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Transitioning from Business Owner to Wealth Owner


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Prepare for the sale of your business with a goals-driven approach.

Selling your business may result in a significant “financial windfall” for you and your family. Your transition from a business owner to an individual with substantial liquid assets can be life-changing but also presents several challenges:

  • How will you know whether the proceeds from the sale of your business will generate sufficient cash flow to support your current lifestyle and your long-term financial goals?
  • Who will manage this newly created wealth, and how will it be invested over the long term?

Based on our experience working with business owners, the following steps can help you address these challenges.

Identify and Organize Your Financial Goals into Four Buckets

The first step in understanding the financial impact that selling your business will have on you and your family is to identify your financial goals and organize them into the following four buckets:

Perform a “Dry Run” to Determine if You Will Have Sufficient Sale Proceeds to Fund Your Goals

Once you have identified and categorized your financial goals, it is helpful to perform a “dry run” analysis of the estimated after-tax proceeds if you were to sell your business under various “best case,” “base case” and “worst case” sale scenarios.

After you have estimated the amount of after-tax proceeds that will be generated from the sale of your business, you can then determine whether these proceeds will be sufficient to fund the financial goals you have identified in the first bucket: your “core lifestyle” goals.

If your total capital (i.e., the estimated sale proceeds plus your other financial assets), invested over time and indexed for inflation, are expected to exceed your “core lifestyle” goals, the excess amount will be available for you to meet the goals that you have identified in the other three buckets: Discretionary, Family and Philanthropic.

To perform this “dry run” analysis, it will be helpful for you and your advisors to run various scenarios that explore the following assumptions:

  • What price range do you estimate the business will sell for?
  • What percentage of the business do you plan to sell?
  • How does your analysis change if a portion of the sale proceeds are deferred (i.e., paid out over several years) or if a portion of the sale proceeds are paid in shares rather than cash?
  • What personal expenses are currently run through the business that will need to be funded by you after the sale?
  • What other sources of income might be created after the sale (for instance, leasing income if you retain the real estate used by your business, or compensation if you agree to work for the buyer after you sell your business)?
  • What taxes will be paid by you in connection with the sale of your business, and how will your personal taxes change post-sale?

A “dry run” analysis can help you to understand the financial impact of a sale on you and your family over the long term and will also give you better insight into the sale price and transaction structure that you would be willing to accept from a buyer.

Appoint a Quarterback for Your Personal Wealth Management Plan

There are many decisions you will need to make throughout the sale process that will impact your personal wealth. When these decisions are not properly coordinated, mistakes can arise – for example, unwanted tax surprises or insufficient liquidity to fund your lifestyle.

Appoint a “quarterback” to help you coordinate the multiple decisions that will arise during the transaction process and to develop comprehensive wealth planning that includes:

  • Communicating with your family about the financial impact that the sale will have on them
  • Understanding the tax impact of the sale, including any potential changes to your estate plan that should be implemented prior to the sale
  • Developing a short-term strategy for sale proceeds and the payment of income taxes associated with the sale
  • Developing a long-term strategy for investing your portfolio in alignment with your goals
  • Choosing a custodian to hold your assets and facilitate stock sales

Manage Your Wealth Like Your Business

Your hard-work, discipline and knowledge have driven the success of your business. Your shift to wealth owner does not make these attributes any less important. Use them to manage your personal wealth the way you did your business. For example:

  • Watch your burn rate – Understand your annual net cash flow after taxes and associated expenses. Know your sources and uses of cash, and monitor expenses via monthly or quarterly financial statements.
  • Use leverage appropriately – Use leverage to your advantage when appropriate, but recognize the difference between liquidity and net worth to avoid becoming “asset-rich and cash-poor.”
  • Understand the carry – Know the erosive power of carrying costs. For example, business owners often invest in real estate; however the costs of debt service, utilities, property taxes, maintenance, staff costs and repairs can add up.
  • Have a back-up plan – No matter how wealthy you become, plan for contingencies. Maintain a liquidity reserve fund to weather unexpected events.
  • Rely on a trusted team and confidant – Work with a team of advisors – your estate planning attorney, wealth advisor, accountant, trust advisor, portfolio manager and estate administrator – to evaluate your full balance sheet and wealth management plan. Also, find a wealth advisor who you trust to serve as your confidant and quarterback: someone you can go to with both simple and complicated questions and who can efficiently coordinate with your other advisors to find solutions for you.

Following these steps will allow you and your family to better understand what your financial life will look like after the sale of your business. For help starting this process, consider meeting with one of our advisors. They can introduce you to our goals-driven approach as well as additional family business experts and resources to help you succeed with your transition.

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This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

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