May 6, 2021

Thinking About Selling Your Business?

By Jim Bruner, CFP®, MPAS®, CPWA®, CEPA®

This past year saw the closure of several businesses in Coachella Valley and the sales of others. Some, such as The Miramonte Resort and Spa in Indian Wells (bought by Lowe), and Riviera Palm Springs (as Margaritaville Resort Palm Springs), are reopening under their new owners.

While the pandemic has seen some businesses close or be forced into a sale, other industries have done well despite it. One local business broker I spoke with suggests an unintended benefit of these times may be the influx of individuals receiving buyouts and early retirement, who are now looking to acquire businesses of their own as they move into the valley.

Even if retirement is not in your immediate future, if you are a business owner, gaining a sense of where you are with your business and where you want to be in the future is important. Finding time to focus on what matters most can be difficult, given the rapidly changing business landscape and the attention required not only to remain relevant but to succeed through the late and post pandemic cycles. However, we can’t plan and invest appropriately without first identifying the desired outcomes.

A good place to start is by taking the time to better understand what you want. Following are five simple, yet important, questions to get the ball rolling:

  • What do you want to accomplish in your life?
  • Who are the people that matter most to you?
  • What do you want your legacy to be?
  • What are your main concerns?
  • How do you plan to achieve your life’s vision?

You may not be able to answer all of these at first glance, but each deserves careful thought and consideration. The answers of course will also change over time as priorities shift. In any case, it is important to align your values with your intended future outcomes in mind.

The information that emerges from this identification process can be invaluable in effectively managing business assets pre-sale, structuring the sale optimally, and developing a strategy for the proceeds from and life after the business.

Now let’s flash forward to the day you decide to sell your business.

Deciding to sell your business

Selling a business is a complex venture that involves several considerations. We believe that financial planning leads to better investment decisions and a better business transition planning process. Yet, even with a “plan for a plan,” you will need to make decisions continually during the sale as you negotiate the various stages.

One of the first considerations is whether the proceeds of the business will suffice to fund future spending needs. Calculating this issue can be a bit technical but extraordinarily clarifying.

In some cases, clients are able to sell their businesses sooner than expected. In others, they may decide to postpone the sale and focus on making changes to increase the value of the business.

As an example, we were hired to do a financial plan for a construction company client in the Inland Empire, who wanted to assess how much he had to realize from the sale of his business on a net basis to not run out of money over his lifetime. Working with the client, we did the planning, determined that figure, and discussed transition options for the business. Reviewing options led to an opportunity to implement an employee stock ownership plan (ESOP) for the transition of the business. This enabled the client’s brother, two daughters and their husbands, who all worked in the business, to continue the business. The planning process also allowed us to help the client with retirement asset decisions as well as life insurance and long-term care optimization. And it helped the client to know where he stood financially and better plan for what he wanted in the near and long-term.

Almost all families have a minimum price at which it is practical to sell their business. That floor represents the asset pool needed to pay for their future lifetime spending. Doing financial planning prior to making a decision on the business transition is important so that options can be fully assessed to plan for the future. It is better to find out early if the business sale may not generate the assets needed to maintain one’s lifestyle rather than proceeding down the road of negotiations to sell and finding out when it is too late.

As a positive example of this, we were introduced to electrical contractors by their CPA as they were starting to consider options for selling their business. We did the financial planning for the two owners and determined they were likely in a very good position to sell the business and remain solvent on a personal financial basis. But where we were really able to add value was in helping them work through the process of determining the best way to sell the business. They had been pursuing an ESOP but determined that wasn’t a good fit for them. We did an assessment of their business and introduced them to a few investment banks on UBS’s boutique investment banking that could provide options to help them transition their business. Today, talks with one of the investment banks are ongoing.

When, how, to whom, and for how much your business might sell are all important to consider. But, as many of these can change or be difficult to assess, perhaps the most important thing to identify from a technical standpoint is whether proceeds of the business might equal the net present value of future family spending. If this projected spending exceeds the post-sale asset base, the family risks running out of money at some point.

If the expected transaction value falls short of your anticipated needs, there are a few options to consider. The business owner(s) could:

  1. Explore an alternative transition type that might obtain a higher sale price
  2. Postpone the sale of the business and put in place a plan to increase its value
  3. Look for opportunities to bring targeted spending in line with the resources the sale nets

Ultimately, your decision should harmonize your goals and personal needs.

But financial planning should not end after the sale. What should happen after you sell your business?

Life after the business

Life after selling your business can be as daunting as it is exciting. Families need to transition from thinking like business owners to thinking like long-term asset managers. Along with that transition comes a number of potential challenges.

Two of these are investment specific:

  1. Selecting a prudent, sustainable asset allocation that best meets the family’s needs, and
  2. Timing the implementation in a responsible way

Many business owners don’t need to invest their assets. Some could hold them in cash and never run out of money in their lifetimes. However, while the current generation may be fine with an all-cash strategy, staying in liquid assets can reduce the sustainability that future generations might benefit from the wealth that has been amassed. Additionally, unexpected high inflation could present a specific risk.

History provides examples of wealth being depleted in just a few generations by the combined effects of high spending, budgetary inflexibility and one or more bear markets. Approximately 70% of businesses don’t make it through to the second generation, according to The Family Business Institute.

The optimal portfolio allocation, therefore, often lies somewhere between an all-cash and all-equity strategy. A dynamic balance of stability and growth can often offer the best outcome. The overall sizing of it determines the top-level asset allocation, taking into account the various, and sometimes conflicting objectives of income, long-term growth and multi-generational sustainability.

After the sale of the business, families can find balance by continuing to assess their immediate and future cash needs, as well as desire to give back, and develop an asset allocation strategy suited to their objectives. Families should consider:

  • Immediate cash flow needs—including short-term expenses (such as general living and entertainment expenses, taxes, etc.) and any other expected income (such as Social Security and/or pension income) over the next three years.
  • Future needs—any assets, retirement needs, healthcare and long-term care expenses they and their family will need, along with any potential earnings they may receive, four years from now to throughout their lifetimes.
  • Giving back—their desire and ability to give back, to their family, organizations in which they believe, or passionate causes, now and in the future.

With proper planning, exiting from a business can often be seen as a swap out of the business position into liquid assets. It can also:

  • Fulfill the long-term target value to provide for the living expenses of the family; and
  • Often result in some of the legacy assets being used by the family for gifting or philanthropic purposes.

Every family and all business are different, and the situation can also change unexpectedly, which is why it is best to plan early for the sale of your business with your financial advisor.

Photo credit: UBS


Jim Bruner, CFP®, MPAS®, CPWA®, CEPA®, is a financial advisor with UBS Financial Services Inc. at UBS in Indian Wells at 75 280 Highway 111, with over 30 years in the financial services industry. He joined UBS in 2007 and has helped to build a comprehensive wealth management practice, serving professionals, entrepreneurs, retirees and their families locally with financial planning at its core. He is also on the board of the Palm Springs International Film Festival and a member of the Childhelp Palm Desert chapter. He has taught corporate finance at Cal State San Bernardino’s Palm Desert location. 

 This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ in the U.S. For designation disclosures visit

The example described was provided for illustrative purposes only and may not be representative of the experience of all clients. There is no guarantee of the future success of any of the strategies discussed.

As a firm providing wealth management services to clients, UBS Financial Services Inc. offers investment advisory services in its capacity as an SEC-registered investment adviser and brokerage services in its capacity as an SEC-registered broker-dealer. Investment advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate arrangements. It is important that clients understand the ways in which we conduct business, that they carefully read the agreements and disclosures that we provide to them about the products or services we offer. For more information, please review the PDF document at /relationshipsummary.

UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA. Member SIPC.

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