Believe it or not, one of the major reasons owners don’t sell (and keep their company much longer than they should) is because they don’t know what they will do after a transaction. For many, sitting around the house or golfing/fishing/gardening isn’t a completely fulfilling thought and, worse, there is no plan beyond that.
But here is the actual reality. Many sellers forget that they may be required to stay for a period of time after closing the deal or even be offered a completely new role, which could increase their desire to hang out since they no longer have to run the day-to-day. I have sold over a dozen companies during the last few years and have seen how sellers transition post-sale; many times, it ends up becoming an entirely new career one way or another.
Here are the three most common paths sellers take post-sale. I’ve included percentages for how often I see each, based on my experiences personally selling multiple IT companies. I hope this gives you some inspiration as to what your next life might look like.
Path 1 – The 12- to 24-Month Transition Stint – 55%
Many times, a sale involves an earn-out. Unless you have a strong recurring business, an earn-out will most likely be one of the terms of your offer. And most owners want to hang around to make sure that earn-out is achieved. This can be as little as six months or as much as three years. It depends on your business and your buyer. While this may not sound so appealing, it can come with some nice perks, like no longer having to manage accounting, payroll, HR, or even cashflow (which, honestly, I think every owner is just fine giving up). Instead, you may be involved in sales, delivery, or operations in some capacity. The point is, you can just focus on achieving the earn-out while giving yourself time to decide what you will do after that period is over. Many times, owners decide they are good with the new role and stay for an extended period of time, increasing their bank accounts in the process while receiving some increased benefits, like medical insurance and profit sharing.
Path 2 – A New, Exciting Role Within the Company – 25%
Many buyers see the CEOs they acquire as great additions to the team. After all, they know the business better than anyone else, as well as the customer base. So, why not find a great role for them moving forward? The role can be full-time or part-time and can be something you already know or something completely different. I have interviewed many sellers who have moved into entirely different roles as part of their transaction, such as systems integration, recruiting, marketing, and M&A, just to name a few. And they love these new roles, as they give them the opportunity to focus on one thing or pursue something they really like.
Also, sellers that roll equity as part of their company sale may want to contribute to the profitability of the new company so that their equity grows even more. So, they stay with the company until the next liquidity event. I see this very often with private equity-backed deals, as there are just more opportunities for growth than there were before.
Path 3 – A Complete Exit Within a Few Months – 20%
This is probably the scariest option for most people. Sure, if you have another business you want to start or a book you want to write, then moving on is something you will very much look forward to. But what if you don’t have a plan after the sale? Then what? I remember being in that exact place and feeling absolutely rudderless. I didn’t know what direction to go. All I knew was that I wasn’t ready to retire completely. But what I was sure about was that I didn’t want to start a new business and have employees, customers, or vendors to report to. I was completely over that!
But I still had some gas left in the tank to do something. “Just what?” was the question. I even enlisted a personal coach to help me “find my passion,” which I had no idea what that even meant at the time.
If THIS is you, then it does become a reason not to sell, and that could be the biggest mistake you make. I see owners keeping their companies long after they have reached their peak because they have nothing to move on to.
So, now comes the question: how do you deal with this?
A good start would be to identify how personally ready you are to sell. We have a quiz for that!
After, I would highly recommend reading the book Finish Big by Bo Burlinham. I mentioned this in my last post, but worth another mention.
Then, I would just start thinking outside of the box. Begin listening to some podcasts to give you ideas. Maybe you still want to earn money, but in a different way; create a product and sell it on Amazon, develop a course, or become a YouTuber or travel blogger. There are so many online options these days that you never even have to leave the comfort of your favorite chair to find fulfillment and make money in the process!
Now, on the flip side, you may have all sorts of plans post-sale, in which case, you can just move on with life. Consider yourself blessed to have a plan; that means you’re less likely to keep your business longer than needed. It’s an enviable position. You just need to sell for the maximum value possible, and we can help with that too. Check out our upcoming course, Ready…Set…SELL, and learn how you can get the most value for your company in 2024.
Whichever direction you head, it’s always important to share your plans and desires with your buyer early in the process. There is nothing wrong with wanting to leave after a certain point in time, especially if you have a second-in-command to step in place. Just be communicative throughout the sales process. Happy selling!
How to Level Up Your Business in 2024