Successful Exit Planning With Our Personal Exit Advisory Service
Personal Exit Advisory®
Also known as founder incubation. For founders like you who are getting ready for an exit or liquidity event in the near future (0-3 years), we provide you with exit planning early to enhance outcomes, reduce tax impact, and prepare you for your post-exit life. Tailored to each founder’s needs and exit strategy, our service simplifies decisions and seizes opportunities through proactive preparation and advanced planning.
KEYSTONE RECOGNITION
SERVICES
Personal CFO, For You
As your Personal CFO, we help you analyze the factors influencing your exit strategy and its long-term impact on you. We understand how busy you are and we know the factors that can move the needle. Our objective is to provide you with clearer choices, present best practices, save you time, and simplify your decision-making process. As your personal CFO we provide you with
- Financial planning to evaluate opportunities, risks, and align goals to achieve your objectives. We will develop a tailored financial plan based on your current financial status, which will serve as the foundation for predicting future financial outcomes and making informed decisions.
- Interactive financial modeling using our software and tools to help you quantify the financial impact of making certain exit planning decisions, or, for example, how a specific exit valuation or tax strategy would affect you.
- Wealth Management (Light) relationship specifically designed for founders and entrepreneurs like you, where your founder stock is the largest asset on your personal balance sheet. We help you start making good decisions now, which will compound significantly over time. This may or may not include investment management, based on your specific situation.
We save you time, and you gain insights into the items that can significantly impact your financial outcomes in the short and long term. Our role is to guide you through and leverage these items, ensuring you to stay ahead of the curve.
Tax Strategy and Structure
When it comes to exit planning for founders like you, we offer expert advice and hands-on support in understanding, developing, and executing on tax strategies that can maximize your after-tax exit results. Tax strategy and structure is multifaceted, and the amount of tax you ultimately pay will depend on a variety of items such as type of equity owned, how long it’s been held, where you live, potential tax rate changes in the future, and tax planning strategies. Our goal is to help you optimize your exit strategy and outcomes effectively and efficiently. Our key focus areas include
- Advanced QSBS planning to determine eligibility, understand all of the QSBS strategies and opportunities available, and tailor those strategies to your unique situation with the goal to increase the amount of QSBS exclusions available
- State tax strategy to determine and evaluate the impact of moving states/jurisdictions in advance of or after an exit, or whether setting up trusts to accomplish a similar objective makes sense.
- Wealth transfer and estate tax planning in advance of an exit for efficient utilization of the estate tax exemption, maximization of gifting impact, and reduction of lifetime estate tax.
- Long-term investment tax minimization by establishing the appropriate investment vehicles and entities. This can include trusts, tax-deferred accounts, and or family office structure.
- Collaboration with top legal teams offering attractive and creative fee structures. We understand that founders, prior to an exit, can have tight budgets. That’s why we have partnered with top-tier law firms who, like us, understand this and are willing to accept less upfront fees.
We provide you with a cost-effective solution to help you save on tax associated with your exit, and position you to save on lifetime tax and on an ongoing basis. Our role is to provide you with expert advice and a customized tax strategy that evolves with your changing opportunities.
Liquidity Guidance and Strategy
Part of the process when implementing an exit strategy for founders is to determine the best source of liquidity, whether it’s before an exit, part of an exit, such as an earnout, or evaluation of the deal itself. It’s our job to help you evaluate each liquidity source or opportunity so that you have confidence and clarity and you know you are getting the best deal based on the opportunities in front of you. Our support includes strategic planning for various liquidity sources, including
- Evaluation of Exits, Earnouts, Mergers, Acquires, IPOs any many other types of exits to ensure you know exactly what this means to you financially, we will model out each scenario so you can make the best decision.
- Share sales/tenders are common for founders and often arise around a funding round. We assist founders in deciding whether and how many shares to sell.
- Guidance on concentrated stock or IPO stock is crucial when your company is acquired with stock (public or private), raising the question of how many shares you should sell versus retain, and the optimal strategy for execution.
- Lending on private shares can be a pathway to access liquidity. We will advise you on when this approach may make sense, and can assist you through the process from initial evaluation to execution.
- For your home purchase needs, we will assist you in evaluating various mortgage options, determining the most suitable choice, and guiding you through the execution and real estate purchase process.
We offer guidance, diligence, and customization to ensure that when you access liquidity through an exit, financing, or secondary sale, your decisions will be informed and made with confidence.
Deal Strategy
Part of exit planning is to ensure you have a clear understanding when considering a deal or LOI, and how it applies to you personally. We’ll help you evaluate various options and model probabilities, provide negotiation data points, facilitate introductions, collaborate on legal aspects, and optimize compensation packages.
- Evaluating multiple LOIs and deal options, and modeling the probability of successful earnouts if applicable, allows you to fully understand all financial aspects, including both risks and opportunities.
- Offering data points to help in deal negotiations that could significantly impact you individually. These may include adjustments for tax advantages, vesting schedules, and choices between cash and equity, among others.
- Facilitating introductions and collaborating with specialty legal counsel to negotiate terms such as NDA, exclusivity, and non-compete agreements. This often comes into play when a founder is required to remain on board for a specific time period to achieve earnouts, ensure a smooth company handover and complete a successful deal.
- Optimizing compensation packages is typically part of the deal negotiation and can be used to increase your personal deal value, assuming that some of the more tax-favorable deal options have been maximized. Factors such as salary, performance and/or timeline bonuses, RSUs, and other items are taken into consideration.
We personally look out for you and work alongside you to ensure that your exit is optimized and successful, considering the opportunities at hand so that you can focus on getting the deal done. Our goal is to help you make the necessary moves so that you feel nothing was left on the table personally.
Entity, Account, and Strategy Implementation
We ensure you are prepared and equipped before a deal is finalized. This ensures that your cash operations, investment strategies, and asset allocation are coordinated and planned in advance. We help you establish this personal infrastructure so you won’t feel pressured to make hasty personal financial decisions, rushed, or paralyzed once you receive the proceeds from your deal.
- We help facilitate the opening of cash accounts, brokerage accounts, trust accounts, retirement accounts, partnerships, charitable vehicles among others.
- Ensuring the safety of your assets is a matter we take very seriously. We are committed to helping you grasp the protection of your assets and provide advice on best practices on custodians, account security, and account insurance.
- Core estate planning documents are crucial to have and may include items such as living trusts, medical proxy, childcare guidelines, living wills, and instructions for your loved ones. These documents ensure that if something happens to you, your wishes are carried out, and the burden on your loved ones is minimized. It is equally important that these are coordinated with any other planning, such as trust planning, that has been done. We will help quarterback this process for you.
- We help manage stock vesting schedules, share transfers, and follow company-specific stock selling procedures. This is particularly important if your company is acquired for stock in a larger public company. There are typically SEC and company-specific regulations on when you can and cannot sell stock, as well as vesting schedules for when you receive stock payouts.
Putting the right structure and strategy in place in advance keeps you organized, in control, and positions you best for the next chapter of your post-exit life.
Transition to Full Wealth Management Relationship
We support you throughout and beyond your exit. This transition to our full service Wealth Management relationship is specifically designed for founders and entrepreneurs who acquire significant assets post-exit. With a new horizon comes new opportunities and new risks. Our objective is to lead you and your family, offering expert guidance and execution on investment, financial organization, financial planning, tax optimization, and risk mitigation. Think of us now as your full service Wealth Manager.
- Now that this once-abstract concept of an exit has materialized into reality, we will conduct post-exit financial planning to compare your deal outcome with your pre-exit expectations, ensuring alignment with personal and familial aspirations, and making necessary adjustments. Structures, plans, and tax strategies are then tailored accordingly.
- Implementing best practices in wealth management, including structuring, setup, creating investment policy statements, asset allocation, alternative investment strategies, and investment execution, aligns your family’s goals and aspirations with your investment strategy’s execution.
- If your exit is significant enough to warrant a Family Office for increased administrative support and organization, we will offer guidance on best practices.
As life evolves, so do the opportunities that come your way. We’re here to help optimize tax, financial planning, and investing, while also ensuring you mitigate risks effectively. It’s like turning the page to a fresh chapter in the same book. We understand where you’re starting from and the journey that brought you here. Just as life changes, so does your financial roadmap. Count on us to grow alongside you and stand by your side as your financial partner throughout your journey.
Success Story: Transforming the Founder’s Journey from Pre-Exit to Post-Exit
Meet Alex, a visionary tech founder whose startup caught the eye of a large public corporation. Like many founders, Alex was deeply invested in his company’s day-to-day operations and growth but felt overwhelmed by the complexities of ensuring that he was doing everything possible to optimize his personal exit planning outcome. That’s where our team stepped in, marking the beginning of a long-term partnership.
Pre-Exit Strategies and Support
One year before the acquisition, we worked closely with Alex by acting as a sounding board and ultimately setting up three trusts for his children. This ensured that upon Alex’s exit, he could exclude up to $40 million of his $60 million exit from federal and state taxes. These trusts were customized to reflect Alex and his wife’s wishes to ensure that their children grew up responsibly, with a strong work ethic, and understood the value of money.
When Alex received an LOI about three months before the deal closed, we helped him model out the impact of the exit to clarify his after-tax proceeds and helped him understand the risk of holding a large amount of publicly traded stock We also provided him with negotiation points to optimize the amount of cash vs. stock, vesting, earnouts, bonuses, and timeline for staying at the new company.
We also connected him with an attorney to represent his and his co-founders’ interests during the acquisition, collaborating with his company’s counsel. This specific attorney straddled the two practice groups of corporate and employment law and was paid for by his company. This involved optimizing items such as NDAs, salary, bonuses, exclusivity, and non-compete clauses in their best interest. This was of extra importance to Alex since he did plan to start another company in a couple of years. Our proactive approach to exit planning and optimizing Alex’s compensation package at his new company significantly increased the deal’s value to Alex, addressing both immediate and long-term financial considerations.
Entity, Account, and Strategy Implementation
Prior to the deal closing, we laid the groundwork for Alex’s financial future, establishing a robust personal infrastructure for investment strategies, asset allocation, and cash operations. We prioritized the protection of Alex’s assets, provided comprehensive guidance on estate planning, and discussed the strategy and complexities surrounding concentrated stock, stock vesting, and share transfers. This strategic preparation as part of the exit planning, allowed Alex to transition into their new financial reality post-exit seamlessly.
Transition to Wealth Management Relationship
With the deal successfully closed, our focus shifted to aligning Alex’s and his family’s financial landscape with their life’s next chapter. Through our advanced financial planning, we compared the exit’s outcome and Alex’s new balance sheet to his initial expectations, adjusting strategies to match evolving goals. Our comprehensive wealth management services, including investment policy creation, asset allocation, tax optimization, and an alternative investment program buildout, offered Alex a holistic approach to preserving and growing their newfound wealth while considering his family’s primary concern: ensuring they always had the freedom and flexibility to make work optional, even though Alex planned on starting a new company. Alex felt comfortable with his decisions, strategy, and plan, giving him and his family peace of mind.
Beyond the Exit: A Bright Future
Today, Alex enjoys a well-structured financial life and a long-term investment strategy that supports not only his personal ambitions but also his family’s multi-generational aspirations. Alex has started a new company and appreciates the ability to rely on us for all financial aspects of his family’s life. However, he has taken an interest in venture investing in companies within his industry. We have allocated an appropriate amount of capital dedicated to this, included in his alternative investment program buildout. Enhanced administrative support has been provided to him and his family on the financial front.
Our ongoing long-term partnership stands as a testament to the positive impact of tailored financial guidance and the importance of navigating both pre- and post-exit opportunities, adjusting where necessary as his family’s trusted financial advisor.
Alex’s story showcases our dedication to empowering founders like you throughout their entrepreneurial and financial journeys, highlighting the impactful difference informed, supportive collaboration can bring from pre-exit planning to post-exit wealth management and beyond.
This case study is for illustrative purposes only. Actual results and performance may differ. This case study is not a recommendation of any investment for people with similar circumstances to those depicted. This case study is a hypothetical composite of various client experiences and issues. Any similarities to real individuals or events are purely coincidental.
Frequently Asked Questions
Exit planning is the process of preparing a founder for the eventual sale or transfer of their company. It involves strategies and actions taken to maximize the founder’s net exit outcome. This includes tax strategy, liquidity guidance, asset protection, financial planning, and ensuring that the founder’s personal goals and aspirations are aligned with the exit outcome.
Exit planning is essential because it allows a founder to proactively prepare for the sale or transfer of their company, giving them increased control over the process. By considering all aspects of the exit, including tax implications, asset protection, and personal goals, a founder can position themselves for a successful transition into their next chapter. Without proper exit planning, founders may miss opportunities or overlook important items.
Legal professionals can play a critical role in the exit planning process. However, their expertise may not cover comprehensive financial guidance, strategy, and execution for all opportunities. Collaborating with a team specializing in assisting founders and entrepreneurs, individuals experienced in this field can offer a more holistic approach to exit planning. Our team prides itself on saving clients legal fees by handling much of the planning and education upfront, rather than having lawyers spend hours on it. This approach addresses both immediate and long-term considerations. Additionally, having a trusted advisor support you throughout the process can provide valuable assistance.
Our fees are mostly structured to be compensated after you have an exit through a wealth management relationship. We recognize that before an exit, you may not have significant free cash flows, which is why we consider this relationship a form of founder incubation. This also explains why we are selective when choosing with whom we work. Following your exit, our fee model is based on a percentage of tiered assets under management, ensuring our alignment with your interests. We benefit only when your wealth grows, providing us with additional motivation to work towards a successful exit and to help you optimize your after-tax outcome. Committed to transparency, we will always openly discuss fees with you before proceeding with any services.
We recommend starting the exit planning process when an exit is a likely reality, ideally 0-3 years. Another optimal time to start exit planning is prior to a Series B round. This gives us ample time to review your financial situation, identify gaps or areas for improvement, get you structured, minimize tax, and create a tailored strategy that aligns with your goals. However, we understand that each founder’s situation is unique, and sometimes an exit can happen quicker than anticipated, and we will work with your timeline.
We look for certain criteria before selecting a founder to work with. This ensures that our partnership is successful and aligned with the goals and values of both parties. Our prerequisites include:
- A clear vision and path to an exit, and an exit expectation that you will net at least $20 million pre-tax.
- A willingness to be open, transparent, and proactive in communication.
- An understanding of the importance of exit planning and willingness to benefit from a wealth management relationship with us after your exit.
Yes, we do have a waitlist. Exit planning for founders is personalized and comprehensive in nature, and we only work with a limited number of founder clients. This allows us to provide you with the attention and dedication you deserve in your exit planning journey. If you are interested in working with us, please schedule an introductory call.