In order to sustain the wealth you have worked hard to create, and give yourself purpose to pursue new endeavors, it is important to build upon the foundation that you have created pre-exit.
Successfully exiting your business may provide you with the financial flexibility to chart a new path, whether, for instance, you choose to start a new business or pursue charitable interests.
At this stage of your journey, turn your focus towards creating an infrastructure and team of advisors to oversee your wealth, educating and empowering your family to become responsible stewards of your wealth, and exploring creative ways that you may use your wealth philanthropically to make an impact in the world.
Post-exit, you will likely be spending less (if any) time with the business you sold and more time overseeing and deploying your newfound liquidity. Many of the successful entrepreneurs we have worked with post-exit approach the task of building long-term wealth by adopting the same level of discipline and structure they relied upon when running their business.
Best practices that have worked well for founders running their “family wealth enterprise” include:
Consider forming a family/multifamily office or outsourcing some of the services that family offices often provide (e.g., a chief investment officer’s role, administrative tasks), depending on the size and complexity of your balance sheet.
Avoid the temptation to say yes to every investment opportunity. Instead, put together a disciplined approach and team to evaluate opportunities in the context of your overall long-term wealth plan.
Create a formal communication structure with your family (e.g., periodic family meetings or a family council) to provide a forum for discussing the family’s wealth and resolving conflicts as your family grows and your balance sheet becomes more complex.
Reevaluate the capabilities of your advisors to ensure your wealth has not outgrown your team.
Whether you part ways with your business or remain involved as an employee, board member and/or minority shareholder, it is important to recognize that your relationship with your business will fundamentally change post-exit. It is not uncommon for entrepreneurs to feel a sense of regret or loss of identity after the sale of their business.
Prior to closing the deal, mentally prepare yourself for the transition and have a clear understanding of how your authority and access to information within the business will change. Founders who have already lined up a new endeavor before exiting their business to reroute their focus, motivation and desire to make an impact in the world are often the most satisfied with how things turn out. Finally, write down any circumstances that may cause you to consider getting more involved in your business again — for instance, a significant decline in sales or erosion of the company culture.
Whether your children are young or grown, one day they likely will become stewards of your wealth. Many entrepreneurs struggle with how to strike the right balance between providing enough for their children — but not so much to make them complacent and dependent.
Start with the “why.” Instead of hard and fast rules for what your children get and what they can and cannot do with your wealth, create a trust structure that gives the trustee flexibility and provides guidance on the purpose of the family’s wealth.
Encourage your children to be entrepreneurial, cultivate their interests and provide opportunities for them to make their own decisions and learn from their own mistakes.
Communicate frequently and transparently as a family about the family’s wealth and proactively address any potential friction or issues that may arise.
Specific strategies to implement strong family governance include:
Giving children the opportunity to learn firsthand about the family’s business holdings, real estate and other assets
Creating opportunities to cultivate your children’s entrepreneurial spirit, for instance by including specific language in their trusts about how certain trust funds may be used to invest in start-up ventures, or creating a family LLC whereby family members work together to invest in early-stage businesses
Inviting outside perspectives to guide conversations and provide a sounding board for family members, or even considering creating a formal advisory board to advise the family on key decisions related to the family’s assets
In many respects, the corporate and civic profile you have built over the years may still be aligned with your personal goals and interests even after you have exited your business. However, this is a good time to reevaluate your continued engagement with certain charitable causes and explore other opportunities to make an impact.
Keep the following in mind when pursuing philanthropy post-exit:
Understand what is out there. While many entrepreneurs choose to pursue philanthropy through traditional routes such as charitable giving and forming a foundation, there are numerous creative structures for supporting the causes that are important to you, from for-profit businesses committed to a particular charitable mission to funds that invest in businesses that support a particular set of values. Weigh the costs and benefits of each alternative before forging ahead.
Avoid jumping in too soon. Just as you’ve made plans for transitioning out of your business, your philanthropic activities require a similar commitment to planning. While you may have more time on your hands, your philanthropy will be more impactful and rewarding if you take time to create a philanthropic giving strategy to implement over time.
Don’t go it alone. As a (former) business owner, you will likely still have access to the community partners with whom you have been engaged over the years. Work toward deepening those relationships, identifying resources that will support your philanthropic goals and otherwise not “reinventing the wheel.”
Business Advisory ServicesEvaluate your exit alternatives, put together a deal team and quarterback the transaction process from start to finish.
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Goals Driven Wealth ManagementModel different financial scenarios to help you determine the amount of proceeds you need to walk away with post-exit to fund your long-term goals.
Wealth Planning & Advisory ServicesDevelop tax and estate planning solutions that help maximize after-tax proceeds upon exit and preserve your wealth over the long run.
Family Business ServicesDevelop a succession plan for your management team to maximize the value of your business pre- and post-exit.
Global Family & Private Investment OfficeEvaluate what post-exit infrastructure will work for your level of wealth.
Philanthropic Advisory ServiceExplore creative and tax-efficient opportunities to give back and make an impact.
