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Sale Proceeds & Charity

You sold your company — congratulations!  What now? Surely something fun and celebratory, as you certainly deserve it.


At some point during the dust settling process, you’re likely to be hit by the gratitude bug.  Generally, people fall into one of three categories:

 

Planned givers — these folks will give off the top and usually have faith / religious reasons for doing so.  They’ll be planning to give away a portion of their proceeds, usually a percentage.

 

Non-givers — these folks won’t give.  They earned their money and no one gave it to them (this is the thought process…), and they don’t owe anyone else anything.  While we don’t begrudge these people, we think this is a little obtuse…


Spontaneous givers — If inspired and the circumstances create the opportunity to give, people in this group will make a one time gift.


I am just going to come out and say it:  If you aren’t in the #1 or #3 bucket above, particularly if you made 7-figures (or more) from the sale of your company, you should consider it!  Not because I am on a high horse and am shouting down to you to do so, but because of what it will do for YOU.


I am going to explain this thought process by the below example scenarios.


Scenario 1:

 

You sold your company and your proceeds were $5M.

 

You pay taxes, and generate about $3.55M (yikes!  Paying $1.5M of taxes is expensive…)


You invest that $3.55M in the stock market index, and ride off into the sunset generating $383,400 per year (average 8% return) of income, never touching the principal.


This is wonderful, but it only benefits you.   Let’s contrast to another example, using a very low giving percentage of 3%.


Scenario 2:

 

You sold your company and your proceeds were $5M


You gave away 3%, which is $150,000, to a charity of your choice


You pay taxes on $4.85M, and generate about $3.45M (note — giving away $150k only cost you $100k, how cool is that?)


You invest the $3.45M in the stock market index, and instead ride off into the sunset with $371,900 per year of income while still not touching principal.


The difference above is less than $12k/yr, on a scale of making $383k vs $372k of income.  Those who have made that level of income, and if you have sold your company for this much, you are probably familiar with this income territory, will likely agree that the difference isn’t really felt.


What is felt is the benefit of the $150k that you gave away.  There are organizations that provide very simple needs, such as providing take home food for school children who otherwise will likely not eat dinner, at an average cost of $5 per meal.  With this $150k donated, you will have provided 30,000 meals. That is dinner for over 650 kids for a year. If you have children, this may resonate (the impact of doing this).


There are other organizations that combat mounting issues such as childhood and adolescent suicide for kids coming from domestic violence situations.   Non-profits exist that provide at-cost counseling services for kids that have these needs, and a gift of $150k would provide over 2,300 hours of counseling.  This would give an hour a week of counseling to 59 kids for an entire year. Consider how many suicides this would prevent.


The beauty of this, though, is that there are organizations that support all kinds of needs.  And because you, the giver, are such a strong business person, you possess the capability to properly discern which organizations would be the best stewards of this money.  I think of this as analytical giving, which is using one’s analytical strength to ensure donated funds are used for maximal benefit, a skillset you uniquely possess.  


Further, the feeling you will receive from this as you see the impact that this gift makes may rival the sense of accomplishment of having generated ~$3.5M of free cash for your own family.   


This may stir a desire in you to give a bit more, and may even flip values a bit in terms of seeing needs in the world and your ability to help meet them.


Note please, no one should feel obligated to do this.  The above is certainly a nudge to consider it, and yet it isn’t my place to tell any person what to do.  My hope is that the above illustrates what is possible from acts of generosity, and the relative scale of what can be done by small percentage giving.

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