What to do after selling your business

The contract is signed. The cheque is cashed. Your business has been sold or you’ve been given a golden handshake. Now what?

It’s a question many former company owners have a tough time answering. Whether you’re looking to sail around the world, start a new enterprise, or spend time with your family, you must now figure out what to do with your money—and with your life.

Here are 13 things business owners should do after leaving.

• Relax

Shifting gears in a rush increases the likelihood of missteps, financial and otherwise. Take some time to reflect on what’s happened, and what’s to come. You don’t need to accomplish everything at once.

• Define your goals

Do you want to spend time with family? Travel? Get involved in a charity or a community cause? Start a new business? Write it down.

• Build a team

Owners and executives are used to working with their teams, and that shouldn’t change. Chances are you’ll need to revise your financial and legacy plans with your wealth manager, accountant, and tax lawyer.

• Determine your involvement

When it comes to wealth, what kind of client are you—strategic or tactical? Do you want to be involved on a big-picture level, or make day-to-day portfolio decisions? There’s no wrong answer but if you’re leaning toward the latter be honest about your capabilities. The skills of a successful business owner are different from those of a successful money manager.

• Pay off debt, then invest

Don’t invest at the expense of paying off the car loan or mortgage. Type A personalities can sometimes value the game of investing over the often smarter but comparatively mundane move of paying off debt.

• Spread the wealth

Owners and CEOs are usually comfortable holding the bulk of their wealth in a single company—their own. After a sale, many take the same approach with their portfolios—especially if they acquired a large block of stock as part of the sale. Big mistake. The focus should be on keeping what you have, not striking it rich. That means diversification and conservative growth.

• Assess and control spending

When you were in business, you could earn more income to cover an increase in expenses by bringing on a new client, giving yourself a salary bump, or declaring a shareholder dividend. Once you cash out, growth’s harder to come by. Rather than allocating more money to riskier investments, it’s better to understand your post-sale spending— taking into account it may be higher because you’ll have free time to spend—and control it before you burn through your nest egg.

• Explore income-splitting opportunities

Will the post-sale portfolio be your primary source of income? If so, take advantage of income splitting. It’s often possible to use a shell corporation to split investment income with adult children and your spouse.

• Learn to say no

In the Internet age, it’s hard to sell a business quietly. This may mean unsolicited calls from friends, family members, charities, and business associates for seed money, loans, you name it. Learning to say no can prevent a lot of stress.

• Revise your will

Your life changes the moment you sell your business. This needs to be reflected in your will. If you have yet to update your will—or if you don’t have one—call your estate lawyer right now.

• Teach the kids about money

Raising children to have drive, ambition and resilience is difficult in an environment of material abundance. Think about how you can teach even your adult kids to respect your family’s recent windfall. Set clear limits on gifts, spending, and other forms of financial assistance.

• Pursue other interests

Single-minded, near-obsessive, focus is an admirable quality in business. In the outside world, it’s often a hindrance. Micromanaging your financial affairs is counter-productive when it comes to preserving wealth. If you’re looking to keep busy, consider branching out into business-related activities that don’t involve your personal finances, such as charitable work, joining a board, or mentoring younger entrepreneurs.

• Revisit and reassess

Selling a business or divesting stock options is a one-time event. Wealth and estate management isn’t. So revisit your financial plans and life decisions on a regular basis to assess what’s working, and what’s not. While the exact schedule for such reassessment should be based on personal circumstances, most professionals say 24 months is a good initial target.

James Dolan is a business writer based in Vancouver.