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Bill and Martha Edge

Retiring and Selling Family Business

Man and Woman Snorkling

Quick Facts


  • Bill 73, Martha 64
  • Small Business Owners
  • Three adult children (only one of whom is interested in the family business) and several grandchildren.

Objectives


  • The Edges want to retire but need to sell their business to do so. 
  • The Edges want to sell the business to their son in a way that is equitable to their other two children from an estate planning/inheritance standpoint.
  • Upon retirement, the couple wants to buy a beach house.

Background


Bill and Martha Edge are small business owners looking to sell their business to retire soon. Bill is a second generation home builder/contractor whose company has an excellent reputation and client base. The Edges have three grown children, only one of whom, (Will) is in the business and interested in taking over once they retire. Bill is in his mid-70s and Martha in her mid-60s so they are close to retirement age now. 

Challenges


Bill and Martha, like many small business owners, face multiple challenges when deciding to sell their business. Who is going to buy the company? What is it worth? How do you get it valued? Another unique challenge for many small business owners is that the business itself generally makes up a significant portion of their retirement plan. Liquidating the business becomes a vital component of a successful retirement. When the company is a family business the parents usually want to hand the business keys over to the kids. But when they do that, there are tax and estate ramifications, not to mention that the business hasn’t been monetized. On top of these issues, keeping the inheritance equal among all of the kids can cause concern for business owners. 

Bill and Martha also want to realize their retirement dreams of purchasing a beach house on the coast of South Carolina, where Martha grew up.

Solutions


Life is full of transitions, and Bill and Martha knew they faced a lot of uncertainty, which is why they reached out for professional guidance. CERTIFIED FINANCIAL PLANNER™ Professionals or financial advisors should consider bringing in a CPA and an attorney to help with valuing the company and creating the buy/sale documents needed to transition this business to the Edge’s son. 

The business and its assets were valued at $350,000 which Will arranged to pay for it outright via financing from a local bank. 

Bill and Martha were rest-assured that their business was handed down to a family member and valued correctly, allowing them to see their business continue to grow under the next generation, and convert Bill’s business into retirement income by selling to his son and pursue life on the beach.

Measurable Results


On top of Bill’s 401(k) and ongoing investment management of other family inheritances, the sale of the business has helped the Edges feel more comfortable retiring now.

  • Assisted in valuing and selling business to the next generation.
  • Assisted in estate planning strategies so all three children have an equal inheritance.
  • Implemented a retirement income strategy that seeks to provide Bill and Martha with a steady and predictable income.
  • Helped the Edge’s determine “how much beach house they could afford?” and how to purchase it.

This is a Hypothetical example used for illustrative purposes only. The strategies discussed in this example may not be suitable for all readers. Please consult a CFP® Professional, CPA, or attorney prior to taking any action. No strategy assures success or protects against loss.