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Selling a business represents the crowning achievement for many entrepreneurs after years spent building a company from the ground up. Beyond just the financial windfall realized, selling validates the business concept and market opportunity first identified when launching the venture.

Yet the question inevitably arises – what’s next after cashing out? While some entrepreneurs look to relax after an exit, others want to deploy newfound liquidity into fresh projects. Nearly all sellers grapple with major financial, professional and lifestyle questions post-transaction.

This guide on life after a successful business exit synthesizes advice from other entrepreneurs, angel investors and wealth managers who have helped seller-founders navigate the transition. Readers will learn how to:

  • Strategically manage liquidity from a business sale
  • Determine optimal post-exit work scenarios
  • Avoid common lifestyle pitfalls seen after major liquidity events
  • Plan wealth management and philanthropy priorities

Sufficient planning for what comes next allows entrepreneurs to enjoy the just rewards from selling a business without newfound wealth also eroding passion for what comes next professionally.

Managing Liquidity After the Sale

The single largest consideration after a sale involves managing the financial windfall responsibly to ensure sustainable growth after the exit. With discipline, seller-founders often maintain the same lean financial perspective that first fueled building their startups through smart capital allocation decisions post-transaction as well.

Limit Immediate Spending & Lifestyle Inflation

Entrepreneurs used to living lean for years tend to see modest lifestyles drastically balloon after a liquidity event. Sudden affluence combined with relief at finishing an exhausting entrepreneurial journey makes it all too easy to splurge on luxuries like fancy cars, second homes, lavish vacations, and other discretionary purchases.

Yet seasoned seller-founders and private wealth advisors urge modesty and restraint during the first 12 months post-sale when it comes to lifestyle inflation. Reasons why include:

Taxes Are Coming – Federal plus local/state taxes claim significant portions of sale proceeds in the year following a liquidity event. Entrepreneurs unexpectedly staring down seven-figure tax liabilities often lack sufficient cash reserves after prematurely overspending.

Recession Resilience – With venture returns tightly correlated to financial markets, an economic downturn can erode excess liquidity faster than expected if not conservatively invested. All-equity portfolios can fall 30% or greater during sharp market declines.

Unexpected Costs – Health issues, unforeseen family obligations, regulatory fines, and deferred employee compensation also drain excess liquidity faster than projected post-exit. Conservative financial plans accommodate these surprises.

Bolstering Emergency Reserves – Smart liquidity management starts by funding 12-24 months of living expenses via safe cash/cash-equivalents to mitigate risks during the unpredictable transition off startup life.

With financial discipline top of mind immediately after selling a business, entrepreneur-sellers avoid derailing exciting second acts due to lack of planning.

Prioritize Tax Planning

Since federal tax bills claiming 20%+ of sale proceeds often arrive 12 months post-transaction, seller-founders must model total obligations early when making reinvestment decisions.

Tax planning experts guide clients to first fund safe interest-bearing reserves sufficient to meet capital gain taxes coming due while also maxing out allowable retirement plan contributions to mitigate current year liabilities.

For those holding founders’ shares, exercising low-cost option grants early in the post-sale window also effectively converts high-tax ordinary income into lower rate long term capital gains for additional tax savings.

Wealth managers also stress making timely angel investments into promising startups to capture further tax relief benefits before obligation deadlines.

Even with great accountants, predicting total tax liabilities from an asset sale remains tricky. Conservative planning gives entrepreneurs flexibility managing taxes before they come due.

Strategically Reinvest for Further Wealth Creation

The greatest business exits result from riding winners and strategically redeploying portions of sale proceeds into emerging leaders poised for their own breakouts.

Legendary entrepreneur/investor Peter Thiel highlights founders who go “from 0 to 1” with an initial successful concept, then “from 1 to N’ by reapplying skills and capital behind multiple big ideas over time.

For sellers able to suppress lifestyle inflation long enough, opportunities abound to fund other founding teams able to scale exciting ventures. Alternatively, rolling capital into promising seed funds or crowdfunding startups opens doors to participate in early upside.

The playbook followed by Facebook’s first professionals who directed wealth earned from the IPO into Instagram, Uber, Airbnb and other breakout startups provides a blueprint for entrepreneurs to replicate.

Choose Investments Reflecting Risk Tolerances

Despite the promising track records backing top venture funds and incubator programs, early stage investing remains extremely high risk.

Without proper governance and portfolio construction, excess concentrations in individual startups threatens capital erosion should those picks fail to scale. Or even a single massive fraud loss can wipe out decades of portfolio gains similar to Bernie Madoff’s devastation of investors.

That’s why even entrepreneurs with high risk tolerance must also carve out allocations to conservative public equities, fixed income, commodities and real estate for balance. Blending lower risk market-tracking assets alongside calculated venture bets allows managing volatility.

Target asset allocation models across stocks/bonds/alternatives suiting varying risk preferences provides entrepreneurs structure when managing newly concentrated wealth. Disciplined rebalancing then keeps overall portfolio risk constant as individual holdings fluctuate in value over market cycles.

Making the Most of Your Next Career Phase

Beyond getting finances buttoned up, crafting fulfilling professional pursuits ranks among the top priorities for entrepreneurs after selling their startups.

Should Founders Stay or Go Post Acquisition?

For those founders who just finished the startup marathon grinding night and day to scale their brainchild, the knee jerk response after selling often trends towards taking extended time off. The appeal of resting and restoring mental health makes total sense after exhausting sprints getting the company off the ground then commercializing the product.

Many buyer companies actually expect and even encourage founders to take a few months off to recharge under structured transition consulting agreements. These pacts enable the entrepreneur to temporarily remain involved while empowering new internal managers or external executives to assume day-to-day leadership roles.

Surprisingly the reality often plays out quite differently. Serial entrepreneurs accustomed to hyper growth environments often re-engage quite quickly after an acquisition despite best laid plans for sabbaticals. Being wired to operate in dynamic environments makes boredom or lack of purpose everyday emotional barriers for founders contemplating early retirement or even long vacations.

While health considerations mandate breaking from taxing founder schedules immediately post-exit, data suggests most successful entrepreneurs only remain disengaged for short periods before the allure of supporting new ideas re-emerges.

Should I Stay or Should I Go?

Whether to remain involved with the acquired business poses another key question for entrepreneurs. Factors favouring continued engagement include:

  • Ongoing “Earn Out” deal consideration still tied to company performance provide incentives for near-term involvement until fully paid out
  • Close partnerships with key employees benefit from the founder staying aboard to ease uncertainty amid changes
  • Institutional knowledge around the company’s vision makes the founder’s perspective valuable briefing new internal teams or external leadership about what drove initial success and shapes future priorities
  • Satisfaction with new parent company and leadership eliminates concerns about culture misalignment after the transaction
  • Flexibility to pursue peripheral projects or secondary priorities under the new owner

And while many founders do elect to stay on for a year or more post-acquisition, equally compelling reasons also exist for making a cleaner break. These include:

  • Desire for full lifestyle change after intensely running the venture pre-exit
  • Disagreements with new management or parent company leadership over strategy
  • Opportunity costs around pursuing new high-potential business ideas or outside ventures
  • Financial security allowing focus on passion projects or philanthropic interests rather than traditional work

There exists no uniform answer on best post-exit timeframe before moving on from the sold business. The founder’s mindset, risk tolerance and outside interests all shape whether, and how long, to remain engaged after change in control.

Evaluate Options for What Comes Next Vocationally

The sense of accomplishment from selling a business fades faster than expected post-exit for many entrepreneurs. High tolerance for risk and constant growth makes up their creative DNA.

While entrepreneur-sellers should allow some weeks or months to decompress before rushing into new ventures, many do begin plotting their next acts almost immediately upon closing a liquidity transaction.

Common positive outlets for entrepreneurs’ energies after cashing out include:

  • Launching new companies in familiar or entirely different industries
  • Joining leadership teams of promising startups poised for growth in need of scaling expertise
  • Formalizing mentorships and advisory roles guiding emerging founders
  • Channeling experience developing new products or business concepts internally for strategic acquirers

In these follow-on pursuits, entrepreneurs often discover accomplishments eclipsing those from initial breakthroughs. Serial entrepreneurs also tend to amplify earnings exponentially over time as successive ventures build wealth, traction and networks.

The decision to “retire” full-time from working ranks as one of the most personally consequential choices entrepreneur-sellers confront after exiting their startups. But for founders only in their 40s and 50s with lingering ambition, the research is clear – those unable to embrace fulfilling work opportunities risk emotional struggles.

Avoiding Post-Liquidity Pitfalls

In addition to making shrewd financial decisions then charting practical next career steps after a sale, entrepreneurs must also navigate lifestyle changes arising from sudden liquidity:

Beware Post-Deal Depression

While the initial months after selling a business produce elation and relief after reaching the finish line, the emotional pendulum often swings negatively as reality sets in subsequently.

The primary drivers of this “post-deal depression” involve:

  • No longer identifying as intensely with the founder role
  • Feeling disconnected from the company trajectory going forward
  • Softer sense of community and camaraderie departing startup colleagues
  • Discovering that exit proceeds don’t permanently resolve all financial concerns given taxes and shifting spending habits

Therapists report entrepreneurs experiencing surprisingly melancholic feelings against expectations of extreme post-liquidity euphoria. The phenomena aligns with Lottery winners and injured plaintiffs receiving surprise windfalls.

The antidote involves sticking to routines, communicating vulnerabilities early, immersing in new projects and acknowledging that no particular event permanently fixes all problems or fulfills all needs forever.

Reframe Self Worth Independent of Wealth

Another crucial priority for entrepreneurs adjusting to unfamiliar liquidity mirrors the psychological emphasis that formerly defined their business creator identities.

With so much previous validation and self-image tied up in launching and running a startups, the act of suddenly selling risks leaving founders adrift from their perceived purpose. Exits redefine how colleagues or peers perceive the entrepreneur’s status as well.

But the smartest seller-founders proactively decouple their perceived significance and impact from newly realized wealth. Those able to express gratitude for financial outcomes without letting money positively or negatively impact self esteem adjust best psychologically.

Reframing self perception around continuing creativity, leadership impact, team development and lifelong learning proves healthier than attachments to particular net worth figures after major windfalls.

Embrace Family & Relationships

Another byproduct from extreme startup focus involves strain on personal relationships – both romantic and with children.

The never normal work rhythms demanded scaling young companies commands huge trade offs in terms of family time. Founders celebrating liquidity events often express sorrow over missing key milestones as kids grew up or allowing marriage bonds to fray due to the pounding pace required by venture building.

The sudden flexibility freed up by an exit offers ideal chances to repair and strengthen personal connections. Entrepreneurs able to avoid diving immediately into Serial founder journeys stand to gain immensely from reestablishing intimacy and shared experiences with partners and children after the blur of startup intensities passes.

Some ideas include planning creative family trips, engaging shared passions like sports or outdoors activities and demonstrating willingness to participate consistently in important personal moments going forward.

Liquidity rightly gets framed as accelerating freedom to pursue greater life ambitions in newer directions. But part of fulfilling founder legacies also includes taking time to appreciate those whose sacrifices and support made such liquidity events possible in the first place.

Planning Ongoing Engagement: Philanthropy & Investing

Even as post-exit depression occasionally creeps in, escaping the intoxicating allure of launching brand new ideas rarely sticks for entrepreneurial personalities. The intellectual stimulation and progress rush of assembling resources behind bold business experiments calls.

While dabbling again as an operating executive or advisor usually emerges first, translating financial outcomes into societal returns also captivates many of today’s wealthiest public and startup tech luminaries.

Prioritize High-Impact Philanthropic Initiatives

Notable entrepreneurial figures like Bill Gates and Mark Zuckerberg adopted public Giving Pledges that obligate donating immense wealth accrued via technology companies to charitable organizations.

But rather than just writing checks, many strategic philanthropists now pursue direct hands-on involvement that allows applying the same measurable impact concepts used in business to determine baseline metrics guiding nonprofit initiatives.

Areas drawing intensive participation from founder-philanthropists based on visible outcomes and accountability include:

  • Financial Inclusion – Globally expanding access to capital, credit and essential financial tools improving life outcomes
  • Healthtech – Harnessing technology to diagnose/treat illness and optimize policy
  • Edtech – Online platforms enabling learning personalization and career mobility
  • Future of Work – Funding new models empowering gig economy livelihoods
  • Sustainability – Accelerating innovations curbing carbon emissions and addressing climate change
  • Equality Initiatives – Supporting historically marginalized groups via economic/policy reform

Unlike passive donations to opaque charities, strategic philanthropists operate much like activist technology investors – leveraging skills honed building startups to fix complex problems.

Keep Investing in What You Know

Just as full disengagement from work rarely sustains long for successful sellers, neither does severing ongoing involvement with nurturing innovative companies. The most multiplication-minded entrepreneurs maintain networks and actively fund emerging startups.

While the failure rates confronting angel investors and early stage funds seems daunting to outsiders, entrepreneur-sellers shrug off episodic flameouts as costs of informational option value. Getting behind promising teams, technologies and timing makes allocating small portions of asset pools towards seed stage and Series A startups feels like playing with house money after a fortunate exit outcome.

Moving further down the risk curve later by directing later stage private equity or growth equity dollars towards breakout companies offers lucrative reinvestment potential as well in more mature ventures able to quickly scale revenues.

And even delegating startup investing through a fund of funds or via personalized managed accounts allows entrepreneurs to deploy expertise assessing teams, traction and total addressable market prospects honed over their careers. Staying close to the innovation frontier fuels creative instincts.

Conclusion

Selling a successful business constitutes a crowning moment in any founder’s journey. But after the celebratory accolades and transaction bonuses awarded immediately post-exit, deeper lifestyle questions around fulfillment, wealth management and purpose inevitably emerge during the adaptation to sudden liquidity.

Navigating depression, unrealistic expectations and strained personal connections represents new challenges for entrepreneurs after leaving startups. Failure to appreciate and adjust to these disruptive dynamics risks regret and sub-optimal decisions.

Fortunately through balanced personal plans combined with strategic capital allocations back into new ventures or social initiatives, seller-founders often smoothly segue into serial entrepreneurship paths punctuated by recurring successes. Their wisdom and support distributes wider to help next generation founders seeking to follow in similarly ambitious footsteps.

Rather than representing the finish line, selling a business offers the starting block for entrepreneurs to run their next races unencumbered by past limitations. The futureabeiing unwritten awaits.

Scott D. Clary

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