Pre-Exit Wealth Planning Strategies

In this week’s Exit Your Way Roundtable episode, our guest speakers were Aaron Marberg and Troy Niehaus. Troy is the Vice President and a Wealth Advisor at Bernstein Private Wealth Management and Aaron is a Client Advisor at Bernstein Private Wealth Management. Troy and Aaron help business owners build solid wealth generation strategies.

In the episode of this week, we discussed pre-exit wealth planning strategies and how to apply them as well.

In this week’s Exit Your Way Roundtable episode, our guest speakers were Aaron Marberg and Troy Niehaus. Troy is the Vice President and a Wealth Advisor at Bernstein Private Wealth Management and Aaron is a Client Advisor at Bernstein Private Wealth Management. Troy and Aaron help business owners build solid wealth generation strategies.

The conversation of this episode started with Troy giving an introduction to his company. Troy said that they focus their practice on working with business owners and entrepreneurs to help them grow and become successful.

Download our free business valuation guide here to understand more about business valuations and view our business valuation FAQs to answer the most common valuation questions.

Adding to this, Aaron said that most of their customers are businesses that want to exit or are planning to exit. Here, the work that their company does is that it makes this exit easier for them by planning the right strategies.

Moreover, Aaron said that among these strategies, they provide this support to other companies in their pre-exit processes as well. Moving on, Damon asked Troy that what happens when a client comes to you with a failed plan?

Responding to this, Troy directed the question towards Aaron. Aaron said that it usually depends on the way the person spends their money. Moreover, he said that people do spend money on their businesses, but the way they spend it matters the most.

Do you want to know if your business is ready for your exit or what you should do to prepare? Learn this and more with our business exit assessment here.

Adding to this, Aaron also said that when it comes to exiting, people should have a set number in mind before that. In this situation, they usually start with a broken record and then have a set number in mind. Therefore, in order to excel, they have to be way ahead of this set number.

Moving on, Aron also added that they should always plan from a taxation standpoint as well. Adding to this, he said that in many situations, when there is a surplus of taxes, you can donate to a charitable vehicle company, some shares of your transport so that contribution can also be cut out.

This contribution then goes in the form of your tax. According to Aaron and Troy, these are the situations that you need to avoid in order to get to the right pre-exit strategy.

Get the most value for your business by understanding the process and preparing for the sale with information here on our Selling a Business page.

The conversation ended with Damon thanking the guests for their time.

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Exit Your Way® provides a structured process and skilled resources to grow business value and allow business owners to leave with 2X+ more money when they are ready.

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Damon Pistulka, Andrew Cross, Aaron Marberg, Troy Neihaus


Damon Pistulka  00:01

Aaron on the stage chat now Aaron and Troy, there we go. Got everybody on the stage. All right. Well, thanks everyone. We’re going to get live here on LinkedIn real quick and then we’re going to get started. Perfect. So it’s gonna take us just a second here All right, everyone, welcome once again, to the exit your way Business Roundtable. We’re here every other Thursday talking about things that can help business owners prepare for their future, whatever that feature may hold.

So I’m happy today we’re gonna be talking about free exit wealth planning for business owners and we’ve got two friends of ours. I’m first of all, I’m your host, one of your hosts, Damon Pistulka with my partner in crime, brother, Andrew cross with me here today. And with us, we’ve got some special people here that we consider a very good in their industry and that is Aaron Marburg, Troy Niehaus. You guys are from wealth, wealth planners, you can correct me if I’m wrong work of Bernstein. I will let you guys introduce yourselves and we will get going. Oh, you’re on your



you’re on mute, buddy.


Troy Neihaus  01:40

We have to test this thing out. Now, I was gonna say thank you so much. Listen, Aaron and I both work at Alliance Bernstein. And we are with the private wealth group at at Bernstein. And, you know, we focus our practice on working with business owners and entrepreneurs and, and very senior corporate executives, I’d say that’s where we spend the bulk of our time, we have very similar practices.

And it’s just great to be able to jump on here and, and share the kind of experiences that we’ve had in working with business owners, we try to meet them really early. So to help them you know, grow and become successful, and then think about some kind of an exit or taking the company public. So it’s great to have have both of us here and be on board with you. So thanks for having us. Yeah, Aaron, what are you going to add to that you got to add something different?


Aaron Marberg  02:37

Well, I’m the guy that knows how to use the mute button as a starting point. No, I like it, nailed it, right. Work of business owners and like to work with folks early, right. There’s a lot of resources we have at our disposal, to be able to help business owners throughout the lifecycle of their company, whether it’s leveraging just Intel, we have our own research, research, research to industry, industry specific data, thematic data within industries, we actually have a lending on the lens capital to businesses.

And then a lot of what we’ll talk about today, I’m planning for an eventual exit from a business. And we spent a lot of time with a lot of the entrepreneurs that we work with planning for that exit well in advance of the actual event, because you can you can actually add value to the deal by pulling different levers from a planning perspective, well in advance of that actual transaction coming to fruition.


Damon Pistulka  03:32

That’s awesome. That’s awesome. And that’s, that’s why


Andrew Cross  03:36

I wasn’t aware of the lending arm portion left to your on your head. That’s


Damon Pistulka  03:41

right, that one down too. So that’s good to know. So first of all, you guys probably have to do your disclaimers, you know, what you say? Is your opinion and all that good stuff, if we need to do that.


Aaron Marberg  03:52

Well, yeah, yeah. Well, you know, it is the securities markets. So they like to say is, yeah, it’s everything that we say is always subject to the it depends, right. Yeah, no guarantees, but But yeah, nevertheless, the lot of good planning. And by the way, a lot of it we’ll talk about from a planning standpoint, I’ll I’ll be it depends caveat to like, we think about tax strategy, because we know that’s like the most incredibly fluid situation in the world right now.


Troy Neihaus  04:15

Yeah. Yeah. But beyond beyond that, that compliance part, you know, we are not attorneys, we’re not tax accountants. But we’ll give advice around those types of strategies that need to be looked at for business owners. And so, you know, a lot of times we’re doing upfront work prior to someone, you know, taking the advice that we give to their attorney or to their tax accountant, so it’s a nice way to help maybe streamline some of that costs. Because they’re gonna charge by the hour we don’t.


Damon Pistulka  04:49

Yeah, yeah. Well, you guys have seen it many times, many times over many different situations. And that’s the real, real benefit of working with true wealth planners. the right size range, because I think that’s one of the things that business owners don’t really understand is that there are different types of wealth planners just like there are different kinds of businesses, you’ve got a small business, that’s a solopreneur. Business, you’ve got a a business that has maybe 50 or less employees, you’ve got businesses that are 50, to say, 200 employees, and you’ve got 500 Plus employee businesses, if we’re formation them that way.

And I think what a lot of people don’t understand is they’re, they’re appropriate wealth planners for those stages as well. And so when we talk about wealth planning, and now this is not for the sole for near typically, but it can help, obviously.

But when you’re looking at this really one of the things that Andrew you can elaborate on this is one of the most important questions I think business owners really need to answer well ahead of the transaction is can I live off the assets I’ve accumulated after the transact or going forward, whatever I’m going to do doesn’t really matter if I’m 42 years old, and I’m going to start another business.

I’m whatever age and I don’t want to work anymore. I think that’s the big question. And that’s the hesitancy and that’s, that’s where we really run into challenges with business owners exiting, if they’re not confident in that, that question. They haven’t answered that question. Well, they really struggle with it should actually.


Andrew Cross  06:30

Well, one of the things about what Aaron said, though, too, is it’s gonna keep coming back, it depends.


Aaron Marberg  06:40

It’s funny, you say that. So we have a, we have a dedicated research team about 40, or 50, people called our wealth strategies group, and a lot of them are former CPAs, former attorneys. I mean, they dedicate all their time to either building analytical system for publishing research around how to help people navigate the complexities of wealth. And the Evergreen joke is that you ask them any questions and their answers always starts with it depends. But it’s true, right?

Because everything that you know, everything that I discussed is so fluid, everybody’s situation is so unique. But But I would argue that one of the, like, fundamental frameworks of what they what they put together is kind of what you were just talking about, Damon, and that is helping people understand what they actually need, before an exit, like what that actual number is, then we, we built a framework and a system for stress testing is called core capital, where it helps somebody understand what is the pool of capital that they need, assuming the markets have terrible, inflation runs high, and you live a long time?

And if you’re going to be under, OK, under those three headwinds, now, you know what that number is? And if you can start to plan for that number, early, that that sets you up for success in basically every other facet of your playing.


Andrew Cross  07:54

Yeah, it was this, you know, real life experience, you know, working with these guys and Aaron with the with a real client on on this kind of thing. I was really impressed with how deep they went into, you know, not just into wealth maximization. Or we can do this with that. You get you there. But you know, what the client going with the business owner going into what, you know, what do you really want to do?

That’s the depends part two, and I don’t think they often, you know, starting early is extremely important, because I don’t think they’re busy working, building a business, the exits rapidly approaching, but I don’t think they’ve given a lot of thought to that. And that’s where we run into trouble. You know, getting a deal done, because they, they get to the ad, they’re at closing. And then yeah, sure seemed like a big number at the beginning. But then I forgot, I got one more kid, I got to get through college I’ve got I’ve got an ex wife and I got some alimony I got to take care of and then boom, it’s taxes, they’re taken out a bunch and thrown, though.


Damon Pistulka  08:59

And even at the even at the higher end of that, I mean, people like to, you know, there’s times you’re setting up foundations, you’re, you want to set up, you know, different ways to transfer that wealth to the next generation, multiple generations. I mean, there’s so much of this, that you really need to understand that. When you look at this, and you guys talk about taxes a lot. I mean, if your take your time and do this right ahead of the transaction, you can mitigate a lot of tax consequences. You can educate your your next generations much better and things like that, correct. Yeah, for


Troy Neihaus  09:35

sure. You know, I think the other thing, though, to keep in mind, that business owners often struggle with that I’ve seen is they’re used to spending whatever money the business generates. Yeah. Well, I can’t say how many owners I’ve talked to, you know, that it’s generated a million dollars worth of income and they’re spending and they’re spending and they’re spending and then they decide to sell their business and of course, It, it, it, you know, every transaction varies. I mean, we’ve worked, you know, hundreds of millions of dollars of a of a sale of the business to something as simple as you know, an eight or a $10 million sale.

And I can’t tell you how many times the people who you are closer to the eight or the $10 million sale, think that they’re going to be able to continue spending the way they’ve been spending the last 10 years with their business, because they’re just, you know, spending that money that the income from the business generates. And guess what that entertainment $10 million, is not going to ensure that same lifestyle that they’ve been used to. So that is also one of the biggest things that I’ve seen.


Andrew Cross  10:37

Yeah, well, I think you’re right, you’re absolutely right. And no matter how many times we talk to them about that, the reality that when the cash flow from the business, the day of closing, it stops, it completely stops. And that’s, that is a traumatic experience. Yes, you’re sitting on a pile of cash, but you, you know, and somewhat of a windfall, but you’re still looking ahead 2025 years, maybe of life, maybe 30. And, you know, you know, that that panic mode starts in, so how do you? How do you learn to manage that money? Or live off of that? asking those questions,


Damon Pistulka  11:19

you had something,


Aaron Marberg  11:21

you’re just gonna say that, you know, the flip side of that is also true, where you do see a lot of people as well, that, you know, they might have a company that’s, you know, valued at $40 million. But they haven’t gone through that process of understanding what their number is, and they may need 20. Right, but they’re, but they’re, they’re holding on, because they actually don’t know that they need 20.

And they just keep working and pushing and, and anyway, it again, like it all starts with this idea of understanding what that number is, because that gives you all the framework for, you know, when if you can move forward when you can move forward. And by the way, also, by definition, if you know what someone’s core capital is, you know, what their surplus capital is. And that’s when you start to also dig into a lot of those different planning tools, you know, philanthropic vehicles, multi generational wealth transfer things. And, and, and, again, planning ahead with those particular, you know, around those particular issues can save a lot in taxes.


Damon Pistulka  12:19

Yeah, yeah,


Andrew Cross  12:21

I think it’s really your core capital, you know, that the model and looking at that, you know, with the clients really helps. You know, the other thing, you know, that was impressed with the help centers that client understand, too, is, is how much opportunity cost is lost by having all their assets tied up in their business, and how much risk their undertaking taking, you know, another, you know, another good reason to sell a business, the great reasons not, you know, mitigate my risk, diversify, you know, I can put this money to work elsewhere.

And that’s what I’m going to look like, without having 100% or 95% of my net worth tied up in a business. It’s not like, those are good reasons why to sell Not, not, you know, I’m just waiting till I’m 65. And I’m going to do it, then whether I like it or not, or, you know, those kind of things where, or I’m not going to sell because it’s just not enough, right.


Aaron Marberg  13:20

That’s a great point. And you know, and you guys know this better than anybody, you know, like, like, you know, Troy and I do a lot of work with the traditional capital markets with stocks and bonds, right? You can buy and sell those any day of the week, any minute, right? It’s not Yeah, they’re highly, highly liquid. That’s not true with businesses, and you weren’t, we’re in an incredible period of time right now, from an m&a standpoint.

But we also know that’s not always true. And you’re right, having like, an arbitrary date on the calendar is tough, because if you’re in a position where you can get out for enough, and the deals like that the liquidity is there, buyers are out there, that’s arguably a really good time to go ahead and go through with an exit because two years from now, there may not be a viable market for private businesses, you might get stuck for 567 years. Yeah,


Damon Pistulka  14:05

and that’s really good. That’s a great point. Because that’s what happened, you know, and in 2008 it in and it just simply, this is going to happen and people are going to be stuck in these businesses, oftentimes for seven to 10 more years, if they really want to get back to where they want to be, or they’re gonna make some significant life changes going forward.

Because what Troy said I just, you know, there are there many, many many, many many and I can say many a bunch more times and still not covered business owners making a million dollars a year in the United States and spending it all and and we’re argument to the harsh realization that when they get to the end, they simply don’t have enough assets to continue that lifestyle.

And the you know, working with you guys, there’s some things that that I mean, you obviously can plan for you can start to divert some of that income into into actual investing. Second help to build this, this nest or this, this these assets that are that are beyond your business, and really start to generate that income. So when when people fail the plan, and you guys see this, and they come to you, and they’re like, oh, man, I’m selling my business, I’m going to get $10 million. You know, I know that this is probably common for you, I’m going to get $10 million. I mean, what are some of the things that you see when they fail the plan when they come to you at this point?


Troy Neihaus  15:34

Aaron? Well, a lot of it is, you talk to you alluded to it Daymond. So, you know, they’re spending from from the the business but, you know, they could have been doing things ahead of time to take some of that income and moving it into entities, like, you know, a 401k, a simple 401k or something like that, something as simple as that, or, you know, look at an a cash balance plan or other other types of entities where you can put the money away, have it grow tax deferred, and start securing another part of their future, you know, that they’re going to need to depend on. And so a lot of them just aren’t even thinking about that. I see, I see that often.

You know, sometimes, depending on how the business is structured, you know, there’s an opportunity right now, even with proposed tax law changes around qualified Small Business stock, and you have to be a C Corp, to be able to take advantage of that. And you have to hold that stock for at least five years. And some people who have an LLC, and are you know, are thinking about maybe converting to a C Corp to take advantage of the qualified Small Business stock holdings. They didn’t wait long enough, or they didn’t do that conversion. And so things of that nature, things that I’m thinking about. Aaron, you want to add to that?


Aaron Marberg  17:04

Yeah, I mean, I was just gonna say that, it starts about something a broken record, but starts with that core number, right, because people they should know that number and be be well ahead that and by the way, also, to that point about spending as well, taking inventory, what actual expenses are because often, you know, we’ll see what you know that, you know, their business, bought their car pays their cell phone bill, right, and does the expenses that they need to understand that they’re gonna have to absorb personally.

So I would say starting there, and then from a planning standpoint, around taxation, and what tax strategy they should be putting in place, because there’s just opportunities to get missed, right?

If they’re in that situation where, you know, maybe they that they are going to get a deal that will more than fund their lifestyle, they have surplus capital, and maybe something that’s really important than just charity, there’s things that they can do, like you can, in a lot of situations, you can donate shares of the company to a charitable vehicle before a transaction, you get the deduction for that, that that contribution, and they get the they can avoid the gain on those shares, because it’s inside of a non taxable vehicle.

Right. And that’s just that’s just that’s just adds value to the overall deal. So, and again, a lot of people don’t know about this, like USPS buys, by example, with Troy was just mentioning, I’ll never forget this was years ago, I was talking with an accountant. And they had a client, they were telling me where they had a client who reached out and said, Hey, we signed an LOI, we’re selling our company. And they I mean, that like that was the first time the CPA even heard of it, right.

Yeah. And they’re like, Okay, so they start running, you know, doing the math crunching the numbers, they come to find out so with Q SBS, you have to hold the stock for five years to get the exclusion, um, CPA dug into the numbers and basically found out that, that they had they, they set up a closing date, that was three months in advance of that client meeting the five year horizon.

So basically, they would have had $10 million of the gain on that sale come to them completely tax free, but they missed out on it, because they just never talked to anybody in advance of that deal. And those are the kinds of things right, it’s just planning ahead. Yeah, you know, that that was $2.3 million, that that cost them. Yeah.


Andrew Cross  19:18

I think to that, what’s really great about this, too, is is with, you know what, with you guys, you know, as soon as possible, it’s like, it’s difficult to do because the business owner, if he’s three or four years ahead of the exit, doesn’t really know what the exit value is gonna be. Right. So you have to make some assumptions there. You know, whereas when they’re coming you late at the end? Yeah. Okay, well, here we’ve got, you know, we’ve got a liquidity event, we got 10 million or 15 million, what can we do with that?

And then the question is, is it enough it doesn’t cover all this stuff, and then you’re missing out on other opportunities. You know, so that’s the part is, look at assume your abs value, look at it. It’s got to be this at and then go to you guys and say, How’s this gonna work for me to say what was the light bulb that went off was the owners looking at that going, I could have taken I got this 20 million now. And I could have put it and worked it this way. And that way and that kind of stuff. And my risk is way gone. And I don’t have employees, it should have sold four years ago.


Troy Neihaus  20:21

Yeah. Troy? Yeah. So there’s there’s two things. Piggybacking on what Andrew just said, you know, you’ve got, you also don’t necessarily have to assume, I’m going to sell my company for 20 30 million, because a lot of business owners, you know, they have friends that are business owners, oh, my friend just sold his company for 30 million, I can sell my company for 30 million, that, you know, it may be a completely different market. And Aaron had mentioned this, they may not even need that much money to sustain their lifestyle at all.

And so part of it is early on figuring out, you know, what am I taking for the business for my spending, that’s not going to be there, what kind of lifestyle, they might be able to live off of $150,000 a year, we can quantify that, depending on their age, you know, how much money they’ve stayed, that they’ve been able to save, what state they live in, what their tax bracket is, and all those things and say, you know, if you continue to spend $50, the rest of your life, you only need x, and then it’s like, Oh, my God, really, I don’t really need x.

And so you know, that part. The other thing that I was going to mention, based from the earlier conversation is Aaron alluded to it, but you know, being able to do things with shares of your company, you know, whether it’s putting it into a trust, or whether it’s put it into a charitable vehicle ahead of sale, you know, you could be negotiating with the buyer, and you could have a deal signed, and but the deal is not going to happen for six months, but it’s signed, okay.

And once you sign you take away the ability to make some of those moves, even though the deal hasn’t been done, because you’ve signed and so the IRS is gonna say, Well, you can’t be putting shares of your company into a donor advised fund to get that extra tax deduction, you can’t do that, because you’ve already signed it, you know, and so then you then you lose part of the ability to significantly reduce your tax taxes in the year of the sale. And so those are just, again, more reasons why I just had this conversation early.


Damon Pistulka  22:29

Yeah. And in you, you come up with a two, I mean, we were working with a client here a couple years ago, that they they ended up in that situation where you said they didn’t need nearly as much money. And, and they, they didn’t want to leave it all to their children. So they were very specific about how much they got. And then they were very specific on how they did that with the transaction for the charity, and it worked out very well for them. It is it is the, there’s so many different things that you can do ahead of the transaction. And that’s why we want to talk about today, it’s and I think is really to understand your options.


Aaron Marberg  23:07

And by the way, I was just I’ll add something to that effect about like we make mistakes early on, a lot of mistakes are talking about or like, you know, people prepared for the actual exit. The other thing too, as you can see people get too motivated by the wrong things, and and actually, quote unquote, over plan on if that’s the right term. So like we’ve seen, people will often see people that will get so motivated by tax avoidance that they will start implementing all these different ideas to avoid taxation, to their own detriment.

And we’ve literally seen situations where somebody said, Well, what do you mean the estate taxes? How much why don’t want to pay that. So they start stuffing shares of their company to these trust vehicles to get it out of their states. That way, when they pass away, they don’t have a state taxes, and they don’t get to the point of the sale have the exit and they actually don’t even have enough money for themselves. Because they put everything in a trust vehicles that they can’t access. It’s for their kids, right? They’re not going to pay much of the state tax. They really I mean, they check that box, but now they don’t get to do anything they want to


Troy Neihaus  24:16

Daymond we worked on a mutual client together that had that problem right. So before they chatted with me if you remember they were working with an estate planning attorney and this to Aaron’s point, oh, this great tax strategy let’s move you know 20% of the business shares into this trust Oh, guess what? They want to spend how much a year we there and they’re not going to be able to do it because they’ve moved their their business shares of their business too. They move too much off their balance sheet right?


Damon Pistulka  24:45

Yeah. Yeah, exactly. And that’s that’s a that’s a it is a really good point because it has to be the overall strategy and that’s why looking and working with someone like like you guys said, that looks at the overall picture. is so important because you’re going to have tax people, you’re going to have estate planning people, you’re going to have CPAs that you’re going to work with in this process. And you really need to have someone that’s looking at the overall and in looking at your future, and not just at the level of, of what I’m doing today.

But what am I going to do tomorrow? So when, when you look at the other side, the other side of this spectrum, when people are creating generational wealth, we got a lot of people now that are exiting businesses with 20 3050 100 million dollars, what are some of the mistakes you see when when they do that, in transferring that wealth to the next generation? I mean, what are some things we could help people with today on that, just to think about?


Aaron Marberg  25:50

Well, I’ll get started, I would say, Well, you have to talk about it, right? But but you also have to have a plan as far as how you go about talking about it. Because you know, it’s like, there’s no never, for example, gives an example. So we actually we have a practice group called our family engagement practice, their sole focus is on facilitating conversations with our most successful clients, amongst their family, about their wealth, and but more importantly, anybody can transfer wealth, right?

But how do you transfer knowledge? And how do you transfer values? Right? That’s a totally different conversation. And that’s the focus of what they do. They’ll build educational curriculum, they’ll build a curriculum for facilitating these conversations. Because if you don’t talk about it, it that can create a lot of problems. In fact, it’s, I will say, with a lot of very successful people, if you kind of boiled down their goals to two things, they they say, How do I how do I tell my charitable goals?

How do I not screw up my kids? And that’s what everybody says, And I’ll never forget, one of my one of my colleagues in that family engagement practice was telling me the story that where they were working with a family who had sold a company for like, $120 million, right, really, really successful deal. And the, the wife was at home with the, their teenage daughter and teenage daughter, you know, as like, it was asking mom, like, hey, you know, Mom, I know dad sold the business, like, what do you sell it for? Right? And your mom says, I don’t we’re not quite ready to talk about that.

And she’s Oh, come on. I know, he sold it like no, you know, we’ll talk about it just as well, to Josh’s con, like, just tell me this, like, did he I know, for a lot did he sell for more or less than a million dollars? Right? And my colleague, my colleague says like, Okay, well, that’s actually interesting. It tells us two really important things. A good news, it tells us that your daughter thinks a million dollars a lot of money. Yeah. Be the bad news is your daughter thinks a million dollars a lot of money. Right. But that also, that also, like gave us the framework for all the conversations that that family engagement practice kicked off with that family with their kids?


Damon Pistulka  27:57

Well, you make a great point, because those kids in those situations grew up, not some of them not really knowing what money their family has. They think that going to doing this doing that whatever they want, blah, blah, blah, we you know, us name it is normal, and they don’t understand a what that really means what that takes the fuel that what that takes, you know, long term if they want to continue to do that.

And I think one of the things that I really liked about what you said, Aaron, and I think is really is ultra critical for business owners that are going to pass on this multi generational wealth is the knowledge of how to keep that how to how to maintain that wealth, because how many times do you see people that you help plan? And then they then they do whatever, and they’re not in this income generating mode anymore? Other than from their asset? And, and they’re spending too much. And it’s all gone in multa? In the children?


Troy Neihaus  29:08

Yeah. Well, it’s it’s both cases, right? It’s the the individual who sold their business. And then it’s, you know, that they try to set their kids up for wealth. There, the kids start overspending.

And so there are a lot of things you can do in advance in terms of setting up specific rules and trust and when the kids are going to get money and giving you time to educate the kids about the values of, you know, if you’re the generation that actually earned the money in the business, what’s important to you and wanting to pass down those values to your kids. But again, it gets so simple down to the basics is what is that core capital number? I had a business owner who sold his business during COVID. Were still in COVID, early, early COVID, right?

For 72 and a half million dollars and and it was an equity We play a private equity firm, bought, bought the business. And so we had a lot of cash up front, we went through the process of identifying his core capital, great, you set that aside, you know, he had wanted to spend $350,000 a year for the rest of his life, no problem, we moved aside, you set up the next bucket of Alright, these are going to be the taxes that you’re going to have due in the year of the sale, you want to set that aside and don’t include it in your spend money. Because that has to be there when the taxman comes knocking.

And so we set that aside in a very safe, you know, vehicle, and then we’ve got the surplus, and the surplus is right, what am I going to take here that, you know, to give away to charity, what part of that am I going to set aside for my kids, what part of that am I going to set aside for myself to be able to, you know, buy that yacht and buy that second, and third vacation home and all these things, that business owner went through and spent so much of that surplus where they only had their core left?

Now, they do have a piece of that a piece of the business, you know, the equity rollover, which they’re working on, but there’s no guarantee that that, that that’s going to have a successful second sale or another event to add to that surplus bucket that they’ve depleted. So really, really, you know, part of this family engagement practice that Aaron was alluding to, is helping these owners and their family members think about that money and the time they’ve gotten what they need to do with it. Yeah,


Aaron Marberg  31:33

I didn’t let me share one more thing, too, that I think it’s just interesting, because you talked about this idea of, of the importance of communicating amongst the family, and why that that communication matters so much. You know, a lot of times that conversation is centered around this idea of my kids are going to get wealth, and I want to make sure that they’re responsible stewards of that capital. There’s also a flip side to that, and why that having those conversations matters so much.

And and just it’s another another story behind this, a colleague of ours was working with some clients where they were working with this brother and sister both in their 50s, both wildly successful by their own right. And Father, they knew it was successful, but Dad never talked about anything about what what his situation was, and passes away. And brother was the executor.

So we stepped in to start doing, you know, the Estate Settlement, finds out that that he dad was really successful. And the brother and sister were both going to inherit, like 10 or 15 million bucks each. And the brother and sister were they were tipped, they were they were irate because they didn’t need the money. And now a lot of the planning that they’ve done for themselves was all thrown up in the air, because now suddenly, they have all this, you know, and I get it good problem to have.

But there’s their position was like, look, there could have been smarter things dad could have done with this money, you could have put it into a trust that skipped generation, once the grandkids, he could have donated it to charity, whatever, you know, we don’t need it. Now we got to deal with it, you know, and it just, it just gets back to this idea of just, you know, having good communication amongst the family. So everybody is on the same page. It really matters.


Troy Neihaus  33:11

Mm hmm. Yeah, I want to add also another point about meeting early when flies is need to be meet early enough to be able to talk to people like you guys, so you can actually help them with their business, get it from from where it is where it needs to be, you know, so often about back people like you, who give us our business owner contacts to to say, Listen, you want to be here?

Well, you got to meet with Daymond. And Andrew, they’re going to help get your company where it needs to be. You want for that lifestyle or for that charity, or for you know, wealth transfer. So it’s imperative to meet them early enough, because they may not be able to do that on their own, they’re going to need to hire someone like you guys. Well.


Andrew Cross  34:08

Yeah, that’s that’s an excellent point. But it comes down to you know, it’s a chicken and egg thing. Right. And we absolutely, I mean, the first question we ask, you know, a prospective client who wants to sell their business is why are you selling?

And then the next one is, you know, to understand what they want to do after but you know, we they don’t know what that number is they need to the second thing we do is got to get in touch with the you know, good planners who understand the picture, because then it may come down to Yeah, instead of finding out at the end, well, we’re here but we needed to be here, which means no deal. That’s not a transaction not gonna happen and but once we establish what that target is, then your chances of selling are way higher. And you’ll get there we can


Aaron Marberg  34:57

correct me if I’m wrong, like you’d like. I mean, we took Troy’s finally, we want to get someone like you guys in front of them early because, you know, give you a runway, you know, six months, 12 months, 24 months to get the business into the right shape where it can sell, right? There’s, there’s always things that need to be cleaned up where it literally adds value. If somebody says, Hey, I’m ready to sell, let’s put it on the market next week, I’m going to venture guess a week is not enough runtime to fix some of those issues that need to be fixed.


Damon Pistulka  35:24

Yeah. And often the biggest challenges what Troy alluded to earlier, they’re businesses making a million dollars a year, they’re spending a million dollars a year, and they go to sell it, it’s where $6 million a year, or $6 million. And, and it’s not enough money, they need to work 1215 20, whatever that is, that’s a bigger problem to keep the same lifestyle. Now granted, 6 million may be wonderful for them, just a different lifestyle moving forward, but they really or whatever, but to really understand what they want to do getting with you guys talking about that core value under including what they want to do.

I mean, I want to, you know, I want to do this, I want to give the philanthropic here, I want to support my kids this way, there’s so many different things they need to consider, that they may not be considering today, I just think that if you give yourself three to five years, you’ve got options, if you give yourself five plus years, you’ve got even more options, like you were saying try some of this stuff takes five plus years, that being with SOX and, and other things that they need to do to think about early now doesn’t mean that you’re going, Hey, I’m getting out and whatever.

But you could you can do this stuff early, so you’re prepared for the worst parts coming to the end and just realize it’s a it’s Oh, last moment that I I really screwed up?


Andrew Cross  36:53

Well, it, it’s, um, it is, once you know what that target is to, that’s the key element, right? So you can, you can do a lot in a short period of time it takes to get closer to that number. So if you can fill that gap, but then the next step is to is, you know, once you have the target, and you’re got a plan to go forward to hit that target and sell it, you know, it may take five years. But if you get to that target in one year, you have to sell.

Yeah, that’s, that’s the whole, that’s the success to it, right? Because we’ve already figured out, you know, what, we weren’t gonna want Len will only because if you wet, then we’ll you know, hit that target, maybe in year one of your five year plan, and then go to your five, you may not be where you think you’re gonna be.


Troy Neihaus  37:41

Yeah, you know, the other thing that owners should be thinking about, they need people on their team, beyond an advisor like me, or Aaron, or advisors like you guys, right? I’ll give you a little personal story. I owned a startup company many years ago, and we had developed an app to prevent distracted driving, we didn’t have access to the right network of resources at the time to really help us address critical issues around business strategy around corporate structure, access to financial capital.

And so ultimately, we had to shut the business down, when Apple who had been talking to came out with their own function that was built right into the iPhones called the Do Not Disturb function, you you might know, that was very similar what we had developed the time.

And so that for many years, that bothered me, and of course, the my co owners in the company came to me, I work in centers, I endeavor to create this environment of trusted advisors, like you guys or attorneys or CPAs, or, you know, high net worth. insurance representatives and, and others who can, who can help with all kinds of different facets of not only the business, but their life and helping to prepare them to get from point A to point B where they need to be.

And so you know, Aaron and I have talked about this many times and we’ve built our practice, we essentially act as the financial quarterback in a relationship where we are in a very unique position to early on to offer advice, we’re not charging, it’s all about this relationship, and then acts giving these owners access to a whole host of resources that in many ways can be much more valuable than you know investment services down the line that Aaron and I hope to manage.


Andrew Cross  39:32

Yeah, you know it that’s it. That’s absolutely perfect. Troy I’m glad you shared that because you know, when we go into a situation to where you have a business owner wants to sell his company, the buyers come rolling in the door. And guess what, they’ve got an acquisition team. They have all that they have their financial people, they have their bankers, they have their attorneys, they have their tax advisers, you know, and next thing you know, they’re you’re in the diligence of what uh, you got on the other side of the field. As the seller,


Aaron Marberg  40:02

by the way, that’s a good. That’s not just that. And that’s not dismissive of somebody who might be who an owner might have been working with, like their accountant or their attorney. It’s just that when they get to a transaction, or even or even thinking about one, it’s to their benefit to bring in somebody who’s as expertise in that space, somebody who’s done deals knows how to navigate that knows how to negotiate the finer points if it’s the attorney, right. So yeah, it’s not again, it’s not, you know, dumping on who they’ve been working with, it’s that they should have the right team around them to get that deal done.


Andrew Cross  40:39

Mm hmm. Yeah. Often you have to build that. Yep. You know, it takes time, right? It takes time. Yeah, yep.


Damon Pistulka  40:47

And you guys are like us working with the transactions in and out, you know, through the transaction process. We build up these networks of people that that we’ve worked with, and other deals that we can trust that we know that we can bring people in and give them that advice that they need.

And and that’s it is specialized, as Erin said, I mean, there’s attorneys that are great general business attorneys, but when it comes to to negotiate and the finer points of a purchase and sale agreement, or whatever you’re talking about in a transaction, it’s a much different specialty. And that’s what a lot of people don’t understand through the process is there, there are lawyer specialties there, just like many other practices, that that really can benefit them at the right time that people like us.

Talk to you all the time. Yeah. Well, you know, guys, it’s been awesome getting to talk to you about this. And I want to thank everyone for listening today, what we’re going to do is we’re going to go back to the tables for a little bit talk for just a minute. We you know, our schedule now is we want to let let have this conversation, talk with people. So and then we want to want to be able to get people back. So there for their next appointment. They’re going to be ready to go on that. But before we leave, what’s the best way to get a hold of you guys?


Troy Neihaus  42:09

Call me not Aaron.


Aaron Marberg  42:13

On Twitter,


Troy Neihaus  42:14

on Twitter. All right. Oh, yeah. You could just honestly, you just go to Bernstein calm, you can talks about our practices. They can call you, David and or Andrew and you guys know how to get ahold of


Damon Pistulka  42:35

us? Yeah, we can get a hold of YouTube,


Aaron Marberg  42:37

or LinkedIn, our contact info is on there as well. So you can always track us down that way as well.


Damon Pistulka  42:43

Okay. Okay. Well, Andrew, what are your parting thoughts here?


Andrew Cross  42:48

Hey, this is great, guys. You know, I want to just I know, we talked a lot, and this seems all this doesn’t apply to me. You know, this is really big businesses that are not, you know, but, you know, the fundamentals. And in the message, you know, to plan that far ahead, applies to every size business, even if you’re a solopreneur. To think about that, too. So and it’s always good, I think good for us to, you know, exit your way to bring some of the stuff the big guys do down to street level where, you know, the small business owner can take advantage of too, so because it’s there, it’s all available, but you just gotta ask for it in advance.


Damon Pistulka  43:29

Yeah, yep. Good stuff, I gotta tell you guys, you know, I’ve been through your core value work with with clients in the past, and that is one of the most valuable that I’ve seen, for for business owners contemplating an exit, you know, really understanding what that number is and how they’re going to live after because it gives them the confidence that if they do the transaction for for that amount, or greater, you know, they know what they’re gonna they have that confidence in, I’m going to be able to be,

I’m going to be able to provide for the next stage in my life. And that is that when you look at that across the spectrum of why people you know, stay in their business too long or don’t sell, I think is a big, a big thing to to hurdle to get over. Excuse me.


Troy Neihaus  44:23

Yeah, you know, I’ll add one last thing. You guys have a national practice, right. And so yeah, I know you got you’ve got listeners on here, maybe following on LinkedIn that could be on the East Coast or somewhere else not in the Pacific Northwest, where we’re at. Bernstein is an that is a global firm, right. And we’ve got 20 offices all throughout the US and the major metropolitan cities and so you know, whether it’s me or Aaron, we’ve got a colleague somewhere else that can you know, work with someone if they want someone more local to where that where they’re at, but just get a hold of you get



If that person


Damon Pistulka  45:02

yeah and that is the one the one benefit of by you guys being a global firm like you are and it is easy to find somebody close that they can work with so


Aaron Marberg  45:12

and it’s actually nice because we also were incredibly vertical organ that like we we don’t compete with each other across our work we work we partner with our colleagues all the time all across the country we I mean we know people on a first name basis and I think every single office around this country so yeah, it’s it’s it’s easy for us to help people get connected with the right folks in another region if we need to do that,


Andrew Cross  45:35

unlike those other guys



are gonna say that but


Troy Neihaus  45:40

like you said that


Damon Pistulka  45:45

thank you so much for being here today. Guys, thanks for sharing some information about this about you know that pre exit wealth planning, the importance of doing it the importance of getting getting added early, you know, some of the stuff you talked about five plus years early, just let that sink in.

And those business owners out there, Lincoln five, less than five plus years early, you need to be before a transaction to get some of this stuff to go through and help to mitigate some of the tax consequences and get the real benefits. So we’re out of here for today. We’ll be back in a couple of weeks on another topic at the roundtable. I want to thank everyone for joining us. We’re going to go off here on LinkedIn and go back to the stage on remote.


Aaron Marberg  46:27

Hey guys.


Damon Pistulka  46:29

All right. Okay, thanks so much, everyone. Thanks

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