Case Study: Business Consulting

Business Ownership Transition Allows Couple to Move to the Farm and Plan for Retirement

Client Profile: The Johnsons

• Married Couple
• Age mid 40s
• Empty Nesters  (one adult child out of the house)
• Business Owners

The Johnsons hired Lynch Financial Advisors to help them secure their financial independence while preparing for retirement.  The retirement issue led to discussions about ownership in the company the Johnsons had worked at for more than 20 years.  They had a minor share in the business, however it was unclear how or if ownership would transfer to them if the current owners were to pass away.  Our clients thought that the owners would simply give them the business, because it was like a “family,” and because they had done most of the work to build the business.

We worked with the Johnsons to get more information and to ensure there was a corporate document stating what would happen in the case of a death of any of the owners.  After further digging, we learned that the owners were not planning to give up their portion of the business.  To the contrary, they wanted their share to be purchased for a seven figure number!  While this came as a shock to the Johnsons, it inspired them to take action.

We brought in a CPA who specializes in company valuations and began negotiations between the Johnsons and the company owners.  As with all negotiations, discussions became tense at times, but a price and terms were finally agreed upon.  It took a lot of work for all parties involved, and a lot of time in Excel spreadsheets to come up with a fair valuation for the company, but after three years, a purchase agreement was signed.

Since then, the Johnsons have doubled sales, as well as the value of their company.  Now they are planning for next leg of their journey… retirement.  This entails identifying and compensating key employees who can eventually take over operations and reviewing the company’s financials to find new ways to increase profits. It also includes establishing a long-term buy-out solution that won’t transfer too much of the business to the employees, ensuring the Johnsons are on track to reach their retirement objectives.   Today, the Johnsons are living exactly where they want to – out in the country – and they are enjoying working together to grow their business until they are ready to retire.