Special Report

A conversation with:
Colten Christianson, CFP®, Partner, Private Clients Practice
Justin Fisher, CFP®, Partner, Private Clients Practice

In the quiet moments before dawn, Steve and Anna Walker sit at the kitchen table with their morning coffee and find themselves reflecting on the arduous journey of building a successful business.

For years, they’ve poured their heart, soul, and every ounce of determination into crafting a company that became an extension of their identity and family legacy. Through both good and uncertain economic times, they were able to scale revenue and employ hundreds of people.

And that hard work paid off. Their business success attracted outside interest, and after careful consideration and due diligence, they decided to sell their company—an exciting, yet complex process of its own.

In this fictitious scenario, “the Walkers” are just one example of a business owner weathering the emotions and logistical challenges that accompany the sale of a venture. Even with preparation, parting with something so intricately woven into the fabric of their daily lives stirs up conflicting feelings—a blend of pride, nostalgia, and an underlying fear of the unknown for them and their family.

The hurdles that emerge during this kind of transaction are enough to test even the most seasoned entrepreneur. From securing accurate valuations to negotiations that might seem endless, business owners will grapple with the intricate dance of preserving the legacy they’ve spent years building while ensuring a smooth transition for both their family, their employees, and the incoming custodian of the business.

This experience is more common than you may realize.

This introspective journey delves into the emotional and logistical rollercoaster that business owners confront when ushering their company into new hands. The struggle is palpable, the stakes are high, and the path forward is anything but straightforward.

Even with years of planning for the future, there are constant variables and unanswered questions that present themselves after the close, such as:

• How will capital proceeds be deployed? Other business ventures, real estate, charitable endeavors, or impact projects, for example?
• How will the increased complexity and risk of management of my personal finances be handled?
• Do I have the right team of advisors to support endeavors moving forward?
• What’s the impact on my family?
• Should I have privacy concerns related to wealth?
• Should I be thinking about family venture capital to support certain projects and governance structures?

In navigating the labyrinth of a business sale, we’ll explore the raw authenticity of the experience—the sleepless nights, the negotiations that feel like a tightrope walk, and the poignant moments of realizing that letting go isn’t just a transaction. It’s a transformation.

Fear Equals Opportunity

Throughout the pre-transaction readiness process of evaluating not only the business planning aspects, but also the emotional and personal planning implications of selling their business, the Walkers will face questions—and perhaps fears—around identity, lifestyle, long-term goals and implications for family and legacy.

“The potential impact on family is one of, if not the most common, challenges a business owner will face during a transition,” according to Colten Christianson, a partner who heads the Business Owners group at Moss Adams.

Let’s delve into some common fears or misconceptions and how to navigate them with confidence.

Fear 1: Change Management in the Face of Uncertainty

Preparing to part ways with a business that has become a life’s work isn’t an easy task. Fears and questions about the unfamiliar terrain of the process with several stakeholders involved can feel overwhelming.

“Business owners are very intentional about the value creation of their business; but at times, they aren’t as intentional about the value creation of their wealth as a family operator,” says Justin Fisher, a partner and lead of the Private Clients Practice and seasoned financial planner who works closely with business owners, individuals, and their families.

Moving from business to personal value “is a mentality switch that can feel abrupt” for business owners, Justin added, which is why he helps clients build a comprehensive personal wealth plan that aligns their business interests with their life goals and aspirations.

Fear 2: Confronting Common Misconceptions

“When a business owner completes a sale, the family business wealth is now the business operation. With so much happening during that transformation amidst a windfall of capital, it can feel overwhelming and lead to common misconceptions," says Fisher.

One common misconception is that you can diversify by spreading money across multiple entities. It's understandable to assume that you might be able to create value or manage risk by having multiple advisors.

The reality: Once you have a significant amount of wealth invested, there's even more complexity involved in keeping everything on track.

Fisher encourages a holistic team approach—one that includes tax, estate, and financial planning considerations. “If you have several people managing accounts that are both buying and selling securities, that may come with complicated tax reporting and potentially higher costs; and that creates a competitive environment instead of a holistic partnership.

In today’s marketplace, owners are specifically looking for advisors who can offer the integrated capabilities of tax filings and planning, investments, wealth management, financial planning, and family office capabilities.”

During the process, numerous complex questions may arise—questions like, is my money safe? Once you’ve sold your business, consider avoiding the instinct to rush to reinvest the proceeds without proper planning.

Fear 3: What Comes Next?

Once the sale closes, a business owner will have to confront a new identity and the uncertainty that accompanies post-sale life.

The prospect of a future without the daily rigors of entrepreneurship triggers a unique set of questions about the next chapter of life and future goals.

The spectrum for those goals can range from the allure of starting a new business and diving into the realm of high-risk, high-reward ventures to pursuing personal passions that were put on hold during the demands of business ownership.

Business owners are pillars of the community.

In fact, in a Harris Poll from May 2023, nearly 96% of business owners viewed themselves as the backbone of their community, and 84% of community residents agree. The psychology of going from one of those community pillars to reflecting on a new purpose after a sale can weigh heavily on someone traversing the process.

For the Walkers, the business, which was the pulse of their existence, transitioned into a financial windfall. Now, they must confront the pressing question of how to sustain their lifestyle without the familiar anchor of the business.

Fear 4: Succession Planning and Changing Family Dynamics

The weight of family legacy and impact on family dynamics is a concern that weighs heavily during this process.

Business owners like the Walkers will take on the intricate task of structuring the family’s future, contemplating the best avenues for estate planning, philanthropy, and gifting assets to heirs.

The fear of making missteps looms large, questioning whether giving too much might erode the drive and resilience they instilled in their children, or if wealth, when not managed judiciously, could become a source of conflict rather than a foundation for future success.

This delicate balance between preserving a family legacy and avoiding the pitfalls of excessive wealth creates a formidable challenge, says Christianson. “One of the most common issues that arises is about impact, family legacy, and being measured when it comes to gifting assets to heirs and children. It’s quite a common fear and one we address right away.”

The fear of making the wrong choice, compounded by financial windfall adds another layer of complexity to the post-sale narrative. The overarching goal is to identify financial, tax, and estate opportunities for any given life event.

So, as one navigates this uncharted territory, striking a balance between financial prudence and embracing new aspirations becomes a delicate dance, one that shapes the contours of the journey ahead.

Harness Opportunity to Create a Platform for Wealth

In the dynamic landscape of post-sale life, forging a future brimming with opportunity is the culmination of years of planning before a transaction.

Crafting a holistic financial plan that aligns with your goals is a vital step in creating a true platform for wealth. This platform extends its support to fostering family financial literacy and instilling a sense of purpose in every financial decision.

This approach helps to unravel the key components that elevate your wealth management into a purposeful and impactful endeavor.

Components of a Holistic Wealth Platform

Build a Holistic Financial Plan and Detailed Personal Balance Sheet

A critical step involves forecasting a personal balance sheet with the same meticulous attention once devoted to business finances. This includes a comprehensive analysis of assets, liabilities, and long-term financial goals. By taking a holistic view, a business owner gains a clear understanding of their new financial landscape, allowing for more informed decisions and sustained wealth management.

Understand Lifetime Consumption

For owners targeting or navigating a transaction, it’s important to determine how much liquidity and cash flow is needed to meet lifetime consumption or spending goals. From there, you can better understand how your balance sheet can support those goals over time.

Align on Estate and Philanthropic Legacy

A transaction will often create opportunities for estate planning and philanthropic or charitable giving, particularly if a deal is expected to net liquidity beyond what’s needed for lifetime consumption.

Recognizing that wealth management isn’t a solitary endeavor, the next pillar of the plan focuses on engaging family members in financial literacy.

This includes imparting a nuanced understanding of the family’s financial legacy and how to navigate the responsibilities that come with it. Educational initiatives, family discussions, and collaboration with advisors form the bedrock of this engagement.

By fostering financial literacy, family members are empowered to continue the legacy purposefully, instilling values that transcend the mere accumulation of wealth. The emotional process of involving the family builds trust and excitement, creating a shared commitment to the sustainable stewardship of financial heritage.

Set Wealth Allocation Targets and Execute on Investment Strategy

This meticulous process, akin to the nuanced art of business forecasting, becomes the guiding compass for navigating the complexities of post-sale wealth management.

It outlines an intricate roadmap for resource allocation to help determine the appropriate risk profile and investment strategy for each of the following buckets:

• Personal consumption
• Aspirational
• Philanthropic or charitable
• Gifting to heirs or multigenerational family members

Each of these buckets will have different goals and objectives that drive the underlying strategy, which could be a different mix of investments—bonds, stocks, real estate, or alternatives, for example. This provides a delicate balance between meeting immediate lifestyle needs and fostering sustained long-term financial growth.

Similar to how a seasoned entrepreneur strategically allocates resources within a business to optimize performance, this approach considers the allocation of financial assets as a pivotal strategy for personal wealth optimization.

By seamlessly integrating lifestyle aspirations with long-term financial objectives, this roadmap transforms the post-sale narrative into a journey of purposeful wealth creation, where every financial decision contributes to a fulfilling and sustainable future.

Create Purpose and Intentions for Wealth

The holistic plan extends beyond traditional wealth management to emphasize intentionality and purpose in future financial decisions.

This involves expanding wealth for a greater purpose, whether through philanthropic contributions, strategic investments, or supporting causes aligned with one’s values. By creating a platform for wealth that transcends mere accumulation, it establishes a legacy grounded in purpose and impact.

This intentional approach not only provides fulfillment for a business owner, but also becomes a guiding principle for future generations, setting a course to serve a greater societal and familial purpose with the wealth amassed.

The Business Sale as a Starting Point, Not the End Game

A strong integrated approach reframes the business sale as a starting point rather than an end game.

The emotional process of letting go is transformed into a catalyst for new beginnings. This perspective encourages a business owner to explore their passions, whether it involves starting a new venture or dedicating time to personal pursuits.

Embracing the post-sale journey as a canvas for reinvention and growth cultivates a sense of excitement and purpose for the future. This transformative mindset not only solidifies a financial foundation, but also sets the stage for a fulfilling and dynamic post-business life.

We’re Here to Help

At Moss Adams, we specialize in guiding individuals through this transformative process, offering insights that extend beyond numbers to foster trust and excitement for what lies ahead.

Reach out with questions as you align your financial goals with your hearfelt aspirations.

Additional Resources

• Business Transition Planning Resources
• Private Clients Practice
• Individual Wealth Management Services
• Transactions Services