Selling a business may seem like the end of a long, long journey, but what are you going to do with the sale proceeds? You could put all of that money under your mattress, put it in a low-earning savings or IRA account, or even invest in the stock market. I have many financial planners do a really good job investing your proceeds from the sale. While I firmly believe that you should use “take money off the table” at closing and invest it in a very safe and secure place. But we must all admit that the stock market is volatile, the bank (while semi-secure) doesn’t pay much interest on their CD’s….how do you achieve good returns in a fairly secure manner? Well, the best answer may surprise you. Before I tell you the answer, let me provide you with some context.
“Controlled planned risk” is a term I hear every day from business sellers about business buyers. Sellers say, “The buyer has to take a risk.” You took a risk when you started your business. Investing with the crowd will only get you what the crowd gets and these days, that could easily mean that despite all of your hard work, you may end up working as a greeter at Wal-Mart to supplement your income during retirement. There is nothing wrong with working at Wal-Mart, per se, but the reasons underlying your decision to start a business in the first place was because you are not the type of person who does things the same way as the “crowd.” You are an entrepreneur. An entrepreneur is someone who knows that they can do it better on their own.
What do you plan to do with the sale proceeds from your business to ensure they can fund your retirement, whether immediately or at some point down the road? You cannot assume that if you take your retirement funds and place them at the feet of financial planners, that you are NOT taking a risk. They cannot (and do not) guarantee a secure financial future. I am not saying financial planners are all bad. I think they are very useful for a portion of your retirement and the majority of your employees’ retirement.
However, one only needs to watch the evening news and have watched developments in the financial markets over the past few decades to see the lunacy of treating publicly traded stocks as a valid investment opportunity for the just-liquidated business owner.
I mean, are these the types of businesses that you are going to turn your retirement dollars over to? What got you here to this place (i.e., the owner of a successful business that you can sell) is the same thing that will get you to the next stage in your life.
Because you are good in business, because you are ready to sell and because, and because as a skilled and careful business owner, you want to consider every option affecting protection of your investment and optimizing return from this major transaction, you must give a careful look at the option of seller financing of your business sale.
As I see it, you have four general categories of places to put the money you receive from your business sale: (1) stuff the money in your mattress or a safe deposit box (relatively risk free, complete control, no reward and pray that the house doesn’t catch on fire); (2) place it in a savings account or CD (low risk, little control, low reward); (3) invest in the stock market or similar investments managed by others (higher risk, little control, higher reward possible); or (4) invest in your own business (carefully controlled risk, high control, even higher rewards).
I sell businesses in Dallas and all over Texas. Owning a business business brokerage M&A firm in Dallas gives me a perspective where I see the good bad and ugly. Let me assure you that as you prepare to sell your business, remember that the sale of a business is an end to one type of investment of your time and money, but also a stepping stone to your next investment in your future.