When working with entrepreneurial clients, planner Seth Streeter, co-founder of Mission Wealth Management in Santa Barbara, Calif., finds that most struggle with two key challenges.
Many of these clients are handcuffed to their companies and stuck working in their businesses and not on them. This means they are putting out fires every day and micro-managing their firms, but not thinking about larger strategic issues.
In addition, many haven’t taken the time to think sufficiently about succession planning, which means the owner hasn’t thought about how to harvest the wealth he has built up in the business.
That’s where Streeter and others like him come in. A CFP, Streeter has developed a specialty in working with business-owner clients. One of Streeter’s clients came to him after building a well-known fashion and apparel firm.
“He had a great lifestyle,” Streeter says. “The business was thriving and he was a superstar -– and then he got cancer.” The illness provided a wake-up call that the entrepreneur heeded by seeking out financial planning. Streeter help him prioritize the most important tasks in dealing with this new challenge.
“I helped arrange a sale [of a portion of the company] to a key employee group,” Streeter says. “We ended up helping them restructure some of their debt in the company and arrange an employee buyout of a chunk of the equity to secure liquidity for the family to pay down their personal debts and to create an investment surplus.”
The complex planning process took two years. Sadly, when it was completed, the client’s illness had taken a turn for the worse, and he died soon after. Although crushed by the loss, the client’s family and business would have been much worse off had the late founder not devoted time to addressing those two challenges common to business owners.
The newly empowered employee group ran the company well through his final months and continues to do so today. Streeter also arranged to restructure the debt on the company’s headquarters, which the founder owned. “This provided nice income for his [widow],” the planner says. “We were also able to set aside liquidity so that he could fund some goals he had for his children, including paying for his daughter’s marriage.”
A dividend for Streeter’s firm is that the business owner’s wife has continued as a customer. “The fact that we knew her husband and that he trusted us goes a long way with her,” Streeter says.