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Case Study: Financial Advice for Business Owners

Do more with what you’ve earned.

Financial advisors for successful professionals, executives, and business owners.


Mike (44) is the founder of a digital marketing firm based in the Bay Area. He would like to slowly transition his business to his 22-year old daughter, Jessica, over the next ten years.

His Goals

  • Mike started his business 15 years ago and hopes to transition the business to Jessica, who recently started working at the firm. Mike hopes to both transition his firm and retire in 10 years. He would like to determine how to best accomplish this.
  • Mike’s tax situation has gotten more complicated over the years and would like a more comprehensive tax plan to reduce his tax liability.
  • He is currently working with a large private wealth management firm, though he does not feel that he is getting the attention and planning services he requires.
  • Mike would like to ensure that his portfolio is properly aligned with his risk tolerance and goals.

Resources & Facts

  • Mike’s income averages $1.3MM per year
  • His primary residence is worth $3.7MM with a $1.1M mortgage.
  • He has an investment property in Maryland that is currently generating $1,300 per month in free cash flow. He is considering whether or not to sell this property as he does not enjoy managing it.
  • He has a 401(k) account with a balance of $470K and various brokerage accounts worth $3.2MM.
  • He has a $1.1MM balance at his bank
  • He has a CPA that files his taxes but does not have a comprehensive tax plan.
  • He does not have a life insurance policy nor does he have an estate plan.

Our Recommendations

  • Slowly transition his business to his daughter using the firms’ free-cash-flow to acquire equity
  • Sell his Maryland property to simplify his life
  • Reallocate his existing portfolio and invest his excess cash for better alignment
  • Create a profit-sharing plan to contribute more to 401(k) plan

After creating multiple scenarios and having several conversations with Mike and Jessica, we recommend that he slowly transition his business to his daughter for over the next 10 years. During this timeframe, Mike will be given a salary that will gradually decline as he hands over more responsibilities to his daughter. Mike’s daughter will acquire equity from her father via the firm’s free cash flow during these 10 years. This way, neither Mike nor his daughter will have to use debt to facilitate this transaction. We worked with his corporate attorney to create the buy-sell plan to facilitate this transfer to Jessica.

We recommended that Mike sell his Maryland property this year (realizing a $180K gain) as we can offset this gain with a portfolio loss transferred in from his previous private wealth management firm. This will relieve him of the constant worry of managing this property.

We immediately began to implement a deep-dive tax planning process to uncover any opportunities to both lower his tax liability and to see if we can convert any of his tax-deferred assets to a Roth account.

While he is not eligible to participate in a Mega Backdoor Roth for his corporate 401(k) due to ERISA rules, we were able to create a profit-sharing plan, allowing him to contribute more to the plan than the stated employee limits.

Regarding Mike’s excess cash balance at his primary bank, we transferred and invested these funds according to his risk tolerance (which is Aggressive) in his newly created accounts with Bull Oak. This way, his funds are allocated appropriately, more efficiently, and will ultimately ensure that his money is performing as expected.

We recommended that Mike plan to downsize his primary home in three years using his current home’s equity. By doing so, he will enter retirement completely debt-free and with a lower fixed expense need.

We introduced Mike to a well-qualified estate attorney and immediately began the estate planning process. We also performed an insurance-needs analysis and determined that needs at least $10MM in coverage. As such, we helped him secure a suitable policy.

Financial plans are not set in stone and it is imperative that they constantly be updated as assumptions and goals change. We have established the following schedule for all clients (including Mike) and believe it to be an excellent cadence for financial success.

Or course, as all of our clients lead busy lives, we meet with our clients outside of these regularly scheduled events as needed. Our availability is just as important to our client needs as having a predetermined planning meeting cadence.

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