By: Daniel Weitz, CFP®, CFA
In this ongoing series, we are profiling several Simon Quick clients to reveal some of the financial and estate planning challenges faced by wealthy families and how we have been able to help them meet these challenges.
All names and identifying details have been changed, but otherwise, the case studies reflect real-life families and situations.
To Sell … or Not?
Mark and Greg Wilson are the father and son owners of a multi-generational carpet cleaning business. In 2019, they were approached by a corporation that was interested in buying the company. While they weren’t actively looking to sell the business at the time, the inquiry prompted them to think about whether a sale might be in their best interest, so they approached us for guidance and advice.
They had two main questions. First, would the amount of money they received from the sale of the business be enough to enable them to continue living their current lifestyle? And second, if Mark decided to retire after the sale, would the proceeds be enough to support him throughout retirement?
In order to help Mark and Greg make a decision we used our financial planning software to evaluate various scenarios if they decided to sell the family business. Based on the projected sale proceeds they would receive, we were able to model out what it would look like if they maintained their current lifestyle, enhanced their lifestyle, bought a second home, or made a substantial philanthropic gift. Ultimately, we determined that if they sold the business, they would be able to live comfortably for the rest of their lives with some spending flexibility.
Next we performed a risk assessment with the Wilsons. In their case, both Mark and Greg played critical roles at the company, so if something were to happen to either of them, the business could suffer and become harder to sell down the line. There is inherent risk in owning a business and in the Wilson’s case the business was a big portion of their net worth. We discussed how selling the business would help them to de-risk their balance sheet.
Lastly, we considered the deal that was on the table. The potential buyer was a big corporation, and their offer was quite attractive. Most business owners are confident that their businesses will grow into the future. We facilitated conversations between Mark and Greg around whether they wanted to keep investing in the growth of their company or accept the offer in front of them.
The numbers only tell a part of the story. Deciding to sell the family business that Mark had spent the better part of his life building was hugely emotional. Mark was nearing retirement and knew that he would be financially stable in his retirement. Greg, representing the second generation, would be responsible for running the business for years to come if they opted not to sell. There was a father-son dynamic at play and both wanted to make sure they did right by the other.
In the end Mark and Greg determined that the proceeds from the business sale would be enough to ensure that they could meet their financial objectives and they decided to accept the offer.
Hindsight is 20/20
We stayed close to the family throughout the sale process. Once the sale was complete, we created investment plans tailored to both Mark and Greg and their families that were designed to help them meet their financial goals. We also discussed opportunity zone funds, charitable giving strategies, and other techniques to help mitigate the capital gains tax bill resulting from the sale.
When COVID hit in 2020, both Mark and Greg felt hugely relieved that they had sold their business, which depended on their team’s ability to enter customer’s homes and perform their service. Their business could have suffered tremendously in that environment, and they were glad to know it was part of a much larger corporation now, one with deep pockets that was better positioned to keep their people employed. While no one could have seen COVID coming, the Wilson’s were very glad they listened when the opportunity to sell came knocking. They now have peace of mind in knowing that the sale of their business has provided enough money for Greg and his family to live comfortably and for Mark to retire.
The scenario analysis we conducted for the Wilsons in the decision-making phase was not a ‘one and done.’ When we meet with the Wilson’s today, we regularly re-run the analyses to see how they are doing. As life goes on things change, and their spending varies from year to year, and so we are refreshing their financial plans as their goals and objectives change with time.
If you’d like to learn more about our financial planning and advisory services and how we can help your family navigate complicated financial matters, please call us at (973) 525-1000 or send an email to firstname.lastname@example.org.
About Dan Weitz
Mr. Weitz joined Simon Quick in 2011 and is based in Morristown, NJ. As a Managing Director and Client Advisor, his focus is on providing investment and financial planning advice to high net worth individuals & families. Additionally, he works closely with endowments & foundations and regularly attends investment committee and board meetings. Mr. Weitz completed Fairleigh Dickinson University’s Financial Planning program and passed the CERTIFIED FINANCIAL PLANNER™ exam in 2009. He is also a Chartered Financial Analyst charterholder and member of the CFA Institute. Mr. Weitz holds a B.S. in Psychology from the University of Maryland and an MBA in Finance from Rutgers Business School. To learn more about Dan visit his LinkedIn.
SSimon Quick Advisors, LLC (Simon Quick) is an SEC registered investment adviser with a principal place of business in Morristown, NJ. Simon Quick may only transact business in states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. A copy of our written disclosure brochure discussing our advisory services and fees is available upon request. References to Simon Quick as being "registered" does not imply a certain level of education or expertise. No information provided shall constitute, or be construed as, an offer to sell or a solicitation of an offer to acquire any security, investment product or service, nor shall any such security, product or service be offered or sold in any jurisdiction where such an offer or solicitation is prohibited by law or registration. Additionally, no information provided in this report is intended to constitute legal, tax, accounting, securities, or investment advice nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. It should not be assumed that future performance of any specific investment or investment strategy will be profitable, equal any corresponding indicated performance level(s), be suitable for your portfolio or individual situation, or prove successful.