Money Management Tips

Derek Notman |

Tips on how to manage the money created from selling your business.

Mr. or Mrs. Business Owner, you’ve done it!  You just sold your business and realized success from all of your long hours.  Stats from the Exit Planning Institute indicate that 80% of businesses below 50 million dollars in revenue never sell, so essentially, you’ve just joined an elite minority of business owners.  If you’ve just received a financial windfall then I’m sure you may be left with a few questions about what to do next. 

As an experienced financial advisor with a Certified Financial Planner® designation, I would like to assist you in understanding how you should use your newfound wealth and ensure you are receiving accurate information and advice.

It’s important to note the information and advice in this blog is not specific to your individual financial situation, but rather, it is designed to give your information and ideas on asset protection to discuss with your financial professional.


Your Financial Windfall

Here’s an alarming statistic for you to ponder - The National Endowment for Financial Education reports that about 70% of people who win the lottery or receive a large financial windfall end up broke within a few years1. I realize you’ve worked really hard and have sold your start-up and haven’t won the lottery.  But, like many business owners, having a sudden and large lump-sum of money can be extremely overwhelming.


Dealing with paper net-worth and assets listed on your Profit and Loss Statements is a very different concept to having the actual money in your bank account.  Essentially, you have turned your ill-liquid assets to liquid assets.  This is a big deal and while exciting, it can be daunting.


Money managementConsiderations in using your money

  • Selling a business is not an overnight process and it would have taken at least a year to ensure all your paperwork and finances were in order.   During this process, you and your team would most certainly have worked on your personal finances as well as the company financials.  No matter how meticulous your planning, seeing those extra zeros on your bank statement is sure to elicit a screech of glee!


I’d like to give you 3 options that might help you decide what to do with the proceeds from your business sale.


1. Determine how much income your money needs to earn each year

During the exit planning process, you and your financial team would calculate how much principal you will use versus how much interest earned off the principal you will use from the proceeds of your business sale.

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2. Build an investment portfolio to meet your needs

Having thought about and prepared for your investment portfolio during your exit planning strategy, once you have determined what return you need to earn from the proceeds of your business sale, work with your Certified Financial Planner to build a tailored investment portfolio & income plan.


3. Self-Control and more self-control

When the proceeds from the sale reflect in your bank account, don’t waiver from the investment plan you and your Certified Financial Planner have set up and put in place.  Prior to receiving the money, be proactive and make a list of things you’ll buy or debts you’ll pay-off.  By maintaining self-control, you can avoid the urge to spend unnecessarily on unwise emotional purchases.  A good idea is to let your money rest for about six months or so before splurging out.


Investment Account Options

The world of investments can be extremely intricate and difficult to understand. If you’re going to invest some of the proceeds from the sale of your business, you need to know where you can put your money. Let me break down some of your options for you.  This is not a comprehensive list of options, but it is a start.

Qualified Investment Accounts

Qualified Accounts are those the government creates for specific purposes and taxes specific ways. Typically, retirement accounts like the following fall into this category.  Although you may have already set some of these up while running your business they still can be a useful tool post-exit.

  • IRAs: Traditional or Roth
  • SEP IRAs (Simplified Employee Pension Individual Retirement Arrangement)
  • 401(k)s
  • Self-Employed 401(k)s
  • Solo 401(k)s
  • Some investors even consider the following “qualified accounts” because the government gives them preferred tax treatment.

529 Savings Plans^

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.


Non-Qualified Investment Accounts

Non-Qualified accounts are those on which the government does not designate purpose or set taxable limitations. They can include the following accounts:

  • Individual Checking or Savings Accounts
  • Joint Tenant Bank Accounts:  Joint Tenants with Rights of Survivor-ship, Joint Tenants in Common, Joint Tenants in Entirety
  • Money Market Accounts
  • Business Accounts
  • Trusts
  • Assets You Can Purchase through Your Investment Accounts
  • Once you’ve opened one or several types of investment accounts, you can now buy assets through those accounts.

Consult with your financial advisor about these types of common asset options:

  • Stocks^
  • Bonds
  • Certificates of Deposit (CDs)
  • Preferred Stocks^
  • Exchange Traded Funds, ETF's
  • Annuities
  • Mutual Funds^
  • Real Estate

Alternative Investment Options:

  • Master-Limited Partnerships
  • Commodities
  • Hedge Funds
  • Real Estate Investment Trusts (REITs)
  • Private Conservatorships
  • Personal Collections (Comic Books, Baseball Cards, Gold, etc)

Celebrate your new-found wealth as it really is a great accomplishment – but exercise caution while you’re having fun.  Engage with and rely on your financial advisor for sound advice and guidance.

Thank you for reading!


Derek Notman

1Exit Planning Institute 2018
2National Endowment for Financial Education 2018 
^Securities offered through properly licensed Registered representatives with NYLIFE Securities LLC Member FINRA/SIPC, a Licensed Insurance Agency.
CD’s are FDIC insured, whereas fixed annuities are guaranteed by the issuing insurance company. CDs are typically used for short to medium term savings needs, while annuities are typically used for long-term funding needs such as retirement.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
This is for informational purposes only.