After the sale: a business owner's first twelve months

For many founders, a sale is the largest financial event of their life. After years of having most of their wealth in one company, they now hold a large sum in cash, along with a new set of decisions and often a lot of unsolicited advice.

The months after a sale are a period when mistakes are easy to make and hard to undo. A structured approach can help.

What should you do with the proceeds in the first few weeks?

In most cases, very little in a hurry. Placing the proceeds in secure, liquid holdings while you plan gives you time to understand your position, take advice and agree priorities. The cost of waiting a few months is usually small compared with the cost of a rushed or poorly coordinated decision.

Secure does not mean the same thing everywhere. Large cash balances can exceed the level of any deposit protection that applies, and a single bank or account may not be appropriate for the whole sum. Ask how and where the money is held, which institution you are exposed to, and how quickly it can be accessed.

This period is also a good time to take stock of any obligations attached to the deal, such as deferred payments, escrow arrangements, warranties or restrictions on competing. Some of these may tie up part of the proceeds or create future liabilities.

How do you decide what the money is for?

Start by listing what the proceeds need to do, then group those purposes by when the money will be needed. Spending in the next few years, longer-term goals, and money for future opportunities or the next generation each call for a different approach to risk and liquidity. Common purposes include:

• Funding your lifestyle, now or in retirement.
• Providing for children's education and family commitments.
• Keeping capital available for a future business venture.
• Supporting philanthropy or community commitments.
• Preserving wealth for the next generation.

Each purpose has a different time horizon and tolerance for risk, so separating them often makes the investment decisions much clearer.

What does a bucket approach look like in practice?

A bucket approach divides the proceeds into separate pools, each matched to a purpose and a time horizon. Money needed soon is held in a stable, accessible form, while money for the long term can be invested for growth. Seeing the pools separately makes trade-offs easier to discuss and easier to stick to.

As a purely hypothetical illustration with round numbers, imagine a founder who receives 20 million after costs. They might set aside 2 million for spending over the next three to five years, 3 million as a reserve for a possible future venture, 1 million for philanthropic commitments and 14 million as long-term capital for the family. These figures are not a recommendation. The point is that each pool now has a clear job.

The split will look different for every family, and it can change over time. What matters is that the reasoning is written down, so that later decisions can be checked against it.

Why is concentration still a risk after a sale?

Founders often move from one concentrated position to another without noticing. Putting a large share of the proceeds into a single new venture, property or private deal recreates the exposure that the sale removed. Concentration can be a deliberate choice, but it should be made knowingly and sized with care.

Approaches tend to arrive quickly once a sale becomes known. A simple rule, such as waiting a set period before committing to any single opportunity above an agreed size, gives you time to assess each one on its merits rather than on the strength of the pitch.

How do earn-outs and deferred payments affect planning?

Money that has not yet been received should not be treated as certain. Earn-outs, deferred consideration and escrow amounts depend on future events and on contract terms. A cautious plan works with what has actually been paid, and treats contingent amounts as possible additions rather than as money already in hand.

This also affects risk. If part of your future wealth still depends on the performance of the business you sold, you remain exposed to it. That may argue for being more conservative with the cash you already hold.

Which advisers need to be involved, and when?

Legal, tax and financial advisers should ideally be coordinated before completion and through the months that follow. Transaction terms, residency, the structure through which you held the business and your future plans can all affect what you can do with the proceeds, and when.

The tax treatment of a sale depends heavily on where you are resident, where the business was based and how it was held. These are matters for qualified tax and legal advisers, and the right time to ask is before decisions are made, not after. Make sure each adviser is working from the same information.

What are the most common mistakes after a sale?

Commonly cited mistakes include acting too quickly, raising spending ahead of a plan, lending or investing informally without clear terms, and assuming that the skills which built a business transfer automatically to managing a portfolio. Most are avoidable with time, structure and coordinated advice.

• Investing the full amount within weeks, before goals are clear.
• Raising lifestyle spending on the assumption that the capital will be replaced.
• Making informal loans or investments with friends and family without documentation.
• Treating contingent payments as guaranteed.
• Leaving large balances with a single institution for long periods.

How do you plan for the personal side of selling?

Many founders find the change in identity and routine as significant as the financial change. A plan that reflects what you want to do next, whether that is a new venture, more time with family, board roles or philanthropy, tends to be easier to follow than one built around assets alone.

It is reasonable to give yourself time before deciding. Some founders find it helpful to set a review point, perhaps six or twelve months after completion, to revisit both the financial plan and their personal priorities together.

Key questions to take to your adviser

• How and where should the proceeds be held while we plan, and what protections apply?
• Which amounts from the deal are contingent, and how should the plan treat them?
• How should the proceeds be divided between near-term needs, long-term capital and future opportunities?
• Have my tax and legal advisers reviewed my residency and structure before I act?
• What process will we use to assess new opportunities that come my way?

A sale marks the end of one chapter. Taking time to plan the next one carefully is usually worth more than any single investment decision made in the first few months.