Post-Sale Considerations: Life After Exiting Your Business While the buildup to selling your company is a flurry of activity where you're rarely left alone, the aftermath is entirely different — you're left to deal with proceeds, taxes,...

While the buildup to selling your company is a flurry of activity where you're rarely left alone, the aftermath is entirely different — you're left to deal with proceeds, taxes, and budgeting on your own. How do you adjust to your new financial and emotional reality after exiting your business?

Address These Post-Sale Financial Considerations

First things first: Before doing anything else, you should address a few post-sale financial considerations. Understanding their potential impact makes budgeting and investing easier.

Capital Gains Taxes

You pay a long-term capital gains tax on profits from the sale of assets you've held for over one year. If you were a sole proprietor, the sale works like you're selling each asset separately. Depending on your income level and filing status, you'll either pay zero percent, 15% or 20%.

Although you're probably familiar with the term by now, it's worth mentioning since it affects your post-sale financials. While you can lower your tax burden by receiving money in installments or negotiating with buyers, it becomes your responsibility once the sale is finalized.

Post-Closing Liquidity

Post-closing liquidity is the amount of cash — or liquid assets — you get immediately after exiting your company. Whether it's paid in installments or a lump sum can affect your reinvestment options.

Sale Structure

The sale structure affects your tax burden, future income level and investment options. For instance, if you agreed to a multi-year earn-out, the buyers will only pay out a portion of the proceeds if your company meets certain pre-defined milestones.

Unless you receive a lump-sum payment, you shouldn't act like the installments are guaranteed. Even if projections look great, the organization may not perform as well as expected. Depending on your contractual terms, you may not be entitled to a payout in those circumstances.

What to Do With What You've Earned From the Sale

There are several things you can do with the sale proceeds. The average business takes up to 12 months to sell, so chances are you've thought about what you'll do with the money at least once. However, having it in your bank account might make you second-guess yourself.

Instead of worrying about making the right choice, reconsider all your options. Whatever you choose to do, make sure you hold something back — experts recommend setting aside enough money to afford three to six months of living expenses.

Investing is one of the most common methods of growing savings. High-yield savings accounts, money market CDs, and short-term treasuries can yield about 5.3% and are low-risk, so they're good choices for growing your nest egg.

You could also dabble in alternative investments like digital real estate, cryptocurrency, art, or peer-to-peer lending. While many of these options aren't as low-risk, they offer unique benefits. Plus, diversifying your investment portfolio is the safest bet.

You should also consider funding your retirement with a portion of the proceeds. After all, you'll need 70%-90% of your pre-retirement income to maintain your current standard of living. One option is an Individual Retirement Account — you can put $7,000 into it annually as of 2024.

Your goal should be to preserve your wealth now that you've moved on from being a business owner. Your investments' performance can affect your retirement age, so you should grow your fortune now to ensure you can live comfortably later on.

What Lifestyle Changes Should You Make Post-Sale?

Whether you were making a six-figure salary or didn't take one at all, you need to adjust your post-sale finances after exiting your business. While the sales proceeds might be enough to live on, getting another income stream is the safe bet. Either way, you should budget to understand how things will change.

What is your current standard of living? Consider what your car payment, mortgage, rent, travel, grocery, and entertainment bills look like — will the sales proceeds and the interest be enough to cover them?

Apply your former organization's financial strategies to your transition to see what cuts you might have to make — if any — to sustain your current lifestyle. Will you have to get a job? Should you monetize your hobby? Can you live off the interest alone? These are necessary questions to ask yourself after exiting your company.

You should also consider estate planning as soon as possible since your windfall might affect how your assets will be managed and distributed. While this doesn't necessarily require a lifestyle change, it's a big consideration.

Dealing With the Emotions of Exiting Your Business

Enough about the financials — what about you? The emotional highs and lows you experience post-sale are often overlooked, but that doesn't mean they're any less important. Understanding where these feelings come from and addressing them early on can help you move on.

Loss Aversion

Loss aversion is a cognitive bias — or an error in judgment — where the pain of a loss is felt more strongly than an equivalent gain. For example, losing $10 feels worse than finding $10. This can help explain why selling your company has made you feel unhappy even though you're getting paid and starting a new life chapter.

Burnout

Doing your due diligence during the sale likely meant stacks of paperwork and a constant back-and-forth between you, your business broker, and the buyers. On top of reducing your years of hard work to tables on a spreadsheet, you had to go over every aspect of your company with a microscope — it's normal to feel burned out at this point.

Burnout can linger for some time. While it could disappear in a few months, severe cases can take over one year. If your feelings of stress and fatigue are sticking around, consider taking a break, prioritizing self-care, or going on vacation. Resting your body will help you clear your mind and prepare for whatever comes next.

Fear of the Unknown

Dreading what comes next is normal, whether you owned your company for a year or a decade. You probably spent ages working toward the singular goal of building it up, so being faced with a sudden emptiness can feel wrong and unnerving. Finding a hobby, job, or pastime to motivate yourself can help you overcome the fear and uncertainty of exiting your business.

Why Selling Your Company Can Take a Toll on You

Every entrepreneur moves on eventually, whether through a sale, merger, acquisition, or retirement. Although you knew you'd have to say goodbye at some point, parting can still sting.

If you're like most business owners, you leave with questions ringing in your ears. Will your customer base like the new owners? Can your brand withstand corporate sanitization? Will your employees be treated fairly once you're gone? Walking away without answers can be tricky — you must trust strangers to head in the right direction once you hand over the reins.

Like any other significant life transition, selling your company can take an emotional toll. Navigating it is deeply personal — there's no out-of-the-box solution. That said, there are plenty of ways to make the transition easier.

How to Effectively Cope With the Post-Sale Identify Shift

Going from being a business owner to a job-seeker or a retiree can give you whiplash. Understandably, losing a label you've had for years — potentially decades — can be confusing and alienating. Fortunately, there are several ways to cope with this identity shift.

1. Ask Who You Are Besides an Entrepreneur

Who are you, if not an entrepreneur? The possibilities are endless. Contemplate who you are outside of work and reflect on your identity before you started your organization to gain clarity — and help yourself move on.

Even if your company was the most important part of your life, it wasn't central to your identity — your motivation, competitiveness, meticulousness, adaptability, and enthusiasm were the driving forces behind your success. Make those features the foundation of your new self after exiting your business.

2. Reach out to People in Similar Positions

You can reach out to personal contacts, co-founders, or like-minded individuals who can help you process the emotional and psychological effects post-sale. They can offer helpful advice, personal anecdotes, and little-known tips.

3. Consider Where You See Yourself in Five Years

You're probably familiar with the question, "Where do you see yourself in five years?" You might have even directed it toward candidates, depending on your former role. Genuinely think about it for a moment.

Whether you picture yourself relaxing in an oceanfront property or sitting in a boardroom, you can use that vision as fuel, letting your aspirations shape your identity going forward. Eventually, you'll find your identity as you work toward your next goal.

4. Revisit the Idea of Starting a Business

The familiarity of being an entrepreneur might be right for you if it's all you've ever done or wanted to do. You could easily invest your newfound capital into a new business venture, accelerating its growth. Not to mention, your past experience is an invaluable asset.

If you're OK with risk and can accept that your second company may not achieve the same success as your first, this option might be a good fit. You can consider it a way to entertain yourself and achieve happiness without the make-or-break pressure of your first pursuit.

How to Find a New Purpose When the Sale Finalizes

Life goes on after the sale finalizes. Unless you must stay on to ensure a successful transition, you probably suddenly find yourself with an abundance of free time. Will you retire or stay on board in a different position? Do you have a hobby or a vacation spot you've meant to try for the past few years?

As of 2024, the average life expectancy is 79.25 years in the United States — higher than the global average. In other words, you have plenty of time to determine what you want to do next. That said, finding a new purpose early on can be a source of motivation and happiness.

You could get a job, start a second business, or learn a new skill. Remember, the only way to know whether you'll be successful is to try it. Whatever you do, don't put too much pressure on yourself in the first few months of your transition. If nothing comes to you immediately, give it time and explore your options.

Get Ready for Life After Exiting Your Business

You're in a great spot — you have money, freedom, and proven business acumen. Wherever you decide to go next, you're sure to find some kind of success in your ventures. Just remember to manage your money wisely and give yourself time to rest before re-entering the grind.

Featured Image Credit: Photo by Andrea Piacquadio; Pexels

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