Business owners preparing for a company sale are often focused entirely on the transaction itself. While maximizing the headline price is the intuitive goal, it means very little without a strategy to maximize the wealth that follows.
Fulton Private Bank’s Michael Shore, a Senior Wealth Planner, and Jon Adams, a Wealth Advisor, dive into the critical mechanics of pre-sale planning. They discuss why waiting until the wire transfer hits to call a wealth adviser is a costly mistake, how to conduct a wealth gap analysis to ensure post-sale liquidity can actually sustain a seller’s desired lifestyle, and how to evaluate complex deal terms like earn-outs and rollover equity from a risk-preservation standpoint.
Here’s an excerpt:
“The key to planning is a pairing of both emotion, and dollars and cents,” says Shore. “We'll ask the client, what does it take to keep the lights on at home? How much money do you need? And based on your presumed lifetime, we can run some cash flow scenarios and determine, well, you need x amount of dollars based on an assumed rate of inflation, your portfolio will grow by x, and you therefore have enough money to live for your lifetime. The problem is this client has never paid for health insurance, has never paid for gas, has never paid for their car, and all of a sudden has significantly different cash flow and lifestyle. They also don't know what they're going to do tomorrow. And all of a sudden they're going to go buy a car, they're going to go buy a boat. We need to really sit down with the client and understand, here's where you are today. Where are you going to be tomorrow? What's it going to cost? And is the multiple you're being offered different than what you're being told in the country club? Which one is realistic? And how can we plan based on various figures to make sure you have enough to and through retirement?”
