You may be surprised by the number of owners who do not have a budget for their business —or maybe you wouldn’t, if you’re among them. Assuming your business is stable and successful, you might be able to get away with lax financial planning. But, once you sell the business, running your personal budget that way may not fly.
Why Business Owners Neglect Budgeting
Business is a moving target. In turn, business owners tend to live and work fluidly. We get up every day and go, knowing that we are always in some flux of spending and making money. Some days are better than others and it’s hard to predict the future. Being a business owner actually entails being a really bad employee; the former breaks boundaries and the latter is expected to adhere to them. While it is highly advisable to take a stronghold of business finances, I can’t argue the fact that it is also possible to get by with a freewheel mentality.
Why Budgeting is a Bigger Issue After the Sale
When you’re selling your business though, budgeting for your future becomes a whole new ballgame. Now, you absolutely need a financial plan to guide your next steps. How much income will you have? How much goes toward your 401(k), social security, expenses? Essentially, you must now live—gasp—like an employee, with a set sum of money to spend each month. You are no longer able to run expenses through the company, work more hours to increase your earnings, or take advantage of the many other freedoms that allow entrepreneurs financial flexibility.
Outside of an elite few who are able to sell at a price that makes them “set for life,” most owners will have to learn—and will struggle to learn—the concept of living within a budget. Those who don’t risk debt, despair or both.
Can’t Stop the Grind
Entrepreneurs are bred to do business. Many of us simply cannot accept a life without work, which leads us to seek business engagements in retirement. If the idea of having a financial ceiling terrifies you, your exit strategy might include buying real estate, opening up a shop, being a consultant or any viable idea that enables you to fulfill both your innate craving for entrepreneurship and your desire to continue earning. I personally plan to work in retirement for this very reason. I love what I do and I’m able to make money doing it. My retirement plan is really aiming for financials security verses actually stopping work.
Even if you plan to work after the exit, you have to go into it with more financial framework than you might have needed while running your business. Remember, this is also your legacy at stake. Let Exit Consulting Group help you establish a plan for a successful, financially savvy transition. Learn more about our services here.