Every business owner will inevitably face the decision: sell or close. Many build their company for years while focused on growing their income, tacitly assuming that someday they might sell and retire. Few think in advance: what happens to me after I sell?  Some are savvy savers and build ‘traditional’ retirement savings, setting themselves up to walk away comfortably. That’s certainly not everyone. So, what about everyone else? Most people will need additional retirement income. We’ve seen owners benefit substantially by creating retirement income from their business after they sell. Below are the smartest strategies we’ve seen that might work for you.

Retain a passive ownership stake.

There’s no better vote of confidence for a buyer than a seller who wants to keep a meaningful stake of equity in the business. If you believe in the business and the buyer’s ability to grow its value, consider negotiating to re-invest the sale proceeds into a passive, minority equity stake. This allows you collect a share of the profits – retirement income – without the daily grind of work! Keep in mind that this approach isn’t always feasible for certain types of buyer financing (SBA, in particular, makes this challenging).

If you pursue this option, it’s critical to ensure that the business is profitable enough to support external investors. Also ensure that proper investor protections are put in place. You don’t want the new owner handing themselves big salary increases and bonuses, leaving no profits to be distributed to you as the minority owner. Nevertheless, done correctly, this can be a lucrative way to continue benefiting from the buyer’s success. The mere offer of such an arrangement adds credibility to any deal in the eyes of the buyer.

Create retirement income with a consulting agreement.

The new owner is undoubtedly going to need help during and after the transition. A buyer will typically negotiate a training period with the seller as part of the sale. Beyond this period, the new owner may want to ‘buy’ your services via a consulting agreement. The new owner may benefit from having a strategic adviser, an extra resource for maintaining important client relationships, or an expert to help launch a new product. A simple consulting agreement can suffice for any of these roles. All are examples of how a previous owner might stay loosely engaged and make valuable contributions without the permanence (or awkwardness) of an employment relationship.

Become a full-time or part-time employee.

Many owners sell and retire not because they can’t handle the work, but because they no longer want the responsibilities of ownership. Shedding ownership benefits means you can also shed the responsibilities you dreaded most. Handling urgent late-night calls from important customers? Forget it. However, perhaps you would be very happy working 25 hrs/week managing important customer relationships or coaching external sales reps, and just need flexible time off. Besides, there’s only so many rounds of golf and exotic vacations a person can handle. A good employment arrangement can be quite valuable and difficult to obtain elsewhere.

Before selling, you have the privilege of staffing the business to align with your own post-transition priorities. As you define your transition, determine in what capacity you’d like to remain involved and how you’ll fit in. Define a focused role that fits with your other post-sale priorities, and shape the positions of those around you so that your proposed role fits in. If you time the sale properly (see “Why Now May Be the Time to Sell Your Company”), you will still have tremendous value to add to the business. This will create both income and an enjoyable way to spend your time after the sale. Our only caution: beware of your own appetite for a new role in which you are no longer the boss.

 Become the landlord.

Business owners can access favorable financing rates and terms on real estate used to operate their business. Owning the real estate helps the owner avoid rental expense while you own the business. It also presents a long term stream for creating income after selling, by renting to the new business owner. Business buyers typically do not view owning the real estate as essential to their business goals. Moreover, they may be unable to afford both the business and its underlying real estate anyway, which is great for the landlord.

This situation creates a win-win opportunity whereby a business owner becomes a commercial real estate investor after they sell. Commercial real estate is generally a safe asset class with steady long term income, value appreciation potential, and tax benefits. As long as the property has been well maintained, it may be attractive for an owner to stay in merely as the landlord. For example, McDonald’s has built much of their long term business strategy on real estate.

Carve out a passion project.

Many owners have products, customers, or projects that they are passionate about and may only be peripherally related, or a small part of their overall business. Such endeavors may not be all that valuable to the buyer, but create opportunities for the seller to carve out a meaningful slice of work he or she can continue to perform, with the consent of the buyer.