What to Do With the Money You Make From the Sale of Your Company

Celebration of Light 2013, Day 2, Canada

Besides, of course, a little celebration…

“Exits are the best part of being an entrepreneur or investor. It’s when we get financially rewarded for all of the creativity, hard work, investment and risk we put into our companies.”
–Basil Peters

When I finally inked my buydown from the company I co-founded, it was a surreal feeling. Over the next 3 years, I was going to be bought down to a significant minority position, and we were going to achieve financial independence.

But, one question remained:

What to do with the money we made from our first sale?

The real temptation is to believe that you have the Midas touch and that, since you’ve done it once, you can do it again and again and again. You could potentially apply your Midas touch in a lot of ways: start another company – which is what I did, although more because it was a long-term goal of mine rather than to try to build a new scaled, salable business – play angel or VC investor in other companies, consult with startups and small businesses (which I am available to do as well), or even make yourself available as a CXO for hire.

Naturally, depending on the scale of your sale, you could pursue any or all of these strategies and still have plenty of money left over to satisfy all of your personal needs. Marc Andreessen did this when he sold Netscape, and he’s been an investor/advisor ever since. When a small fraction of your net worth will provide you with all of the income that you could ever need in your lifetime, you get the freedom to explore other paths – philanthropy and building new companies amongst them – without a pressing concern for ROI.

For those of us who get a sizeable chunk without achieving go buy a yacht money, we need to figure out what we should do with our earned windfall.

I’ve Sold My Company! Now What?

Maximize Your Lifetime Utility

FUN!  LA County Fair 2007

Don’t forget to have some of this in your life!

“I think Smithers picked me because of my motivational skills. Everyone says they have to work a lot harder when I’m around.”
–Homer Simpson

When we hit PIRE, we plan on doing a lot of world travel rather than seeing places in the United States that we haven’t seen. It’s not that we don’t think that the U.S. is a neat place or that there aren’t tons of sites to see in our own country.

We think we have a more pragmatic reason for choosing international travel.

It doesn’t have to do with cost of living arbitrage, although that’s a nice benefit about some of the places that we want to see.

It’s not because we’re worldly bon vivants.

It’s because, we figure, we’ll still be relatively young and healthy. The toll of long travel and adjusting to new climates and environments won’t be as bad when we’re in our 40s as when we’re in our 70s.

That’s not to say that older people can’t travel. They can. They do. But, it does require more planning and support. When we went to Rome, we walked all over the central section. We only rode public transport to get to and from the airport. After that, we got everywhere on our two-legged people movers. We walked most of Barcelona. We walked all of Reyjkavik (not that it’s much of an accomplishment, but it is more difficult in December).

In our 70s, it’s doubtful that we’ll be able to do that. Plus, we can still hop on an overnight flight to Europe, sleep on the plane, and, after a couple of cups of coffee, be ready to go the day that we land. Again, later on, we might not be able to do that.

Thus, while it’s difficult to face and acknowledge our own pending decline and mortality, we have tried to plan for maximizing the time that we have to be active and physically sound and can take in more leisurely activities when we’re older. It’s easy, relatively speaking, to drive through a national park. That’s why Yellowstone, the Grand Canyon, and Arches will be itineraries later in life.

I’m starting to see a pattern with my clients that flips this paradigm on its head.

They’re working until their 60s, retiring, and traveling.

So far, so good.

Except that there’s one problem.

They overshot the mark in accumulating their wealth.

They’re at the point where they have far more money than they can ever spend in their lifetimes. Even accounting for bequest motives, they are likely to die with lots of money.

Meanwhile, in the present, they have a small and shrinking window to do all of the things that they wanted to do. They are running out of time, and will run out of time long, long before they’d run out of money.

The Money Happiness Continuum

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