Our Technology business owner fits the classic story of the software company started in a college dorm room transforming into a multi-million dollar company. Like any startup, the early days were filled with hard work, late nights, and an all-out desire to do it better than the rest.
We started with this client right as the Tech Bubble was bursting. Luckily his company was still small, and he was reinvesting most of his income back into the company. At that time, his investment goals and portfolio resembled the average middle-class family in the U.S. When his business began hitting on all cylinders, that changed quickly.
Fast forward a decade and our client's hard work finally paid off with the sale of his side business to a Fortune® 500 company. After the sale our work for him changed substantially. Due to the uncertainty of a startup business, we had assumed that the value of this company was $0 to be conservative. We had shaped our financial plan and investment strategy around this assumption. Post-exit the client had a large influx of cash that drastically improved his financial situation and changed his investment needs.
Our client's goals after the sale became more focused on growing his investment assets with less risk and greater liquidity than before. We implemented the following on his behalf:
1) Requested his other money manager's statements so we could limit redundancies in holdings and strategies,
2) Added a healthy weighting in Alternative Investments that offered greater diversification and a history great downside protection,
3) Built the portfolio with highly-liquid investments that could be turned to cash within several business days.
With his main business still under his control, our client looked for new ways to expand using the proceeds from the sale of his side business to help fund the efforts. Given this dynamic, we have not used a Limited Partnership structure for any of his investments because they are illiquid.
Additionally, we have helped this client build relationships with other financial firms who understand the software space. The complexity of his situation requires a wide range of professionals and skill sets. Unlike large investment banks who try to provide many services under one roof, our firm recognizes a one-stop-shop approach is inherently flawed and leads to sub-optimal results. One way we can serve our clients is to line up the best professionals they need, and work with these professionals to get our client the best outcome.
Once you have a liquidity event, the objectives change. Smart growth is important, but most important is avoiding large losses.