Frequently Asked Questions

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FAQ - Category One

Business Owner Tax Planning FAQ

What mistakes cause business owners to overpay in taxes?

Mistakes most often come from things you are not doing rather than things you are doing wrong. Your bookkeeping and accounting should catch the potential mistakes in things you are doing. A financial advisor should help with finding the things you are not doing. Some recent ones we have seen involve retirement plan contributions, profit-sharing, end-of-year expenses, and poor bookkeeping. We have also seen gaps in communication between accountant, client, and prior financial advisor. Most of the time, the planning ideas are easy to come by. The challenge comes in finding which is best for your unique situation along with communicating the plan and implementing it with the other people on the team.

How should business owners think about capital gains, ordinary income, and distributions?

All of these are tied together somewhat. Capital gains is typically going to be the lowest tax rate for our clients. This means investment accounts can sometimes cost less to get money from than a traditional retirement account. Your ordinary income rate is the tax rate that everyone typically talks about. When you take money from a traditional retirement account, you will have to pay ordinary income tax. If the account is big enough, the amount required to be pulled from it can cost more than capital gains taxes. Distributions can be taxable or non-taxable. For example, in an S-Corp, you can sometimes take distributions with money that has already been taxed. All of these things can impact each other to help or hurt your tax situation. It takes someone looking at all of them together to determine what is best for your family.

When does a business owner need more advanced tax planning?

Tax planning can provide some great return on investment at a very low income. There are tons of tools that can be found that relate to a variety of financial situations. The tax code is massive and is filled with opportunity. If you are thinking about tax planning, you are probably ready to talk to someone about it. The biggest value for tax planning comes around the estate tax threshold. Here the impact is much bigger and there are much larger potential issues. Many times the risk is not that you miss out on an idea to save money. Instead, the risk is with poor execution. So, you want to make sure you have a team in place that can effectively execute on the plan. Even still, it would be a mistake to assume that you don’t need tax planning if your income is below $250k. There are lots of ways to save a few thousand dollars here and there.

What retirement plan options make sense for profitable business owners?

Most of the time this question comes up when our clients want to store away more than they already are. This points us towards a 401(k) plus Cash Balance Plan. While you are under 40, a 401(k) is typically the best for saving the most. Once you get closer to 50 or 60, the cash balance plan can be incredible. These two tools can combine to let business owners save +$200k into retirement accounts every year. This will typically be the most that we see clients want to save into these types of accounts. These are great options if you have delayed saving for retirement but your business has become very successful as you approach retirement. The most common reason to not use these accounts comes from the loss of access to the money. Tax savings are great but they almost always come with a trade-off. For retirement accounts, the trade-off is usually access to the money until retirement.

How do I decide whether to keep cash in the business or distribute it for tax planning?

For a business with multiple owners this can be somewhat complicated. There should be a clearly defined set of expectations in this case. When you are the only owner, many of the taxes will have already flowed through to you. This can mean you are able to take out cash without needing to pay more taxes on it. Your entity type will determine the best approach for these decisions. Generally, we like to take cash out if it is being invested because of liability that the business might have. It can also be wise to avoid holding all of your cash personally if you are worried about a personal lawsuit or debt. These decisions involve a ton of variables so they should be tailored to your specific situation. It would be a mistake to assume something online will 100% fit your situation without talking to your advisors.

What tax moves should a business owner consider before year-end?

Big expenses are one that every CPA should and usually does mention as an option. Profit-sharing can be another option that offers some great flexibility on scale, while also helping with employee retention. Both of these options can be pretty simple to implement and can offer tons of savings. For most of the owners we work with, maxing out or contributing heavily to retirement plans is a simple way to lower taxes while better achieving their goals. We are also looking at gifting for anyone whether or not they are a business owner. Gifting also has some components that can make it valuable for year-end even if there are not immediate tax incentives. While some decisions like profit-sharing have to wait until year-end, it can be helpful to plan ahead mid-year. This can make an already stressful time easier to get through so that you can fully enjoy the holiday season.

How do I coordinate my CPA, financial planner, and investment strategy?

Usually, it takes one of your financial professionals quarterbacking the planning. A high level financial advisor should do this. You need someone that can see the entire picture and understands it all enough to make sure it aligns. Most people have to do this job themselves. If you do not understand the financial world well, it can be super difficult to do. This can leave you feeling like your CPA doesn’t really understand your business, your investments don’t match your goals, or just a general worry that you are missing something. It can be great to ask a potential financial professional how they engage with the other advisors in your family’s lives. You should make sure that their approach will cover all of the areas that you want help.

How can business owners reduce taxes without hurting growth?

The most straightforward answer is one that many CPAs will suggest. Making a big purchase at the end of the year can be great to set up the business for future growth while also using the expense to reduce taxable income for the year. This is great because the expense can be all sorts of things that will be helpful for the business in the future. We see this go wrong sometimes when a business is tight on cash because they are waiting on payments, but taxable income still shows as high so the CPA suggests buying something. This can be a headache until those payments come in. Even worse, the purchase can sometimes be wasted on a vehicle that doesn’t help the business grow. The purchase should be something that will help the business grow, and not simply just an expense to lower taxes. In a construction business, we have seen heavy equipment purchases work well because they can directly lead to extra revenue.

What are the best tax strategies for business owners with strong profits?

A simple one can be making purchases before the end of the year. This reduces taxable income in the year the purchases are made. You also want to make sure you are taking money out of the business efficiently. Retirement accounts can also be a great place to build wealth outside of your business while also reducing taxable income in the business. These can also be great employee incentives when combined with profit sharing and employer matching. We have found that many business owners would rather keep a little bit less money if it meant giving more to their employees instead of having to pay a bunch of taxes.

FAQ - Category Two

Business Owner Personal Financial Planning FAQ

How much money should I keep in my business versus take out personally?

For the businesses we work with, we see 1-3 months of expenses work best. In some cases, up to 6 months becomes reasonable but it is less common. 3 months is a great target for newer businesses that are trying to build up their cash reserves. A business with a high volume of sales that stays pretty steady could get away with keeping a low amount of cash on hand because the odds are very high that cash will continue to be generated. We work with one business that has highly fluctuating profits. This leads to needing closer to 12 months expenses on hand during the peak time that we can then deplete until the cycle restarts. And it’s still a very lucrative business. The answer also depends on how long the business has been successful. When a solo owner has large personal savings, we can keep the business’s cash lower because the owner can loan money to the business if cash gets tight one month. For an S-Corp, this can be especially advantageous. One of the most common mistakes we see with this cash is keeping it in a checking account. Owners should make sure that most of it is in a money market fund or something similar that can be accessed within a business day but also generates interest closer to 3% or 4%.

How much liquidity should a business owner have outside the business?

The short answer is as much as possible without suffocating the growth of your business. The business will probably be your best returning asset so it makes sense to invest in it. Especially because you have control over it. We like the personal liquidity to match the stage of the business. When you are in your first five years, we expect low personal liquidity, but it would be beneficial to have more. When you are more stable, you have less of a need for personal liquidity, but it would be best to be building personal savings and investments outside of the business. It can be hard for business owners to build up reserves outside of their business because they are seeing opportunities to reinvest within the business and likely save on taxes. A common mistake we see is that a tax professional will recommend making a big purchase at the end of the year because profit was high. Many times the owner would benefit more from keeping the cash on their personal balance sheet to build outside investments. The big purchase that is not needed for the business is often just a waste of money in the name of tax savings.

Am I too concentrated in my business financially?

u are young and your company is trying to grow, investing primarily into it can make sense. If you have an established company you would probably want to be more diversified. Everyone has heard other people talk about having diversified investments. As a business owner, this can lead to questions about how they should handle investing in their business. For the business to grow it will take some amount of reinvestment. We see that over time the effectiveness of each dollar invested tends to flatten out. This happens as the business stabilizes. Around this point is where investing significantly in companies outside of your business can start to make a lot of sense. Early on the payoff for reinvesting in the business should be very large. If the company can grow 30% each year, that is typically a very good investment. At some point, the growth will slow and then the decision becomes more dependent on risk adjusted return and the cost of capital for you and your business. These decisions have a lot involved with them that takes understanding business, corporate finance, and personal finance. Our team was designed to address each of these three categories fully because otherwise the advice would have gaps. When we look at the balance sheets of business owners that have reached a very high level of success, it is common to see 50% of their net worth inside private businesses they own. Many younger entrepreneurs will have 75% or more of their net worth in their business. One of the risks with diversifying outside of the business too early would be starving a growing business of the cash that it needs to grow. The reason that many people talk about businesses taking 5-10 years to make a lot of money is not just because it is hard to grow revenue, but also that growth requires spending money most of the time.

How should a business owner invest outside the business?

We like to evaluate a barbell strategy for our very successful business owners that have yet to diversify much. This often involves taking less risky investments that perform best in economies opposite to those that your business thrives in. This reduces a lot of the risk that exists from having a massive equity position in one company. It is very common for financial advisors to manage a set of accounts and not factor in the pieces of your financial picture that they don’t make money from. This can lead to massive unnecessary risk that does not align with your goals. Your largest asset, your business, should be a major topic of conversation with your financial advisor. Some owners with smaller businesses will feel like they need more growth in their investment accounts because their business will not fund all of their retirement. This situation can benefit from a more balanced investment account. We also see this in young families that have tons of time to wait for a market rebound if the market struggles.

How much risk am I taking by having most of my wealth in one business?

A well established business might not be too risky to be concentrated in. The main risk could come from spending nearly all of your income. This could lead to having too little income in retirement. Just like a normal employee, spending all of your income is probably not a wise decision and can lead to issues in the future. You should be building some wealth outside of the business once it is generating regular profits and does not have as obvious reinvestment opportunities. There should be a point where the returns expected from a 401(k) match or tax incentive from a Roth account are worthwhile. Some business owners will feel like they have to keep saving into accounts once they start. An alternative would be to save big for a few years, then switch the focus back to reinvesting and growing the business. This can be a more sustainable and comfortable approach for those business owners that aren’t 100% done trying to grow their business but know they can take less risk.

How much cash should my family keep if most of our wealth is tied to the business?

The minimum target should be 1-3 months of personal expenses. If the business maintains a low cash balance, it probably would make sense to keep a higher amount set aside. Having customer concentration can lead to significant risk if you are completely reliant on monthly income from the business. The more risk like this that exists in the business the more it can make sense to keep higher reserves. As always, your stage of life and your goals will play into this. Rapid growth will likely require more cash and more risk. If you are already successful in business, it might be time to start stacking the profits on the sideline. The most common mistake we see is owners leaving this cash in a bank account earning 0.1% interest rather than a money market or combination of bonds that can get closer to 4% interest based on recent rates.

How much of my net worth should be outside my company?

This answer will fluctuate a lot depending on your age and the stage of your company. Well-established and highly successful families tend to aim to have 20% - 40% of the family’s wealth in their private businesses. Often this can involve a partial sale. For younger families, it can be good to try and build savings that can cover a few years of personal expenses. For ultra-high net worth families, it is common to see 40% of the wealth in private businesses. Within that is a mix of active and passive ownership. Having half of your wealth outside of your business before any kind of sale would be a great position to be in. This can set up your family to have a very well diversified portfolio of investments while still maintaining significant ownership in the family business.

What should a business owner do before a major income drop or downturn?

Obviously the more time there is to prepare for this situation the better. The first step is most often going to be revisiting the family budget as well as the business budget. This will let you forecast cash needs. Then, you can work with your advisors to determine the best way to get that money from bank, investment, and retirement accounts while minimizing taxes and fees. The biggest mistakes would be doing nothing to current spending or assuming that the income will return quickly. By lowering expenses, you can lengthen your emergency savings from lasting 3 months to maybe 4 or 5.

What is the most tax-efficient way to get money out of my business?

This depends completely on the entity type, profit, compensation structure already in place. This also depends on if the goal is to be the most efficient today or over a lifetime. For small businesses, this can involve minimizing self employment taxes. For larger businesses, this can mean trusts, loans, and many other things. We commonly see business owners misunderstand how their business is taxed. Let’s assume you have a flow-through business. Your business pays taxes based on net income. Distributions do not impact net income. This means that you can take $0 in distribution on $1m in net income. You still pay tax on $1m in net income. This means there is usually money sitting in your business that you could take out and have to pay $0 in tax to receive. Larger businesses can add in needing to think about partial sales, transfers to the next generations, and personal loans against equity. There are plenty of ways to get money out of a business, but we know it can be hard to identify which is best for you. Most of the time it takes a combination of a few pieces to get the best solution.

How do I know whether my current lifestyle is actually sustainable?

For young people, saving 15% - 25% of your income should lead to having enough saved to sustain your lifestyle. Often, it will take less than that. A rough target for our clients is to spend 4% or less of their investment portfolio each year. This amount will maintain the value of their investments in most cases. For less wealthy people, spending can be higher because social security income will cover a significant chunk of the income needed. Some analysis will show families pulling all of the growth out of their investment accounts to live on. While this can provide decent estimates, it does not account for inflation. So, the analysis can show a family maintaining an investment account value, but in reality their needs would deplete most or all of the accounts.

When should a business owner diversify outside the company?

Every situation is going to look different because everyone has different goals for their finances. If you want to retire and live on a small amount, diversifying early could be great. Diversifying later will be better for someone that is trying to build a large operation that their whole family can work for and benefit from. The simplest question to ask is will my business have a specific expense with a specific payoff that will result from reinvesting instead of diversifying? Spending the money will not usually be best if you cannot connect a specific return to the large expense. There can be some hesitation about investing in the market instead of your business because what if your business needs cash in the future for a big purchase. This is where you as the owner can reinvest in the business and increase your cost basis in the equity, or you can loan money to the business and generate some income. Just because the money has left your business does not mean it has to be gone forever. Make sure you are saving some though and not spending everything that comes out.

How do I know if I’m saving enough money from my business?

The first step would be having a few months of reserves set aside. After that, retirement accounts being maxed out would be ideal. Some owners are hesitant to put the money into a retirement account in case the business or family needs the funds. In that situation the 25k-50k target is still what we would look at. A lot of the decision should account for the type of business and its stage. You should also consider your own timeline leading to retirement. If the goal is to get enough money to retire quickly, the calculation looks very different from someone that has already made enough to live on. Often, we will see people reinvesting in the business because they feel like they should. Without a specific path for the reinvestment to lead to growth beyond returns that could be generated elsewhere, this can lead to disappointment. If there are specific areas of the business that need cash invested for specific initiatives, reinvestment can be great. Too often this clarity is not in place and the owner forgoes building their personal balance sheet without getting anything in return.

Should I pay myself more salary or take more distributions?

This question primarily impacts an owner with a “reasonable wage” below $200,000. Owners in this category can reduce their tax liability by paying themselves distributions because of self-employment taxes. For higher earning owners, there are some other factors to consider in the decision. Many of the options involve convenience rather than simply math. We have seen owners take large W2 “bonuses” at the end of the year to pay their tax liability rather than paying quarterly estimated tax payments. On paper, this adds a 3% tax on the “bonus” amount. However, for some, the convenience and extra time with their cash is worth it. The questions and answers depend largely on your unique situation and preferences. That is why it can often take a team of experts to find the correct answer for you. Overall, a reasonable wage below $150,000 could lead to having significant tax savings from taking distributions instead of wages, but your CPA would need to confirm what that reasonable amount is.

How much house can a business owner safely afford?

We want our clients to have their home values be 20% or less of their total net worth when they retire. This comes from payments, taxes, and the associated lifestyle expected. Knowing this, we can project future account values and future home values to see where a certain size house will line up. We commonly see 30% of income going to a home payment. This can work for business owners if they also keep a good cash reserve in their own accounts or in their business. The consistency of the business would also be something worth considering. There is also a common rule of thumb to go into retirement with a mortgage worth 50% the value of the home. Generally, we would want a business owner to be more financially conservative than a W2 employee, but most times they can follow similar guidance for housing.

Should I reinvest more into the company or build more personal wealth?

It can make sense to focus more on personal wealth and taking less risk if you are nearing the time that you want to retire. For everyone else, we like to make sure that the reinvestment has a definite purpose to it. Sometimes reinvestment can be spent on things that don’t directly lead to a better business. In those cases, it often is better just to take the chips off the table. Reinvesting can be great and is often necessary. We love to help clients think through this topic and luckily do not have to push for them to fund investment accounts. We are free to support whatever is the best use of capital for them. However, most businesses will reach a point where it takes massive investments to accelerate growth. If your goal is not to have a massive business, there will probably be a time where you can get better and safer returns elsewhere. This can be a very difficult topic for business owners because it is a much different thing than what made them successful initially. Capital allocation is a much different game than the hustle of starting a business. There is only a small group of founders that are naturally gifted at both of them.

FAQ - Category 3

Business Owner Exit and Long-term Planning FAQ

How much money do I need outside the business before work becomes optional?

A good rule of thumb is that your annual expenses need to be 4% or less of your investment accounts. Before making a decision though, you should have an advisor use a monte carlo simulation to give you an exact number needed. We have found that every clients’ expectations differ on this. Some expect they have enough already and are wrong while many others think they need to work 5 more years but have already saved enough. Spending and income are the two biggest levers in retirement planning. So, it is unsurprising that it takes a significant amount of savings and conservative spending to be work-optional at 45 or 50 instead of 65.

If I sold my business for less than expected, would I still be financially secure?

You would want your financial advisor to run Monte Carlo simulations to see what different amounts will lead to in retirement. This can give a detailed picture on what different sale values lead to for retirement spending ability, charitable giving, and passing on to the next generation. People will often miss that using tax & estate strategies can reduce the overall sale value needed to be financially secure. With good planning, the remaining value after taxes can be equal to what would have been left over from a sale at +20% higher. Evaluation of a purchase offer should almost always include a retirement monte carlo alongside it. This is especially true for owners looking to retire after the sale.

How do I know whether I have a transferable business or just a profitable job?

You would want your financial advisor to run monte carlo simulations to see what different amounts will lead to in retirement. This can give a detailed picture on what different sale values lead to for retirement spending ability, charitable giving, and passing on to the next generation. People will often miss that using tax & estate strategies can reduce the overall sale value needed to be financially secure. With good planning, the remaining value after taxes can be equal to what would have been left over from a sale at +20% higher. Evaluation of a purchase offer should almost always include a retirement monte carlo alongside it. This is especially true for owners looking to retire after the sale.

How much life insurance does a business owner really need?

While many businesses are transferable, they might not be transferable at the value the owner wants. In many smaller businesses, the primary value drivers are the client list and relationships. To know what the business will sell for, it takes knowing what the other party is interested in buying. A large business might have people and processes that the other party wants to own. They might just have a cash-flowing asset that someone else wants to hold and maintain. Or they might have something small that is kind of valuable to the buyer. There can be benchmarks and industry standards to look at, but it all comes down to what a buyer is willing to pay for the business. Unless the business is a decent size, the owner will likely have to continue to work for a handful of years to sell it at the price they hope. Many service related businesses will require some amount of time staying involved post-sale to get the highest exit price.

How should a business owner think about trusts and gifting strategies?

The common rule of thumb for life insurance is 10x your annual income. To get a more accurate number you would want enough to support your family’s annual expenses alongside paying off most of your debt and funding goals like children’s college. If all properties are paid off and you have significant investments outside of the business, you might be able to self-insure some or all of the need. Business owners will commonly miss having something like buy-sell insurance for their business. Odds are that your spouse and family are not equipped to or do not want to run your business without you. Using insurance to fund the purchase of the business by a different successor can be a great way to get your family more money and reduce the headaches that would come from trying to quickly sell the business. If you can determine the amount of money that would be needed by your family today using a monte carlo simulation, you can combine life insurance with your investment assets to reach the amount most optimally.

What happens if I become disabled and the business depends on me?

The difficulty comes from deciding what supports your goals for your family and how you want the next generations to engage with the family wealth. The basic thing to consider is what is the amount of money you need versus what you can afford to give away now or in the future. This is basic math that an advisor and attorney can work together to determine. A good advisor should recognize that giving your next generation an extra million dollars is worthless if it destroys their life. The most important part of the estate strategies will be defining your goals and weighing trade-offs based on more than just the numbers. Sure, you could get a million dollars to your 20 year old grandkid efficiently, but will they know how to engage with that money?

When should I start exit planning if I am not ready to sell?

The categories that matter in exit planning will be valuable to work on for any successful business. Digging more deeply into exit planning is most valuable within 5 years of an expected sale. By the time you get within the last year or two, there are some options but they are much more limited than what could be done in 4 or 5 years. Surprisingly, many owners who set up their business to be set up very well for a sale end up with a business that is much more enjoyable to operate. This often pushes back their retirement timeline because they no longer feel like they need to sell. And this lets them wait for the best offers before deciding the business is worth selling. The exit planning process goes hand in hand with having a good efficient business. By deciding to prepare the business to sell better, the business should also function better.

When does a business owner need estate planning beyond a basic will?

What estate planning strategies should business owners consider while their company is growing?

One of the best places to start with estate reduction strategies is gifting up to the annual exclusion limit. For 2026, you are able to give any individual up to $19,000 absolutely tax free. They do not owe any tax on the gift and neither do you. You can do this for as many individuals as you want to. This exclusion can be used to give away shares of the family business tax-free. After 10 years, each grandkid could have $190,000 worth of ownership and there would be no tax involved. The value of the ownership could continue to grow as the business grows of course. The great thing about this strategy is that it does not require trusts to use. The biggest mistake with estate planning is not thinking about it early enough. We have also found it helpful for owners to know exactly how much money they need for themselves. We do this using a monte carlo. Then, they can be free to give away amounts beyond that.

How do I prepare for retirement if most of my wealth is tied to a future exit?

The biggest thing is to prepare for a variety of scenarios. If your retirement success depends on an exit, there can be unhelpful pressure in negotiations to just get a deal done. Saving some money early can mean you don’t need the business to sell for its absolute best. You can also spend time preparing the business better for a sale. This can help increase the expected value. That’ll leave a higher chance that the offers you are able to find will be sufficient for your family’s goals. The biggest risk would be doing nothing to prepare for an exit, and many times the tasks can have some of the best return on investment.

What financial planning should happen before an eventual business sale?

The first topic most people think of is tax planning. Some time should be spent trying to limit the size of the capital gain that comes from the sale. Estate planning is another area that should be looked at for decent size sales. These areas can come together and combine with trusts and charitable giving to help the same sale price have a larger impact. Making a basic financial plan is a key component that many people under-utilize. If you know that your financial plan says that you need a sale of $6M, then a sale at $7M could look great. Sometimes, a business owner can be disappointed that they cannot get offers at the $15M they think their business is worth. After finding out that the sale would still cover all of their financial needs, they usually feel much better about it.

How do I protect my family from business risk?

Having a life insurance funded buy-sell agreement is one of the cleanest ways to handle the business if something were to happen to you. This would reduce some complexity by getting your family life insurance proceeds instead of business equity. Thinking about handling potential loss of income, the simple answer is to build up savings. Another approach would be to purposefully work to reduce risk areas like customer concentration, product quality consistency, employee training, etc. We like when owners are aware that their financial picture has different things to worry about than a W2 employee. The worst type of risk is risk that you are not aware of. By knowing where risk lies in your financial picture, we are able to attack potential problem areas.

How do I protect personal assets from business liabilities?

A big piece of protecting the personal from the business is to maintain a definite line between the two. Many business owners will expense things that might be personal expenses. This can be great for taxes and many times has no issues. An issue can arise when someone in a lawsuit argues that there is not a separation between you and the entity. If you have been using the company’s bank account to purchase personal items, the lines become much more blurry. This can expose your personal assets to risk that they should not be. The other thing to be aware of is personal guarantees. Many loans or lines of credit will require some form of collateral. For a business with a small balance sheet, this collateral will sometimes be a personal guarantee. There might be no way to avoid this guarantee, but you want to at least be aware of it.

What happens to my family financially if I die before I sell my business?

There are a few ways you can plan ahead to minimize the downsides in the event this happens. The most basic is a life insurance funded buy-sell agreement. For family businesses, succession planning and training can be helpful for keeping the business operating well. The surviving family can have way more options to be taken care of when the business is set up to succeed after the founder’s passing. It’s very common for founders to fail to build enough outside assets before they pass away. A great way to remedy this is to have the business or successor purchase life insurance on the founder. This will provide capital that can be used for purchasing the business from the founder’s family.

What should I do now if I want to sell my business in the next five to ten years?

Should I own my building personally or inside a separate entity?

Generally, it will make sense to hold in a separate entity. This is especially true if your business will not be the only entity in the building. Liability is a component of this. You also get some additional flexibility by having the building in a separate entity. We have seen some business owners use the real estate as a stream of retirement income to support their family after they sell the business. This also lets them scratch the business “itch” while being able to enjoy retirement. If you are the sole owner of your business, you can probably be fine owning the property personally or in the business, but the risks seem to typically outweigh the benefits.

What should business owners do after a liquidity event?

Most of the biggest tax savings and planning should happen prior to the sale. After the sale, the challenge becomes how to use the wealth. This can include how to prepare your children or grandchildren to better handle it. This can also include determining causes you want to support and in what way. The goals can become much more abstract than prior to the sale, but they can also become much more meaningful. This can be a difficult transition for business owners. Many of the skills that made you successful might not be as useful and there might be some skills that are missing. We like to help clients answer the question, “What does your wealth mean to you”, and we do this through a series of conversations. If the sale is large enough, this next stage can be similar to running a business, but the industry and goals are very different. For example, a $30M portfolio could be producing $3M per year in “revenue”.

How do I turn business value into lasting family wealth?

The biggest components will be keeping personal spending conservative and being efficient with investing profits. Once you have built a cashflowing asset, you can reinvest in many correct ways. The biggest mistakes would involve getting unnecessarily risky with investments or using cash inefficiently. Often we see this as unnecessary business expenses for the sake of tax reduction. We also see speculative investments that friends suggest or are involved in. Many times, the business will have enough growth that investments in the stock market can be very conservative and the family will still be able to grow significant wealth. Keeping personal spending low makes the required sale value much lower than would be otherwise. Personal spending being low in the first generation can also help the second and third generation keep lifestyle expectations lower. This would lead to the inherited wealth “going further” in the future.