When Mark came to us, he had spent years focused on growing his business and handling the daily challenges that come with running a company. Leaving the business hadn’t been on his mind thus the company’s structure was still based on advice he received when he first started.
Now, thinking about retiring early to spend more time on the golf course, Mark faced uncertainty. He had never sold a business before, didn’t know where to start, and wasn’t sure if early retirement was even possible.
The Challenge
Mark owned all shares of his operating company through a holding company. Without a clear exit strategy or updated corporate structure, he worried about how to maximize value and protect his personal financial future. Advice from multiple professionals left him feeling overwhelmed and unsure.
He needed answers to crucial questions:
- What is my business really worth, including intangible value?
- How can I reduce taxes and keep more of what I earned?
- How do different sale structures and earn-out options affect my retirement plan?
- Can I take full advantage of the Lifetime Capital Gains Exemption?
The Approach
We began by stepping back and understanding Mark’s full picture: his business, his personal goals, and his legacy. After defining what success looked like for him, we designed a plan to address all angles.
- Realistic Business Valuation
We arranged a valuation that included intangible assets like client relationships and brand equity. The valuation showed a fair market value of $8 million (notably higher than prior estimates that overlooked these factors). - Financial Planning with Scenarios
We built a financial plan around multiple sale price scenarios, from a conservative $6 million to an optimistic $9 million, showing the impact on retirement income, taxes, and estate value. This gave Mark the clarity to understand what each outcome meant for his future. - Share Freeze and New Class of Shares
We implemented a share freeze, locking in the current value of $5 million on his existing shares and issuing a new class of shares to capture future growth. This setup preserved the potential to use the Lifetime Capital Gains Exemption on up to $3 million of gains on the new shares. By doing this, Mark was able to save approximately $1.2 million in taxes he would have otherwise paid on the sale of those shares. - Establishing a Family Trust
To improve tax efficiency and estate flexibility, we created a family trust to hold the new shares. This allowed income to be distributed among family members, lowering overall taxes and facilitating long-term wealth preservation. - Collaboration with the M&A Firm
Throughout the sale process, we worked closely with the M&A advisors. We modeled how different deal structures, including earn-out arrangements that could pay out over several years, would affect Mark’s financial plan. This coordination gave him confidence during negotiations knowing how each offer aligned with his retirement and estate goals.
The Outcome
Mark moved from uncertainty to control, with a clear understanding of his business’s value and a tax-smart plan tailored to his retirement dreams.
Key Results
- A comprehensive valuation of $8 million including intangible assets
- A flexible financial plan showing retirement income ranging from $150,000 to $250,000 annually depending on sale price
- A share freeze preserving $5 million in value and access to Lifetime Capital Gains Exemption on $3 million of future growth, saving Mark approximately $1.2 million in taxes
- A family trust enabling tax-efficient income splitting and estate planning
- Confident negotiations with M&A advisors, factoring earn-out scenarios over three years totaling $1.5 million
- A coordinated team delivering one seamless strategy
