Understanding how your business has improved your life is critical when deciding how to replace it, and what to replace it with. Selling your business can be a hugely emotional experience, and not necessarily in the way you might expect. UBS shares some tips for a smoother transition.
Understand what business gives you
Business psychologist Dr Mark Parkinson likens the exit experience to bereavement. “It’s fair to say entrepreneurs will go through the same range of emotions that would affect someone who had suffered a ‘real’ loss: disbelief, grief, despair, anger and depression,” he says.
The pain can be exacerbated, he says, by observers’ assumption that “with all that money, it’s just sheer indulgence.”
A study by US researchers found most entrepreneurs reported having a difficult time in the first year or two after a sale. Business owners found that they lost a sense of identity and community and that coping with this loss sometimes took years.
The key, then, is to be prepared and employ the same resilience that entrepreneurs have used to build their businesses, in the next stage of their journey.
Research from Colombia Business School suggests that entrepreneurs need to spend time before exit considering what their business provides for them, besides income. “If you understand the degree to which your company is supplying meaningful personal relationships, use of time and sense of purpose, you can take steps to begin building other social networks, uses of time and sources of purpose before the sale is final,” one researcher explains.
Nurture the next generation
Meaning is not only found at work, however. Finding time for family is often near the top of the priority list for entrepreneurs newly liberated from long working hours, but parents can do more for their children than spend quality time together on exotic holidays.
The children of entrepreneurs often inherit a work ethic. A 2012 study in Sweden found that having an entrepreneur parent increased the probability of becoming an entrepreneur by 60%.
Understandably, some parents want to ensure that their children will maintain motivation for work and a sense of purpose in the face of a major wealth event.
One way to achieve this is to set up a formal programme of learning to prepare the next generation for a future business they might inherit.
Another is to offer them responsibility via a foundation, says George Rooke, an adviser to wealthy entrepreneurs at UBS: “You can give your children the remit to make the business case for supporting a cause they feel passionate about.”
Be disciplined about philanthropy
Many entrepreneurs return to business in some form, but some also take the opportunity to invest in charities or causes close to their hearts.
The key to success here is to make a realistic assessment – not only of how much money you can afford to plough into a charity or foundation, but of what you intend to achieve.
“A lot of money is wasted in charity because people don’t think it through properly. They need to take care not to replicate what’s already there, or to duplicate effort that has failed to work in the past,” says Rooke.
“I would encourage people to be more tightly focused in their desired outcomes than they might initially think – or perhaps to partner with other charities to get more bang for their buck.”
Take a balanced approach
The choice, of course, is not between business, philanthropy, family or other interests. Since the sale of IRIS software, Martin Leuw has divided his time between advising and investing in other businesses, working with the Prince’s Trust – and sharpening up his drawing and painting skills.
“My idea was to spend a third of my time still in business, a third ‘giving back’ in some way – both in time and money – and the other third just having unadulterated fun.”
Our BQ Bulletin emails will land in your inbox at 7.30am, Monday to Friday, with a mix of the latest local business news, national news, and features to inspire you. Sign up here!
Click here to read our privacy statement