Case Studies For Business Owners

Every situation is different. Every story is different. That’s the challenge — and the thrill. Here are three hypothetical* stories about three business owners and how we might help them strategize a comfortable future.

  1. Selling the business to family members 
  2. Converting the business into a prosperous retirement
  3. An innovative approach to transferring ownership

1. Selling the business to family members

The client built a family dry cleaning business with his dad. Several decades later, the business had blossomed into a 70-person operation with multiple North Bay locations and significant real estate holdings.

Then came the moment to look at his future. In this situation, we would analyze a range of scenarios and ask some fundamental questions. What was his family situation? What kind of life does he want to live? How much income does he need to live that lifestyle?

A primary component of the strategy in this situation came in the form of a charitable remainder trust. The client sold a 12- unit apartment building that took a lot of his time to manage and moved to a luxury apartment in a high-value neighborhood. He ended up with a great view and no management hassles.

He also was able to sell his dry cleaning business to his daughter at an affordable price. While the daughter got the business, the client got major equity out of the business and doubled his income.

2. Converting the business into a prosperous retirement

In 1983, this client bought a bankrupt construction supply company. He cut out the middleman and started selling direct to contractors. The business took off and expanded around the Bay, especially after the Loma Prieta earthquake in 1989 and resulting construction boom.

An ongoing concern of the client was having enough capital to retire comfortably. In 1998, out of the blue, he received a generous offer to buy his business. Working in concert with his CPA, his attorney and a business acquisition expert, we would help him dissect the offer and identify the pros and cons of selling.

After he decided to sell, we would then take him through the process and structure a tax-favorable deal. He stayed on with his company for several years as a consultant. Suddenly, however, our client found himself with a lot more free time and a lot more money.

From there, we would focus our attention to developing an investment strategy for him.  Now he’s retired, living comfortably and free of his concerns about outliving his capital.

3. An innovative approach to transferring ownership

In some situations with our experience with business owners, we begin working with them as a sounding board on tax and estate planning, spearheading a team that included estate and business employment attorneys. In this scenario, we guide clients  through financial planning and help invest liquid assets to support long-term goals.

This client owns a commercial flooring business focused on working with REITs, realtors and developers. The business has operations in San Jose, the East Bay and Sacramento. When it became too large and complex for the managerial skills of our client, he decided to look for a buyer.

In this example, we would bring in a consultant to help advise on the sale of the business. He cleaned up the balance sheet, put people and procedures in place, and generally made the business more attractive to potential buyers. We would help bring in another consultant to identify the right type of buyers.

If a first deal fall through, we would help facilitate a new and innovative one. In the new arrangement, the client and the prospective buyer would form a staged partnership. Investors will put in money and the client will receive a percentage of the growth over several years.

The new deal is structured to ensure a smooth transition and the continued financial health of the business. By doing so, it is designed to maximize the value of the client’s equity as he transitions out of the business into the next phase of his life.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future  performance of any specific investment, investment strategy, or product (including  the  investments  and/or  investment  strategies  recommended  or  undertaken by Private Ocean,  LLC [“Private  Ocean”]),  or any  non-investment  related  content,  made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated  historical  performance  level(s),  be  suitable  for  your  portfolio  or  individual situation,  or  prove  successful.  Due  to various  factors,  including  changing  market conditions  and/or  applicable  laws,  the  content  may  no  longer  be  reflective  of  current opinions  or  positions.   Moreover,  you  should  not  assume  that  any  discussion  or information  contained  in  this  blog  serves  as  the  receipt  of,  or  as  a  substitute  for, personalized investment advice from Private Ocean.  Please remember that if you are a Private Ocean client, it remains your responsibility to advise Private Ocean, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/ evaluating/ revising our previous recommendations and/or services, or  if  you  would  like  to  impose,  add,  or  to  modify  any  reasonable  restrictions  to  our investment advisory services. To the extent that a reader has any questions regarding the applicability of any  specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Private Ocean is  neither  a  law  firm  nor  a  certified  public  accounting  firm  and  no  portion  of  the  blog content should be construed as legal or accounting advice. A copy of the Private Ocean’s current written disclosure Brochure discussing our advisory services and fees is available for  review  upon  requestor  at www.privateocean.com. Please note: Private  Ocean does not  make  any representations  or  warranties  as  to  the  accuracy,  timeliness,  suitability, completeness,  or  relevance  of  any  information  prepared  by  any  unaffiliated  third  party, whether  linked  to Private  Ocean’s web  site  or blog  or  incorporated  herein,  and  takes  no responsibility  for any  such  content. All  such  information  is provided  solely  for convenience  purposes  only  and  all  users  thereof  should  be  guided  accordingly. Please also note: If  you  are  a Private  Ocean client, please  advise  us if  you  have  not  been receiving account statements (at least quarterly) from the account custodian.

*Case studies are hypothetical and not based on real clients.