Financial Advisory Practice For Sale

My Lawyer Told Me Not To Do It

Case Study

When Dennis Brandenton called his accountant to complain about his attorney’s warning not to consider a transfer to his child and key employees, his accountant immediately initiated the business Exit Planning Process.

As an advisor skilled in Exit Planning, Dennis’s accountant probed not only Dennis’s choice of successors, but also asked Dennis the first questions every owner must answer when thinking about departure:

  • When do you want to leave?
  • How much income or money will you want or need when you leave?
  • What do you want to do for your key employees and for your other children?

The accountant quickly involved Dennis’s other advisors (insurance professional, attorney, and financial planner) to begin to assess the financial resources available to Dennis.

Dennis soon realized that it is one thing to design a business exit via a transfer to a management team; it is quite another to ensure that his financial objectives would be met in the process.

Once Dennis defined his financial objectives, his Advisor Team could determine the size of the gap between his existing financial resources (both personal and business) and the amount of cash he could expect from a transfer of his business to his desired successors. Only then could Dennis’s Advisor Team determine whether Dennis could transfer his company to the successor he chose.

Like all owners, Dennis had to ask and answer the three basic Exit Planning questions to determine if he could exit his business in the way he wanted.

Dennis wanted to transfer his business to a management team that included one of his children. Rather than immediately pursue that particular objective, it was critical for Dennis to step back to see if that type of transfer would satisfy his other exit goals and objectives.

  • Would a transfer to his management team allow him to leave on his timetable?
  • Would such a transfer yield the amount of cash he needed to attain his financial objectives?

If not, were there other paths that would allow Dennis to leave at or before his chosen departure date, with more money, or perhaps, greater benefit to his family?

These questions (and others more specific to each owner’s situation) require careful consideration before charging ahead.

Beginning an orderly consideration of your exit objectives today can help to save you time, money and grief. Better still, it can help change the answer to the question, “Can you help me leave my company to the successor I choose?” from “Maybe” to “Yes.”

This is an important, yet involved, topic. Please contact me to discuss many of the issues involved with an insider sale.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

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