After years of dedication to building your business and seeing it through countless ups and downs, you might receive an offer for the company that you can't refuse. While this may sound like a great opportunity, you must prepare yourself and your family for life after the sale.
Prepare for an emotional rollercoaster
Deciding to sell a company you founded or helped build can feel like riding an emotional rollercoaster. Add in the expectation of an influx of newfound wealth, and you may find yourself facing an identity crisis.
An owner of a successful commercial real estate business felt remorse and a sense of loss after the company, which had been in his family for three generations, was sold. Having been raised during the Great Depression with a scarcity mentality, he was neither prepared for nor comfortable with the idea of being rich. He didn't know how to accept and identify with wealth. He also grieved the loss of his family business legacy, since his children and grandchildren would not be able to work in the family business.
As this example shows, letting go can be hard for founders, owners, executives and even key employees, and it's helpful to prepare for that feeling of loss. Selling a business can be compared to having your child leave the nest: It may be the right thing at the right time, but it can undeniably feel bittersweet. It's important to take the time to process those emotions.
Fortunately, you don't need to go through this emotional journey alone. While some people may be unable to relate to your feelings of loss, only seeing your “golden ticket,” try to lean on friends and peers who have sold businesses of their own. They can offer advice and support. You may be surprised by how generous people can be with their time.
Communicate thoughtfully
The first step in processing the sale of a business is to take a deep breath, decompress and do some serious reflecting. You may be tempted to splurge and start spending right away, but it's important to pause, develop a plan to diversify and protect the wealth, and wait until you actually have the dollars in hand.
Once you've taken the time to process your emotions, consider how and when to share the news of the upcoming sale of the business with your loved ones, friends and employees. More importantly, how do you help those close to you prepare for the impact of the news, in addition to the wealth?
Consider this cautionary tale: An owner of a successful family business made the decision to sell his business, but he kept that decision to himself. His immediate family did not even know. His son, a senior in college at the time, was confronted by his significant other and roommate, who had read about the sale in the news. They asked him what was going to change now that he was “rich.” The son didn't know anything about it and had no idea how to respond. His significant other wanted to know how this would affect their relationship. He was furious about being put in this situation.
This example shows the importance of communicating early on with those likely to be affected by the sale. However, be thoughtful about whom you tell and when. There are rules to be followed from a business and regulatory standpoint. Before you start talking to anyone, investigate what you are allowed to say, to whom and when.
That said, don't wait until the sale has been publicly announced to tell those closest to you. They should hear the news from you first and should be given time to prepare for how their worlds could change.
To ensure the key people have advance notice, make a list of all the stakeholders who could be impacted. These might include parents, siblings, children, employees, board members and friends. Think strategically about how and when to share the news with them, and what their reactions might be.
Beyond telling stakeholders that a sale is likely and the news could spread, also talk about the potential impact and what others are likely to say to them.
People could ask, “Are you still going to work? Are you going to move? What are you going to do with all that money?” They also might say, “Must be nice!” or, “I have a great investment (or business) for you!”
Include your inner circle in thinking through how to handle those types of comments and questions.
Define what's next
Even when everyone who needs to know has been appropriately informed about the sale, there will still be numerous conversations that must take place. Start by gathering together those closest to you to discuss your values and vision for the future.
Then take the time to dive deep and talk about what you want your lives to look like in the future. Make sure everyone is at the table, including children. Involving younger generations makes a world of difference. Even at a young age children are intuitive and know when there is something happening in the family. This can create anxiety, stress and fear. Create an open forum to share feelings about the changes to come and possible implications.
Explore what it took to get the family where it is, and celebrate those endeavors. Also, set expectations for what a healthy lifestyle looks like going forward. In other words, enjoy the fruits of your labor, but don't lose yourselves or sacrifice who you are. You should redefine your purpose and reestablish your identity. Wealth can feel incredibly empty without a sense of purpose about who you are outside of the money.
Next, develop a governance plan that establishes how decisions will be made regarding the wealth. Include all generations who will have a voice and a stake in establishing the legacy.
Finally, don't avoid talking about sensitive issues when it comes to money. Yes, money can be an awkward thing to discuss, and it can be tough for people to get over that hump. But it's important to do so. It shouldn't be a taboo topic.
What happens if you don't have those conversations? The consequences can be dire. Research has shown that when family wealth is lost, the cause is often not poor investments or financial planning but a lack of communication among family members and a failure to establish consistent values.
After all the hard work of helping to build a company and achieving success and fortune from its sale, what a shame it is to squander that wealth, or for it to ruin family relationships. The good news is that this doesn't have to be your fate. For those who take the time to process their emotions, communicate effectively and define values and legacy going forward, the wealth — and the impact of that wealth — can last.
Jill Shipley was formerly with Cresset.