How to Invest
3 ways founders invest $5,000,000 or more after selling their business.
In the early days of a startup the life of a founder is less than glamorous. In other words “it kinda sucks!”
- They don’t have much if any money
- They live frugally, mostly because they have to
- They spend whatever savings they have and then go into debt
- They are hyper focused on their business
The passion and focus of the founders, along with the stars lining up correctly, can lead to the scaling of the business, life starts to get a little easier.
- They start to get traction, sales, and serious investors
- They don’t have to eat ramen noodles 7 days a week
- They start to get a paycheck
- They are now able to start paying off debt and even save a little
Then that day comes when you no longer are the founder of your business. Your ‘child’ has grown up and moved out, you are left with loads of time and typically a lot of money.
- They have had tremendous success
- They are no longer involved in the business
- They don’t have a paycheck anymore, but a lump sum of money
- They have to adjust to life after a startup
So how do you go from being the founder who was focused on their business, who was the focus of everyone else, to living happily on the fringe?
As a Certified Financial Planner®* my soul purpose is to help founders (entrepreneurs) from startup through exit. Helping them live an enjoyable life through the leverage of financial planning.
Given my unique position I tend to hear more about the struggles and successes founder’s go through than their attorney, psychiatrist, priest, and doctor, combined! Because of this intimate knowledge I have gained some insights on what works best for founders’ money once they have exited their business.
Keep in mind that the sooner founders spend some time on their financial planning the sooner they will be better prepared for the windfall of selling their business, the following 3 things assume that you have already engaged the services of a financial planner earlier on in the cycle of your business.
3 investment ideas for founders with $5,000,000+ after selling their Business
They set aside enough money so they will never have to worry about it again.
By this point most founders have a pretty good idea on how much money it takes for them to maintain their & their families lifestyle indefinitely. With the help of their financial advisor they set up an investment portfolio that is low risk, tax efficient, liquid, and most importantly generates the income they need.
They set aside money for their next startup.
After taking some time to decompress and enjoy the lack of stress from running a fast growing business, a lot of founders show interest in starting another company. Given their new financial capacity they set aside around 10% of their money for the next venture.
They set aside money to invest in other startups.
The founders I have worked with all understand how hard it was to start and scale their business. Some of the hardest times for them were raising capital and finding strong strategic partners. Now that they have made it through the entrepreneurial gauntlet successfully they want to give back to the community that helped them. They do this by setting aside relatively smaller sums of money to invest in a variety of startups that they are passionate about.
Coming into a large sum of money as you sell your business can present its own challenges and stresses. But, these aren’t the only things that will be happening to you. Arguably just as impactful, if not more, is the mindset transition from founder to being on the fringe.
You are used to getting up every day, working long hours on your business, and then doing it all over again week after week and so on.
► What I have learned from working with founders is that although their business is definitely part of who they are, they don’t let it define them.
What do I mean by this? Founders realize that their business is not who they are as a person. It is something they created, but it is not them. A good analogy is when you have a child. That child is yours, you created them, but they don’t define who you are. You are separate from them, just like you are separate from your business.
An Enjoyable Life on the Fringe
Founders that understand the transition from focus to fringe, both financially and personally, are the ones that are able to walk away from their business and enjoy life after their exit, life on the fringe of what they used to do, without financial worry or an identity crisis.
If you are a founder I hope you have learned a few things from what your fellow entrepreneurs are doing with their money that will give you some direction for your own situation. If you know a founder who may be selling their company, please share this post with them.
Thank you for reading!