InSight

Exit and Growth Strategies for Middle Market Businesses

Your-Money-Inc. and the Importance of Planning Ahead

By Roy Graham | Jun 09, 2010

Entrepreneurs prepare extensively over the years as they build their businesses, but many fail to plan for an exit.  In my recent article, “Exit Planning for Business Owners”, I examined an area that many business owners neglect and that may be the most important part of the business transaction: life-after-business. In fact, during the current troublesome economic and tax environment, never before has it been so important for entrepreneurs to engage world-class wealth planning professionals prior to a business sale as part of their final exit plan.  There can be no small mistakes in the wealth management plan because once a deal is finalized, it cannot be undone.

In reality, when entrepreneurs sell their company they are really just transitioning from their current business (say, Smith Widget Co.) to another business, which we will call Your-Money-Inc.  This new company will have a completely new mission and will need to be guided through an entirely new set of challenges.  Creating a mission statement for Your-Money-Inc. should always begin well before your business is sold.  This planning process starts with a seemingly simple question: “What goals do I want to accomplish starting immediately after I exit?”

How can you be sure that your company’s market value will support these goals post-close?  The fact is, unless you have worked with a specialized wealth management team, it’s very difficult to be certain of anything at all.

The cost of inaction can be very high.  As an example, failing to do adequate estate planning utilizing all the appropriate estate planning techniques available to you can cause unnecessary taxes at death. There are no mulligans or do-overs when selling a company and the cost of inaction can be extremely high, resulting in needless taxes.

There is a new breed of wealth managers that specifically focus on partnering with you before the sale of your business.  These new-breed wealth management groups will become an integral part of your M&A team.  Along with your investment banker and attorney, they will assist you with thoroughly analyzing the terms of any offer to confirm that the deal terms indeed support your life-after-business goals.

As a fully independent investment banking firm, CFA believes clients are best served by third party wealth management firms and we work with many of the leading firms in America.  With proactive planning and the right wealth management partners, you can ensure Your-Money-Inc. pays your family dividends for generations to come.

posted by Roy Graham


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