Selling or recapitalizing your business may dramatically increase your level of wealth, which allows you new opportunities. When through a liquidity event, it is vital to consider your new financial reality. Whether you are retiring, shifting your focus to philanthropic endeavors, or investing in a new venture, you will want to have a long-term plan in place.

The financial modeling around your transaction aims to estimate the net after-tax proceeds you will receive from the transaction. As you approach a liquidity event, your wealth advisor will refine the terms of the transaction and more accurately estimate the net proceeds amount. This can then be used to address your primary planning objectives.

In many situations, your wealth advisor may consider financial independence as a primary goal, regardless of whether you will continue to work or earn income. You may want to understand how much capital would be needed to recreate a paycheck while factoring in the impact of inflation, income taxes, and market volatility. After understanding your current lifestyle spending requirements, your wealth advisor can solve for this “lifestyle capital” with a high degree of confidence. This process will then reveal if additional capital may be available for other planning objectives, including gifting to family members, earmarking funds for future business investments, and charitable giving.

What Are You Looking to Accomplish With Your Wealth?

$30 Million Net Proceeds
$10 Million
$15 Million
Private Capital
$5 Million

Here, we illustrate a transaction that results in $30 million in net after-tax proceeds. This founder had a lifestyle spending objective of approximately $600,000 after tax. Solving for an inflation-adjusted spending goal, we identified approximately $15 million that would be needed for a sustainable income stream. The excess proceeds could be set aside for two additional goals, funding wealth transfer trusts for children and allocating funds for future business ventures and direct investments.

Liquidity events can be transformative to your financial situation, as you shift from an opaque and illiquid balance sheet to one that is liquid, very transparent, and potentially volatile. Choosing the right wealth advisor to help you manage your personal wealth is the first step in taking a highly sophisticated and comprehensive view of your total wealth profile. Contact a William Blair advisor and start the conversation today.

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