Hartford Business Journal

HARTFORDBUSINESS.COM | JUNE 26, 2023 9 Your Greatest Illiquid Asset – Your Business and How to Maximize Its Value S P O N S O R E D C O N T E N T Banking products and services are offered by KeyBank National Association. All credit, loan and leasing products subject to credit approval. ©2023 KeyCorp. KeyBank is Member FDIC. 220315-1508958 We have fresh ideas to move your business forward. By: Mark Commune, Key Private Bank Market Leader It is said that to get wealthy you need to own a lot of one asset, but to stay wealthy you need to own many different ones. Generally, the goal is to diversify your wealth portfolio into different asset types, which helps to protect against a drop in value in any one category. While this advice makes sense, the reality for many business owners is that their personal wealth is largely concentrated in a single illiquid asset – their business. And with a possible recession looming, many of them are asking when the right time may be to cash in on the value of their business. If you are a business owner, understanding how and when you will eventually transition your business to maximize its value is a key factor in your wealth planning strategy. Is Your Business Recession-Resistant? Markets run in cycles and when businesses perform well because of favorable economies, valuations are high, employees are engaged, and buyers/investors have a high degree of interest and activity. But in a recession, your business may not fare as well. Recessions can hit hard, and fast. The Dow Jones Industrial Average fell 30% in the first quarter of 2020 during the onset of COVID-19 and fell 41% peak-to-trough in that same calendar quarter. The global financial crisis of 2007-2009 also exhibited significant, rapid losses for stock investors. In October of 2007, the Dow was at a peak exceeding 14,000. By February 2009, it had dropped more than 50% to less than 7,000. Therefore, any allocation of your wealth in this broad market had been cut in half. The wealth concentrated in your privately held business may fare differently than your other assets in a recession. The important question to ask yourself is, "Will my business sustain less damage to its value than other assets in my portfolio during the next recession?" Based on your answer to that question, you might be better off shifting assets to less risky categories (i.e., from illiquid to cash or cash equivalents) today versus a transition a few years from now. Business Transition Plan Fits into Your Wealth Planning With a well-designed transition plan for your business – whether it is a sale to a third-party buyer, a sale or gift to family members or a purchase by employees – you can take control over the loss of wealth that may occur in the next recession. Planning for transition while your profits and company value are high is the best time to protect your illiquid asset wealth and build a path toward reaching your personal goals in a timeframe that works best for you and your family. Ready to speak to a wealth professional about your wealth planning strategy? Contact Mark Commune, Key Private Bank Market Leader or visit www.key.com/wealth. Opinions, projections, or recommendations contained herein are subject to change without notice and are not intended as individual investment advice. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice. Investment products are: NOT FDIC INSURED* NOT BANK GUARANTEED* MAY LOSE VALUE * NOT A DEPOSIT* NOT INSURED BY ANY STATE OR FEDERAL AGENCY About the Author: Mark Commune serves as Senior Vice President and Key Private Bank Market Leader for KeyBank's Connecticut and Massachusetts market. He leads a wealth management team located in Hartford that provides objective and skilled advice and financial solutions for high net-worth individuals and families throughout Southern New England. Mark is located in KeyBank's business offices at 225 Asylum St. Suite 1910 in Hartford and can be reached at mark_commune@ keybank.com.

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