Business owners will get a chance to hear insights from private bankers on selling or otherwise transitioning out of a company, getting a window into what may be the biggest decision a business owner makes – other than whether to start a company.
Peapack Private Bank & Trust, a century-old bank specializing in serving affluent individuals and middle market businesses, is presenting “Mind Your Business and Legacy: Smart Steps for Business Owners.”
Attendees can join business owners and senior leaders from Peapack Private for a breakfast briefing focused on protecting what they’ve built, and planning business transitions, including practical guidance, executive strategy and networking.
The event, focusing on personal and business planning strategies, is Thursday, January 22, with registration from 8:00 – 8:30 a.m. and breakfast and presentations from 8:30 to 10:00 a.m., at Mutual of America, 35th Floor, 320 Park Ave., 50th-51st Streets, in Manhattan. To register for this free event, email sgroff@peapackprivate.com.
“Most business owners want to transition their business, maybe now or in the future. Helping them make that successful from a personal and business perspective is what this seminar is about,” said Peapack Private Senior Managing Director Becky Wuest Creavin. “We’ll talk about all the aspects that owning and transitioning a business involves, the economics, the emotions, your company, family, identity, legacy.”
Resources not regrets
The idea is to help businesspeople become informed and prepared for a process that, ideally, should take place over years, whether or not they are considering this now.
“Seventy-five % of business owners regret selling their business a year after they sell it,” said Rob Melle, Peapack Private senior managing director, senior financial advisor, and chartered retirement planning counselor. “So much of their identity was wrapped up in this business that they are unhappy. A transition should be done after a great deal of preparation and planning.”
Peapack Private, a boutique private bank, provides complimentary planning and some services for fees by their experts. Founded over 100 years ago in an affluent community in New Jersey, the private bank expanded into New York City, bringing on bankers from Signature and First Republic, expanding in Manhattan at 300 Park Avenue, across from the Waldorf, and in Garden City and Melville on Long Island.
“The timing of selling your business depends on several factors. One is your personal goals,” said Ray Radigan, Peapack Private senior managing director, wealth advisor, a trust and estate attorney with a specialty in trust planning. “The second is your market.”
Even when you decide to sell, different buyers lead to various processes and outcomes. “You could sell to employees, to private equity, or another company in your space. And it doesn’t have to be a sale,” said Matthew Luczyk, senior vice president, head of corporate advisory at Peapack Private Investment Banking, a subsidiary of Peapack Private. “You could transition to your (adult) children.”
Some owners want to remain involved, while others want a clean exit, decisions that should impact whom you sell to as well as how. Melle said sales to third parties, such as private equity firms or strategic buyers, can provide clean exits.
“You can transition to management and slowly step back,” Luczyk said. “An ESOP (employee stock ownership plan) is a way to do that or transition to family that allows you to still be involved.”
Process and preparation
“The first step,” Creavin said, “is to understand and verbalize goals and objectives, determining passions, dreams and goals, and then figure out your costs. We have a planning group that can run analysis on how much it costs to do things you want to do when you retire,” she continued. “We figure out how much you have now and if that’s enough to help you meet your dreams.”
They also look at tax planning, which can be best implemented over several years. Owners can use tools such as QSBS (qualified small business stock), a gift from the federal government that eliminates taxes on the first $15 million of capital gains if you meet certain requirements.
“That’s important,” Creavin added. “You might decide you want to sell your business next year. Then you can’t plan to be QSBS eligible if you are not already.”
Estate planning
“For estate planning,” Melle said, “lower valuations can be beneficial for gifts, so gifting early can be best. As the business grows, the value grows.” He continued, “The best time to plan to minimize estate taxes is to do it early. That can be a strategy in estate planning.”
Charitable trusts and foundations, which can bring tax benefits, as well as contribute to donor-advised funds, are options. “We help clients think through those strategies,” Radigan said. “We don’t want to make clients experts. We can do that for them, but we want them to see the whole picture.”
While earnouts can be appealing, they may be riskier than owners realize, involving uncertainty. “More than half of earnouts never get realized,” Creavin said.
Foundations for the future
Different people have different goals, which can impact price, process and other aspects of the outcome.
“It depends on your goal as a business owner,” Luczyk said. “We can help you walk through what’s important to you and the best ways to do that and the most tax efficient way to accomplish those goals. It is not what you ultimately sell your business for, it is what you keep.”
Business people should consider not only their business, but their life, happiness and plans, including the money they need and when.
“We want to talk about not only a business plan, but a personal plan,” Creavin added. “What’s your passion? What will move you and make you happy when you’re done with your business and transitioned your business.”
Big purchases like boats, vacation homes and major gifts can be a part of the planning. Look at your budget post-sale, before you close on a sale.
“Whatever your vision is, it takes money,” Radigan said. “Money is the fuel that helps you get there.”
This event covers a wide range of aspects related to transitioning companies and lives during a critical time for the business and its owners.
“This seminar is about helping you have a business plan and a personal plan,” Creavin added. “Both are really important to your success, whatever your success means to you at the end of the day.”
“Mind Your Business and Legacy: Smart Steps for Business Owners,” Thursday, Jan. 22, registration 8:00 – 8:30 a.m. and breakfast and presentations 8:30 -10:00 a.m., at Mutual of America, 35th Floor, 320 Park Ave., 50th-51st Streets, in Manhattan. To register for this free event, email sgroff@peapackprivate.com.
