What Should You Do With Your Money After You Sell Your Business?

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According to an ancient proverb, The best time to plant a tree is 20 years ago. The second-best time is now.

This statement couldn’t be more true when it comes to planning for the ultimate sale of your business.

The more time you can give yourself to prepare for a sale, the more options you’ll have when it comes to your sale proceeds. In this article, we’ll delve into the importance of planning well in advance, three considerations for how to manage your sale proceeds, and what your post-sale income requirements might be to ensure proper alignment for the future you’re envisioning.


3 Considerations When It Comes To Managing Your Sale Proceeds

Selling your business is something you have one chance at doing right – there’s no dress rehearsal. Without planning ahead, you may find yourself in the position of asking what to do with your money AFTER you have sold your business.

With so many considerations, some more obvious than others, we recommend starting to explore the process 5 to 7 years before your targeted exit date. With that in mind, here are three considerations for what to do with your money after you sell your business:


#1 Post Closing Liquidity

The value of your business as the owner, and the value derived after its sale, are two very different things. Post-closing liquidity is the amount of available cash or easily convertible assets that an exiting owner will receive immediately after completing a financial transaction, such as a merger, acquisition, or a sale.

In order to help assess the amount of cash you will have available to you after the sale, you have to determine how the sale of your business will be structured. Questions to consider include:

  • Is the sale to a third-party or a company insider?
  • Is this an all cash sale?
  • Is there an installment agreement?
  • At what intervals will you receive payment?
  • How many years will you receive the installments over?


#2 Don’t Forget About Paying Taxes

In addition to your post-closing liquidity, you need to consider taxes. While there are methods to drastically lower taxes at the sale, some amount will still be due. The specific tax consequences will vary depending on factors such as the structure of the business (inside sale vs. third party sale), the nature of its assets, and the applicable tax laws in the jurisdiction. The taxes applicable to you might be:

  • Long-term capital gains taxes on the sales proceeds above your cost basis (Federal and State, if applicable)
  • Ordinary Income Taxes on any short term capital gains or interest income from an installment note
  • ACA Medicare Surtax

It’s important that you earmark money to pay for the taxes applicable to the structure of your sale. Consult your tax advisor in advance to determine what taxes may be due, and how to prepare.


#3 What Will You Do After The Sale?

This is a big one, business owners. To properly align your post-sale income requirements with the sale of your business, it’s prudent to know what you plan to do after the sale.

Your answer here will help determine how to invest your money accordingly.

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If you decide to retire entirely after the sale of your business, your sale proceeds need to fund your retirement plan just like a 401(k) would. How can you take your assets and turn them into spending? From here you can both reinvest your money as well as fund your lifestyle after being a business owner. 

Speaking of funding your lifestyle AFTER being a business owner. This is why planning well in advance, think 5 to 7 years, matters.


Starting Another Business

Another path some business owners may choose to take is starting another business. Because you’re an entrepreneur at heart, this might be your desired path as well. If this is the case for you, it makes sense to keep your sale proceeds liquid to roll it into the next thing – whatever that venture may be.


Working In Your Business

This option is something we see far more than you would expect. For those business owners who want to keep working but don’t want everything that comes along with running a business – you may choose to sell your business but remain part of it.

Working in your business, not on it, allows you to realize the value of your business but keep receiving your income. It can also help increase the value of your business at sale, since they get to keep you around for a few years.

Here everybody wins. Yes, you and your buyer.

That’s because you mitigate risk to your buyer, making it a safer investment for them, while giving them continuity. Retaining your key employees is an important part of a successful exit, but YOU are THE key employee. Your continued involvement will likely provide the ultimate continuity in your business, while relieving you of all of the decision-making responsibility.


Align Your Post-Sale Income Requirements With How You Manage Your Sale Proceeds

Preparing for the sale of your business is (or should be) a long game. But, many times business owners realize they are ready to be out of the business…but also realize they haven’t checked all the boxes they should have along the way.

Prepare ahead to maximize the value of what you spent a lifetime building.

The reason we stress planning for your succession at least 5 to 7 years in advance is to start working to maximize your business value BEFORE it’s time to sell it.

Doing so better positions you for a stronger sale price which further funds your lifestyle after the work of owning a business. 

So, what comes first – your personal planning or planning for your businessNot sure where to start? Let us help. Contact an experienced professional at Consolidated Planning today.

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Exp. 2/2026 2024-169878


Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.  

This material contains the current opinions of James M. Matthews and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.

Published:  March 1, 2024