Wealth management is all about making smart decisions with our wealth in order to achieve all that is important to us. We would argue that wealth in itself isn’t enough to help us achieve our goals and dreams. We must be proactive in managing the taxation, investing as well as the spending of wealth in order to achieve a high probability of success.
As successful entrepreneurs, we are typically great at delegating and making high-level decisions. We farm out tax, legal, financial and investment planning to teams of experts that we call upon to help us navigate these complicated areas. But since we are typically the ones with the vision for the business or our personal lives, our job is to make sure that our advisors know what we wish to accomplish.
In preparing our latest white paper – Exiting Strategies: The CEO’s Seven Critical Steps To Cashing-Out Of A Business, Managing And Preserving Wealth — we conclude that there are two contributing factors to a CEO’s success in his/her good exit, from a wealth management standpoint: Developing your exiting plan, and developing your team.
In 1947, Howard Hughes was quoted as saying “A million dollars isn’t what it used to be” and in 1997 Ted Turner was quoted as saying “A billion dollars isn’t what it used to be.”
Having said that, what is your number? How much of a lump sum do you need to get as a net after tax cash-out to achieve everything that is important to you? What are your estate planning considerations? What charitable causes do you wish to contribute to and how much? What about your current lifestyle, how much will you need annually to maintain your current standard of living? What will you and your loved ones do after the sale? Why are you selling?
These are all crucial questions that you must answer; otherwise you may not achieve all that is important to you.
Wealth management must constantly be updated and revised, just as with a ship or airplane where the course must be adjusted regularly to reach the right destination.
Developing your team is a critical step. Typically, your team will consist of a CPA, a transaction attorney, a financial advisor, an M&A firm and an estate-planning attorney. If you are the typical CEO we’ve dealt with or interviewed, then millions of dollars are on the line when you are in the process of cashing-out. Beware: The biggest beneficiary from the sale may just be Uncle Sam. Taxes can eat away most of your proceeds if you aren’t careful, but with proper planning you may be able to pay very little taxes or even nothing.
Here is the dilemma. Most entrepreneurs have never sold a business; therefore they must find the right team members to guide them through a good exit, which is in itself a full-time job. And, in addition to their current full-time CEO position, they must now take on the extra full time job of quarterbacking the team players to make sure that there is continuity to their exit plan.
A good wealth management plan makes the process as smooth and profitable as possible while keeping the wealth issues at the forefront.
Christopher G. Snyder and Haitham “Hutch” E. Ashoo are principals of Pillar Financial Services in Walnut Creek. Contact them at 925-356-6780.