In 2018, I sold my test preparation education business to a private equity firm.
Anyone who knows me would say I am generally an introspective person. Both in my personal life and in my business, I do a ton of journaling, exercises, visioning, and planning.
But when the wire came on the day I sold, I had not seriously thought about what I wanted to do with the rest of my life.
It turns out that is very common; most entrepreneurs underplan for what they will do after their sale. Like me, they figure that they’ve reached the pot of gold at the end of the rainbow. But for most of us, it’s more complicated than that.
My own failure to plan led me to study the post-sale process. I interviewed over 70 entrepreneurs for my book, Beyond The Exit: What Successful Entrepreneurs Do With The Rest of Their LIves, and have now spoken to hundreds of entrepreneurs in similar situations.
If you hope to exit one day, this is what I’ve learned on timing your exit planning.
Why timing matters for planning your post-exit life
One of the biggest reasons the timing of your post-exit planning matters is that it can affect the kind of deal you go after.
For every acquisition, there’s always the question of, how and to what extent will the founder stay involved? Some buyers want to keep the founders at the helm of the business, while others prefer to lean on their infrastructure and people instead, giving the original founder an opportunity to work less or exit entirely.
Most entrepreneurs overestimate how much they will want to keep working with their buyer. This is a story I’ve heard many dozens of times. Some are horror stories of entrepreneurs being mistreated by buyers, but more often it’s just the case that entrepreneurs don’t particularly like having bosses. Often we started companies precisely for this reason, and being older and much wealthier after exit rarely makes us more amenable to having a boss.
If you know what you want your post-exit life to be like, you can use that life plan to know what to negotiate.
Are you totally done with this business and industry? Maximize cash upfront. Are you full of energy and looking to build something big with new capital? Roll more equity. Do you secretly think your buyers are bozos who don’t know what to do with your business? Avoid an earn-out.
Knowing what you want in advance sets you up to negotiate the prize that will best suit you later.
The wrong times to plan for what you want after you sell
Let’s start with the two least helpful times to do the post-exit planning process.
In the 3 months right after exit
While many entrepreneurs end up using this time to plan for post-exit life, this is probably the worst time to do it. Here’s why.
When we leave our business, we’re leaving part of ourselves behind. That’s probably pretty obvious, right? We go from being one of the most respected people in society (successful entrepreneur) to a prime working age unemployed person. Our identity changes overnight.
We also lose the hustle and commotion of startup life, which was probably exciting, if stressful. Without a big goal to work toward, some founders find life feels meaningless.
That’s why, in the months right after closing a sale, entrepreneurs might be tempted to jump right into the next thing, looking to replicate the feeling and exhilaration of running their business.
But I found so many entrepreneurs who started a second business right away were, in retrospect, lukewarm about the choice. As one of my interviewees said, “If you wanted another business, why did you sell the one you had?”
During the sale process
While some entrepreneurs run a thoughtfully planned sale process, others end up selling to what my friend and banker James Marciano calls a UFO – an unexpected flattering offer. This is particularly true for smaller acquisitions.
When an entrepreneur gets a UFO and chooses to accept it, they end up on a nonstop downhill sprint to close the deal.
Everyone in the process — your lawyer, your banker, your accountant, the buyer, and often your employees — benefit if the deal closes, and the faster the better. There simply is not time in the rush of the sales process to stop for a three-day retreat in a mountain cabin and plan your life.
Even if you don’t get an unexpected opportunity and instead pursue a sale intentionally, it doesn’t tend to leave time for thinking and planning. Most entrepreneurs are stretched thin — more than they expected — during the sale process, between continuing to run the business and working through due diligence.
So what are the best times to plan for post-exit life?
From all the interviews I’ve done with founders,I believe the best time to think hard about what you want after you sell is well in advance: when you first start getting inklings that you might want to sell.
Maybe this is the time when you lose a little enthusiasm for the business and spend more time on the pickleball courts. Maybe you find yourself actually reading the dozens of outreach emails you get from search fund buyers and wondering what might be possible.
In any case, before you engage with an M&A advisor or banker, it’s definitely time to sit down, reflect, and plan.
And remember, those unexpected offers are rarely time-bound; if someone wants to buy your business, they’ll probably still want to buy it after you’ve had a month to think it over.
The happiest post-exit entrepreneurs I met are the ones who thought hard about what they wanted their life to look like, then used their business and their sale to make that happen.
How to get started with post-exit planning
Looking to get started?
There are a number of great exercises that entrepreneurs can use to think through what to do with the rest of your life. I like to start with an old standby — the painted picture (or sometimes, vivid vision).
To do this:
- Set aside at least 2 hours of uninterrupted time
- Use a paper and pencil — your journal would be great
- Think about how you imagine a day in your life, three years in the future, and write about it. It’s as simple and as complicated as that
- Consider — where are you? Who are you with? What do you do? What is the vibe? How do you feel?
Sometimes it’s hard to get started, but once you get going on a painted picture, dreams and intentions tend to flow out.
That’s what you want — we’re looking for your most real desires, as of yet unconstrained by how you will make it all happen.
The how comes later. Because if you take the time to figure out this essential part of your planning process before getting swooped up into the excitement and stress and task list of your deal, you’ll be far more likely to come out on the other side feeling truly happy.
