Even the most prepared can be surprised by the sudden wealth of turning equity into capital.
Every business owner has found themselves in a situation where they're so busy working in the business that they forget to pick their head up and work on the business. Often the same thing happens when transitioning a business to new owners. Most business owners are great in their chosen field, but navigating the sale of a business and the subsequent need to manage money can be quite foreign.
The thing about managing money is that it's very different from managing people.
Business owners typically have to focus on cash flow. When you have many expenses taking money out of your business, then you also need to focus on bringing in money consistently enough to cover all of those expenses. Some businesses generate the majority of their profits in only one or two months per year, but they still need to cover expenses in the off months, hence the focus on cash flow.
In fact, many successful business got that way by constant reinvestment. So while the business may be growing constantly, it's entirely possible that the owner has really never had much money to manage - it was always spent on the next growth opportunity.
The need to suddenly focus on capital appreciation is a very different approach to money. As well, business owners who may understand their industry in great detail may not understand the Canadian tax system, especially when it comes to estate planning, investment returns, and the sale of a business.
Run your Household like a Business
If you want to continue making decisions the way you have been while you were a business owner, then just run your household like a business. Start by building a Net worth statement, or Balance sheet as you may be used to calling it, then a cash flow statement, and set some goals and expectations for the future.
Then, in order to make sure that the future unfolds as you expect it to, consult experts to ensure that you are not being less than efficient, or making decisions that will result in unexpected consequences in the future. Just like in business, you'll likely need a good lawyer, accountant, and certainly a financial planner, or a personal CFO if you prefer to think about it that way.
Don't forget that many of the consequences of your decisions now will only become apparent well into the future.You may need your money to last for 30 years or more, it's hard to know if spending a certain amount of money today will result in a lack of cash flow 30 years in the future. Financial modeling is an important part of this decision making process, and a financial planner can help.
Keep in mind that most financial planners in Canada are also business owners. A retiring business owner has more in common with a financial planner than might appear on the surface, and you may value the relationship as much or more than the coaching and advice.
Whether leaving your business to family, or to new owners, the change of lifestyle can be a shock to your system. For most business owners, men especially, our entire self image is wrapped up in running that business. When we've sold the business, then "who AM I?" becomes a common question. Take time to think about who are, and who you want to be, outside of running your business. That way you'll have an answer when everyone you know starts asking "So, what are you going to do now?"