Creating value today to pursue
a successful transition tomorrow

As a business owner, you face important decisions every day about how to drive long-term value and the best way to maximize your largest asset—your business. UBS client research tells us some important truths:

  • On average, non-financial assets account for nearly two-thirds of business owners’ total assets.1
  • 65% of owners are not familiar with all of their exit options
  • 83% of owners have no written plan, while 48% have done no planning at all
  • Even for owners who decide to pursue a sale… 80% of those below $50mm in revenue and 65% of those above $50mm in annual revenue are unsuccessful.

At Demarco & Associates We understand the competing priorities that most business owners are juggling. As a Financial Advisor with the Certified Exit Planning Advisor (CEPA) designation, Rich DeMarco can help you align your business, personal and financial needs well in advance of a sale or succession.

His experience working with dental practice owners and energy company leaders has given Rich a clear insight into the need to build business value so that you can maximize your options and transition when you are ready. Rich can advise you on all of your exit options. He collaborates with a seasoned, multidisciplinary team of professionals to support your continued success. In addition, UBS offers a network of boutique investment bank partners who can help with a full or partial sale, as well as a vast array of investors and lenders to assist with capital raises for growth and expansion.

The full life-cycle of your business

Planning your life‘s vision

All business owners, planning an exit or not, should start by going through a deliberate process to understand the outcomes that are important to the owner and his or her family. We can't plan and invest appropriately without first identifying the desired outcomes.

Five simple questions can provide an entry point to this conversation:

1. What do you want to accomplish in your life?

2. Who are the people that matter most to you?

3. What do you want your legacy to be?

4. What are your main concerns?

Ultimately, those four questions lead to a fifth:

5. How do you plan to achieve your life's vision?

We don‘t expect everyone to be able to answer all (or any) of these questions at first glance. These questions deserve and require careful, deliberate thought. We find that business owners, in particular, tend to focus so closely on running and growing their business that some have never put much time into these issues.

41% of business owners expect to exit their business in the next five years

Key Considerations in Business Transition Planning

Planning for a strategic exit

The sale price: Is it enough?

One of the first considerations most business owners focus on when they start considering an exit is whether or not the proceeds will be suitable to fund their future spending goals. The analysis required for calculating this issue can be a bit technical but extraordinarily clarifying during the process of exiting a business. In some cases, we've found clients could sell their business earlier than they expected. In others, clients have decided to postpone the sale and focus on making certain changes to increase the value of the business.

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. The proceeds of the transaction need to at least equal the net present value of future spending for the family. If future spending objectives exceed the post-sale asset base, the family will face a severe risk of running out of money at some point in the future.

If the expected transaction value falls short, there are a few viable options to consider:

  • Explore an alternative transition type that could bring a higher valuation
  • Postpone the sale and implement a plan to enhance the value of the business
  • Reduce targeted future spending to bring it in line with postliquidity event resources

59% of business owners plan to retire when asked:
“What are your plans post-exit?“

Resources for business owners

Post-sale considerations

Following the sale of a business, families need to transition from thinking like business owners to thinking like long-term asset managers. Along with that transition come a number of possible challenges. Two 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 wealthy families don't need to invest their assets. They could, in a general sense, hold their assets in cash and never run out of money during their lifetimes. An all-cash strategy reduces the likelihood the fortune will be sustained over multiple generations, and unexpected high inflation presents a specific risk, but most of the time the current generation will be fine with an all-cash strategy.

History has shown that the optimal portfolio lies somewhere in between all-cash and all-equity. A dynamic balance of stability and growth is necessary. Post-sale, families can find that balance by using the Liquidity. Longevity. Legacy. framework to develop an asset allocation strategy that fits their needs and objectives. The overall sizing of each strategy drives the top-level asset allocation, taking into account the various, sometime conflicting objectives, of income, long-term growth, and multi-generational sustainability.

43% of business owners plan to travel when asked:
“What are your plans post-exit?“

Case study: Helping prepare for life after the sale

Dental practices

Should you acquire a competing dental practice? How can you finance continued growth? What are your options for selling your practice and retiring

As a medical professional, you face complex financial decisions about your practice and your family. We have experience in working with dentists at every stage of their business lifecycle. Rich DeMarco is a member of the Maine Dental Association, a member of the New Hampshire Dental Society and an active contributor to the Association of Retiring Dentists. He can help you design a plan to retire on your own terms and seek to maximize the impact of your liquidity event.

Energy companies

What is the best way to transfer ownership to the next generation? How can you ensure that children who don’t work in the business are treated fairly?

Rich DeMarco is a member of the Energy Marketers Association of New Hampshire, the Maine Energy Marketers Association and the Propane Gas Association of New England (PGANE). Our team knows how to address the concerns that owners of fuel and energy companies face. We can connect you with industry resources and share best practices from our own experience working with other companies.