Sold Your Business? Now What?
When you sell your business, it's easy to think the hardest part is over. Youâve negotiated the deal, signed the papers, and walked away with a big check.
But now comes the part no one talks enough about:
How do you turn that lump sum into a reliable income for the rest of your life?
Retirement investing after a business sale is very different from putting money into a 401(k). Youâre managing volatility, taxes, Medicare costs, and withdrawal strategies all at once.
Here are 5 key differences, along with real strategies and case examples from franchise owners Iâve worked with:
1. Youâre Managing Cash, Not Just a Portfolio
The Issue:
Maria (a QSR owner who sold at 58) had $3.5M in cash sitting idle. She was afraid to invest it since the markets were dropping following some bad economic news and she didnât want to lose her money. But staying in cash meant falling behind inflation and having no growth.
Strategies That Help:
- Bucket Strategy: We allocated 2 years of expenses to cash, the next 3â5 years to a moderate-income portfolio, and the rest to long-term growth. That structure gave her income without panic.
- Sequencing Plan: We identified which assets to draw from first to protect the portfolio during market downturns.
- Gradual Entry: Instead of dumping her money into the market at once, we used dollar-cost averaging over 12 months to reduce risk and buy stocks at lower prices.
2. Taxable vs. Tax-Deferred Accounts Require a Different Withdrawal Strategy
The Issue:
Kevin (66) sold his 9-unit franchise for $6M. Most of it landed in a taxable brokerage account, with very little in IRAs. He didnât know how to draw income without triggering major tax consequences.
Strategies That Help:
- Capital Gains Management: We prioritized using his brokerage account strategically, harvesting gains during low-income years while avoiding IRMAA surcharges.
- Roth Conversions: With limited IRA assets, we used a multi-year Roth conversion plan to take advantage of lower brackets while reducing future RMDs.
- Donor-Advised Fund: Kevin was charitably inclined, so we set up a special charitable account called a Donor-Advised Fund to offset capital gains with a sizable charitable deduction.
3. $5â6M Might Not Be Enough Without the Right Income Strategy
The Issue:
Many franchisees assume that selling for $5M+ means theyâre financially set. But if you want a $100K lifestyle for 30+ years, especially with inflation and health costs, the money has to be managed carefully.
Strategies That Help:
- Custom Cash Flow Planning: We forecasted future expenses with inflation, then matched income sources to each phase of retirement.
- Risk Allocation: Owners with shorter timelines had more conservative portfolios, while younger retirees like Tasha (age 55) kept a portion in equities for long-term growth.
- Expense Guardrails: We created âspending guardrailsâ to flex lifestyle spending based on market performance â this helps preserve capital while enjoying life.
4. The First 2â3 Years After the Sale Are Crucial
The Issue:
Tasha sold her stores at 55 and wanted to retire early. But she wasnât sure what to do with her windfall. The wrong moves in these early years could cost her hundreds of thousands in avoidable taxes.
Strategies That Help:
- Roth Conversion Window: With little income post-sale, she had a limited-time opportunity to convert pre-tax assets at a low bracket - we took full advantage.
- Cash Buffer: We carved out 2.5 years of expenses in cash to protect against sequence-of-return risk.
- Charitable Gifting Plan: She supported a local nonprofit, so we helped her gift appreciated assets to avoid capital gains and still support her cause.
5. Your Income Sources Now Affect Medicare, Social Security, and Taxes
The Issue:
Franchise owners often donât realize that how you pull income, not just how much, impacts your Medicare premiums, Social Security taxation, and overall taxes.
Strategies That Help:
- Glidepath Withdrawals: For each client, we designed an order of withdrawals (Roth, brokerage, IRA) to manage income spikes and keep the Medicare IRMAA surcharges low.
- Tax Diversification: Building tax-free, taxable, and tax-deferred buckets gives flexibility each year depending on income needs and market returns.
- Delay Social Security: When appropriate, delaying benefits can boost future income and reduce taxable income in early years.
The Bottom Line
Selling your business gives you a one-time shot at building your financial future. But itâs not about investing like you would with your 401(k), itâs about creating a sustainable income system that works with taxes, markets, healthcare, and your goals.
If youâre thinking about selling - or already have, this is your moment to plan smartly.
Get a personalized look at your numbers with the Financial Gameplan for Franchisees, a one-time planning session built for owners like you.
Click here to learn more or book your session.
Ruzanna Queenan, CFA
I am Ruzanna, the President of Queenvest. Like many women, I wasnât always good with money, but I learned through many years of work in the financial industry how to use money well. I am fortunate to have the opportunity to help strong, ambitious business owners and executives take control of their money and ultimately, their personal success.
.svg)