling your business. However, you’ve probably heard that you shouldn’t put all your eggs in one basket. Diversifying your income will protect you if a sale falls through or the price is lower than expected.
Associated Tax Implications When You Sell Your Business
Understanding the tax implications of the sale will help you avoid issues with the IRS. It’ll also ensure you get to keep as much profit as possible. During this time, you might want to work with a tax advisor to make sure you don’t miss anything.
The sale will usually include multiple assets, like property, inventory, and goodwill. Proceeds from these items may be taxed either as income or capital gains.
If you’ve held an asset for more than 12 months, the earnings are usually treated as long-term capital gains. This is good news for you, as taxes are lower for capital gains than for income.
Family Considerations With New Status
Clear communication with your family is vital. Give them a chance to bring up any concerns they have, whether financial or otherwise.
If you run a family business, this step is especially important. Make sure your family knows what to expect from the sale. There may be changes to their career path, pay and benefits, and job responsibilities. Addressing these possibilities in advance will ensure everyone is on the same page and has a chance to prepare.
There’s a good chance your family’s financial needs and status will be different after the sale. If you work with a financial planner, involve your family in the process.
Aso, if you choose to sell to a family member, there are some unique factors to take into account. Here are some tips for this situation:
- Don’t make assumptions about the price or the transition just because the buyer is someone close to you.
- Put things in writing, such as a sale agreement.
- Check in often throughout the sale process.
Most likely, your financial needs could change after the sale. While you ran your company, your primary goal was probably to create wealth. After the sale, you’ll need to focus on protecting that wealth.
If you don’t already have a financial planner, consider working with one while you sell your business. They can help you get your financial documents in order to ensure a smooth sale process.
Once the sale is complete, a financial planner will help you manage your earnings from the sale. They can also work with you to find ways to diversify your income.
Our Final Thoughts
You’ll likely experience mixed feelings about selling your business, especially if you built it from the ground up. You’re used to devoting huge amounts of time and energy to your business. It can be hard to step back.
Focus on your goals, whether they involve retirement, starting another company, or some other adventure.
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Frequently Asked Questions
How long should I stay involved in my business after the sale?
It depends on the details of the sale. Your buyer might ask you to stay involved for some time, or you could ask to remain in a management role as part of the agreement. However, a detailed transition plan and sale agreement will help you avoid staying on if you don’t want to.
What should I do with my time after I sell my business?
You might feel overwhelmed once your business has sold, especially if you’re not ready to retire. Don’t forget that this is an exciting stage of your life. First, consider taking some time off to travel or just relax. Then, you can consider using your proven skills as an entrepreneur to start a new business or other venture.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.