What to Do After Selling Your Business
Whether you’re planning an imminent sale or just contemplating the future of your company, you have a lot of work under your belt.
Whether you’re planning an imminent sale or just contemplating the future of your company, you have a lot of work under your belt. You may be so excited about the prospect of moving on to something else that you’ve given little thought to what that something else might actually be. Knowing what to do next is a critical component of business exit planning. Here are some questions to help guide your decision-making.
Should I Stay on Staff After I Sell My Company?
Working for the new owner after your departure can increase the transaction price and ensure a smooth transition. But if you’re feeling burned out or are eager to move onto something else, you may feel disinclined to stick around. If you’re considering staying for an earnout, you need to have a lawyer and accountant carefully review your options. Be prepared to have some conflict with the buyer, and set clear ground rules for how your relationship will function.
Common Post-Sale Roles
If you do opt to stay on staff after leaving your company, what roles might you fill? In most cases, you’ll act as a consultant. You may also become an employee, and you almost certainly will not remain an executive. You must ensure you are comfortable with this role shift, and that your contract allows for the possibility that you may leave early if things don’t work out as you hope.
If you do agree to stay on, you will likely have two options:
- With an employment contract, you’ll become a member of the business’s staff, and answer directly to the buyer—your new boss. This can be a difficult transition for some owners, but often comes with more regular hours and reliable pay.
- With a consulting contract, you'll work as a freelancer. Your earnings may be flexible, tied to your results, or depend on how many hours you work each week. You’ll have more control over your time, which appeals to many entrepreneurs.
Rolling Over Equity to the Buyer
If a PE firm purchases your company, the buyers may expect you to make a rollover investment.
Most PE firms use a two-part sale. First, they purchase a controlling interest in the company. You’ll retain some portion—usually a small non-majority share. The PE firm attempts to grow the company, and then sell it, buying you out of your shares. This can be a great investment, but only if you believe that the company will continue to grow. A novice PE firm or one that does not know how to operate your type of business could end up tanking it.
What if you’re fully done? Then you can sell for whatever price you can get outright, and walk away permanently. The best way to ensure this strategy is successful is by spending several years preparing for the sale. The right advisory team can help you accomplish this feat. Of course, you’ll still need a plan for what comes next, whether it’s a new company, traveling the world, or just spending time with family. Keep your eye on that prize, and it will motivate you to grow your business so you can achieve a successful sale.