Most business owners I work with spent years putting the business first. They reinvested profits, paid themselves less than they could have, and treated the company as their largest investment, because it was.
Selling is often the moment that work finally turns into money they can use. It is a well-earned reward. For many owners, this is a once-in-a-lifetime sale, and some of the most important financial decisions have to be made before the deal is signed.
Think about the exit earlier than feels natural
Owners who are deeply committed to their business often find it hard to think about leaving it. That is understandable. But it means exit planning tends to start later than it should.
Sometimes the timing is not yours to choose. I have seen owners receive an unexpected offer, at a price they could not turn down. It is a good problem to have. It also compresses months or years of planning into a much shorter timeframe.
You do not need to want to sell in order to plan for it. Knowing your options ahead of time helps a surprise offer become a decision, not a scramble.
Decisions that close before the deal does
As negotiations advance, some planning opportunities become harder to use or disappear, even before a sale agreement is signed. A few examples:
•Estate and gifting plans. Gifts of ownership interests to family or trusts can move future growth out of your estate. The value used for a gift must reflect the facts at the time, including any sale negotiations already underway.
•Charitable planning. If charitable giving is part of your plan, discuss it early. A gift of business interests made when the sale is already effectively certain may leave you owing tax on the gain, even if the gift happens before signing. Your advisors and the charity should confirm that the gift can be accepted and that valuation and deduction requirements are addressed.
•How the deal is structured. The type of business entity, whether the buyer purchases assets or ownership interests, and when payments arrive can all affect taxes. Receiving payments later does not necessarily defer all the tax.
Larger sales may bring more planning options and more people to coordinate. But early planning matters at any size, and the sale may be the largest financial event of the owner's life.
That team may include a CPA, the attorney handling the sale, a valuation consultant or investment banker, and an estate planning attorney. We try to serve as the quarterback for your personal financial plan, coordinating with those professionals so the pieces fit together, while each leads their own area.
Price is not proceeds
The headline number is not what lands in your account. Taxes, fees, debt payoff, and payments scheduled for later all affect what you receive, and when. An earnout, which depends on agreed conditions being met, may not pay the full amount.
Taxes are usually the hardest part to accept. Owners who spent decades building a business are often frustrated by how much of the proceeds must be set aside for taxes. That frustration is understandable, and it is one more reason to plan before the deal rather than after.
After the money arrives
When the proceeds land, there is often pressure to do something with them right away. I encourage owners to take a more deliberate approach. Ideally, the tax and temporary cash plans are in place before closing.
What needs attention now:
•Taxes on the sale. A large gain may require estimated tax payments before your next return is due. Work with your CPA to determine how much to reserve and when payments are required.
•Where the cash sits for now. Review access, deposit insurance limits, and any investment risks before deciding where the proceeds will stay temporarily.
•Your new normal for spending. Once income and benefits from the business change, figuring out what your lifestyle actually costs is a discovery process, and it shapes everything that follows.
What can wait:
•Investing everything at once. With the immediate obligations covered and a temporary cash plan in place, there is room to work through the longer-term investment decisions.
•The next venture. Entrepreneurs at heart often want to invest in a new business within a year or two. That can be a good fit, and it is worth deciding in advance how much you are willing to commit.
•Opportunities that find you. Once a sale becomes public, the calls start. It is reasonable to say, “I am not making any investment decisions right now.”
The part no spreadsheet covers
Many owners stay on for a transition period, often tied to an earnout or an employment agreement. Those months can be emotionally tricky. The new owner starts changing things, and it can be hard to watch decisions you would not have made in a business you built.
Afterward, most of the owners I have worked with have retired, at least in name. Some find they miss the engagement of building something and look for a new venture to stay involved. Either path can work. It helps to have thought about what you want your days to look like before the sale, not only after.
Where to start
If a sale is on the horizon, or you simply want to be ready if an offer arrives, start with the decisions that close before the deal does. Our team is glad to work alongside your CPA and attorneys to help sort out what needs attention now, what can wait, and what comes next.
About the author
Andy Foldenauer, CFP, is a Senior Vice President - Financial Advisor and Senior Portfolio Manager with RBC Wealth Management in Richmond, Virginia. He and his team work with individuals and families through major life transitions, including retirement, the sale of a business, an inheritance, divorce and the loss of a spouse. To start a conversation, contact the team at (804) 225-1483 or andy.foldenauer@rbc.com.