CEOs need techniques for cashing out.
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.
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