041: [Author Interview] "Exit by Design: Integrating Elite Wealth Management and Proactive Business Exits to Secure your Freedom" with Joe and Marissa LoPresti

In this episode, I welcome Joe and Marissa LoPresti, the father-daughter co-authors of "Exit by Design: Integrating Elite Wealth Management and Proactive Business Exits to Secure your Freedom".

Their book introduces an integrated approach to wealth management and business exit planning, aimed at securing financial freedom for business owners. They explore the concept of the 'freedom point' and the role of virtual family offices, providing insights into achieving a strategic and fulfilling exit from business.

Joe and Marissa LoPresti's Background

• Career Paths: Joe started his career on Wall Street, then moved on to create his own wealth management firm, Arlington Wealth Management. Inspired by her dad's entrepreneurial drive, Marissa was drawn to finance and eventually teamed up with Joe in their family business.
• Book Inspiration: Joe and Marissa noticed a lack of resources combining business exit strategies with wealth management. They decided to write a guide to help business owners strategically plan for every phase of ownership.

Key Concepts from "Exit by Design"

• Integrating Business Exit and Wealth Management: The book highlights the importance of combining business exit strategies with wealth management. 
• Strategic Collaborations: The importance of synergy among different advisors, including CPAs and financial advisors, is discussed, showcasing how such collaborations can lead to more holistic and effective client service.
• The "Freedom Point": This key idea in the book refers to the moment when a business owner has enough wealth to live their ideal life. It stresses the need for early planning to reach this point before selling the business.
• Virtual Family Office: Joe and Marissa present the idea of a virtual family office, which is a team of experts in different fields working together to address the specific needs of business owners, acting like a personal CFO.

The Future of Business Exit Planning

• Advancing the Industry: Joe and Marissa envision a future where integrated planning becomes the standard, with a focus on pre-sale preparation and strategic tax planning to enhance business value and secure owners' financial freedom.
• Educational Outreach: Through "Exit by Design," they aim to educate business owners and advisors alike on the benefits of early and comprehensive exit planning, setting a new benchmark for success in the industry.

About our Guests: 

• Joe LoPresti is the President and CEO of Arlington Wealth Management.
• Marissa LoPresti is the Business Development Manager and Associate Advisor at Arlington Wealth Management.

You can learn more about their work at:
https://www.exitbydesignbook.com/
https://www.linkedin.com/in/joeloprestiria/
https://www.linkedin.com/in/marissaalopresti/
https://arlington-wealth.com/business-owners_/


About Your Host:  Paul G. McManus is an accomplished author and expert in helping financial professionals grow their businesses. With over eight years of experience working exclusively with financial professionals, Paul has helped his clients generate tens of millions of dollars in fees and commissions.

Transcript

Speaker 1: 0:05

Welcome, Joe and Marissa. It's great to have you here today.

Speaker 2: 0:07

Hi, thanks for having us. Thank you very much.

Speaker 1: 0:09

Congratulations on your new book. Exit by Design, integrating Elite Wealth Management and Proactive Business. Exit to Secure your Freedom Now as a business owner. I'm excited to dive into this topic with you today.

Speaker 3: 0:23

Awesome, we are as well.

Speaker 1: 0:24

Joe and Marissa father daughter team and you guys are co-authors of this book. What inspired the two of you to write a book and then this book specifically?

Speaker 3: 0:34

We feel that business owners in general are getting isolated advice. So really we wrote the book to help business owners understand the importance of designing an elite wealth management plan before, during and after their exit from the company or sale of the company, and working with a wealth manager that understands the unique needs and concerns of business owners.

Speaker 2: 0:58

So in our experience, we tend to see owners working with business advisors when they're building the value of their business or selling their company, and then with wealth advisors or financial advisors on their personal financial planning. But we are seeing that the advisors are working more in their own silos and they're not necessarily collaborating with each other and seeing how their advice impacts the advice of other advisors.

Speaker 3: 1:25

We've seen books written on business exits or succession planning and other books written on various aspects of wealth management, but we really haven't seen a book written on integrating both elements for a business owner to help them optimize their wealth and experience a more satisfying and enjoyable exit.

Speaker 1: 1:43

Interesting, and that's what you mean when you say the advice that they're getting is more in silos.

Speaker 2: 1:47

It's working together to make sure we're all on the same page, especially with a business owner. We have so many different moving parts.

Speaker 1: 1:53

Before we get into more of the specific content of the book, I'd love to maybe step back for a second. Just ask you and get a sense of who is Joe in Ursula Preston. We'll start with you, Joe.

Speaker 3: 2:03

I started in the industry in 1985 and I started working for some Wall Street firms. Over the first several years I didn't feel that sales focus culture was really my thing. I branched out and started working independently and doing a lot of my own thinking and developed my own investment strategy which we still use quite a bit today in our wealth management business. So I really wanted that freedom that most business owners look for was important to me and we find that's really important to many of our clients, and we really integrated that concept quite a bit into the book the concept of having a business owner secure their freedom so they can enjoy their life.

Speaker 1: 2:47

Marissa. So how did you end up working with dad?

Speaker 2: 2:50

It's kind of all blurry for me too. I always say it was just always finance for me. I never really thought about doing anything else. I watched him growing up and stuff and seeing him run his own business and I was always like that's what I want to do. I've been here ever since and I really enjoy what I'm doing and I just learn so much every day and it's fun to do it with him.

Speaker 1: 3:10

Tell us a little about the process of writing the book together. What was that like?

Speaker 3: 3:13

That was a unique experience. We just kind of embraced it and I credit Marissa for really pioneering our focus on addressing the unique needs of business owners. It was her persistence that should be our niche and that's where our expertise is. Where we could really add significant value is the wealth management for business owners. We did a lot of work, a lot of research.

Speaker 2: 3:34

So my dad is a business owner and he's the type of person that we wrote the book for. He's the founder of Arlington Wealth Management and he's owned the business for 24 years. He works tirelessly to make this a successful business and he even recapitalized the business several years ago and sold a minority stake to his business partner, now John Hollahan, a managing director of the company. The experience working on the book together, I said I started interning here. I have worked here for five, six years, pretty much since I graduated college, and our relationship work-wise has always been very student teacher. I've learned so much from him and writing this book was just so fun for us because it was something that was new for both of us.

Speaker 1: 4:21

Let's pivot and talk about some of the content from the book a little bit, and it's just a repeat what you said earlier. It's the idea behind it. It's geared towards business owners and it's really the idea of, I would say, marrying together the advice that they get, both from a wealth management standpoint as well as a business growth, business exit standpoint, which is typically not done together. From your perspective, what is the ideal time for a business owner to begin working with you? Is it at the point that they're looking to sell their practice, or is it before that?

Speaker 3: 4:55

We think it's before that. There's so much that can be done in that three, five, seven-year window before a business sale and that's really where we think the rubber hits the road is that pre-sale wealth management and laying out the plans of how you want to exit the business, what type of exit you would prefer, what type of buyer you would prefer. Preparing yourself, your staff, your team for the exit. Starting to look at your business the way a buyer is going to look at it's much different than the way an owner looks at their own business and improving certain metrics that a buyer is going to look at and that is going to increase the value. Of course, tax strategy. There's a lot you could do with tax strategy prior to the sale and that's a learning experience.

Speaker 3: 5:44

The tax code's some 70,000 pages long or something like that. I don't know the exact number but it's huge. There's tax strategies. Even after almost 40 years of being in the wealth management industry I'm learning about from members of our virtual family office. But teaching that to a business owner of what their opportunities are, potential some they're going to resonate with, some they're not going to resonate with and identifying the ones that are palatable to them. Integrating that into the plan. All of that could be done years before the actual sale and integrating it with their lifetime cash flow plan, and there's just a tremendous amount of work that can be done in that, say, three to five year window prior to the sale.

Speaker 1: 6:27

I think sometimes the things that, as a business owner, I think about are important may not be the same factors that a buyer thinks are important. Or maybe, for example, there's a term called owner dependency. What is owner dependency and how does that factor into this equation?

Speaker 3: 6:43

Yeah, owner dependency means that you own a job and not a business. That's the way we like to say it, right? Because if the business is too dependent on you, the owner, that's not of desirable business in the eyes of a buyer. Most buyers aren't going to want to work as hard as you did to build a business. They want a business that can more or less run itself and they're making an investment into that business and they may be the CEO or the strategic leader of the company, but they don't want to roll up their sleeves and do all the work that you did. They're buying that from you. That was your sweat equity, but certainly earlier the better. There's a lot you could do in terms of building your personal wealth, accumulating your wealth on a more tax efficient way, setting up the right retirement plans for your business and then just advisory from a business aspect, designing the business so it's not dependent on you, that it operates on its own with a team. That's a very desirable business.

Speaker 1: 7:42

For someone who's not familiar with the term virtual family office. First and foremost, what is that? And then, secondly, how does that factor into the work that you guys do?

Speaker 3: 7:52

A virtual family office is a team of professionals that have niche expertise in various areas that a business owner may need at some point in their life. It could extend from business advisory, coaches, consultants, intermediaries on selling the company right, brokers, mergers and acquisitions, etc. It could be somebody who understands how to coach you for business growth or building value of the business.

Speaker 2: 8:20

We like to call ourselves your personal CFO, so your personal chief financial officer will do the majority of the planning, but we'll be able to bring the people in that need to be there for your specific situation.

Speaker 1: 8:33

It's a concierge type service that you guys provide.

Speaker 3: 8:35

Yeah, it's concierge type service. We have a kind of frontline team that we provide here at Arlington Wealth Management. That's your product planning team and we could generally handle, let's say, 70 to 80 percent of most of our clients' needs with our expertise. But when it extends beyond our expertise, we have a deep bench behind us of experts in various areas.

Speaker 1: 8:56

I think there's something like 65 different experts now and growing, in our virtual family office that we could bring into a relationship as the publisher, so my company helped you publish the book, and one of the things that we focus in on with our authors, such as yourself, is the idea of a short book, and what that means from my perspective is that, just like the stuff that you're talking about, these are things that could take years, that can be overwhelming.

Speaker 1: 9:22

There's so many different facets to it, and this could be five, 10 books that someone has to go out and read to get somewhat educated on the subject matter, and so what I love about your book is that it encapsulates all these different elements that we're talking about in this interview, but it does it in such a way that a reader can literally read it over the course of one hour, so it's very doable, and then they can make the decision in terms of, okay, is this something I want to act on now? Should I reach out to Joe and Marissa? Is this something that? Okay, I have enough information for now and I want to do it later? It just makes it very accessible to a business owner so that they can be much more do-do-do-dil, just be much more proactive and make an important decision about what the best next step is. So one of the concepts that you talk about in the book is the freedom point. What is the concept of the freedom point that you discussed in your book?

Speaker 3: 10:11

The business owners we work with value freedom above all else. That's why they started their own business, just like you said, so they could call the shots when Marissa said earlier that I'm a typical business owner, that we wrote this book for. I started Arlington Wealth Management because that Wall Street sales focused culture that I experienced when I first entered the industry didn't resonate with me. I wanted to create a business on my terms, so you could say that I place a high value on personal freedom, and that describes most of our clients. So if freedom is the top value for our clients, then helping business owners secure their freedom is our ultimate goal, and that's where the freedom point comes in.

Speaker 2: 10:53

Yeah, there's so many different variables a business owner has to think about when they're trying to pass their business. It becomes very overwhelming. And there's a type of transaction, the type of buyer they want, preparing their staff and the customers for the sale. Will they have a continued role in the company after they leave or do they want a clean cut? What's their life look like after the transaction? Will they get the price that they want and deserve for their company? And then, of course, there's the personal financial aspect of managing their wealth, coordinating all of the daunting tasks. That's where we excel. Your freedom point is when you've accumulated enough wealth, both in your business and outside of it, to live the ideal life that you want to live, unbothered by any financial constraint.

Speaker 3: 11:41

And it's about more than just your lifestyle. It's about securing your freedom of time, your freedom of relationships, who you're spending your time with, how you're spending your time, your freedom of purpose in life. It's all of those things. That's your freedom point.

Speaker 1: 11:55

Yeah. So I have to ask, I think, a lot of business owners I think that's a very attractive message and most people work up until 65 so that they can finally retire and enjoy their retirement. A business owner or entrepreneur oftentimes can be different in the sense that they love what they do, they have control over their time, freedom, etc. And while they might exit their business, it doesn't mean that they're looking to retire. So maybe thinking about that post-sale wealth, how do you approach that with your clients?

Speaker 2: 12:26

Our ideal client. In general, we do run into people who are looking to sell their business and start a new one, but ideally our clients are people like Joe, who have built their business their entire lives, and we kind of help too with the emotional aspect of leaving your business after being your life for the last 20, 30 years. Our ideal client is somebody like him, who has owned their business for a majority of their life and really looking for that freedom that came with why they started it in the first place.

Speaker 3: 12:57

I was just going to say. A lot of our clients don't really want to leave the business. This is their baby. They identify it, sometimes more proud of it than their own kids in some cases, because they put all that sweat into it. Determining their freedom point is a big deal. We ask them to think about what makes them happy, what they want and need for a comfortable life, and then the way we go about determining what their freedom point is. We develop a detailed plan. We call it a lifetime cashflow plan. It's a detailed model that considers your personal spending, your lifestyle costs, your taxes, your future life events.

Speaker 2: 13:31

We find a lot of the business owners come in when they're first looking to engage with us and they think the value of their business is a lot higher than what it is. And again, they've spent their whole life building this company. How could it not be extremely valuable? And they're not thinking about these things that a buyer does and really valuing the business through a buyer's eyes.

Speaker 1: 13:51

No, this goes back to one of the earlier ideas, which is it's ideally you're not waiting until you're ready to sell the business, but you're at least three to five years in advance You're starting to think about things so that you can optimize it from tax, from a revenue, but also from a buyer's perspective.

Speaker 2: 14:06

Yes, you have some realistic expectations.

Speaker 3: 14:09

And you have time to change the face of the business at that point and we use a tool called the Value Builder Score, created by company Value Builder, to see how you stack up in the eyes of a potential buyer, and then we could help you increase your score. Selling prices can increase significantly that, according to Value Builders, by 70% when your score moves from average to a score of 80 out of 100. And that could add millions to your sales proceeds without a bigger business or growing the business, just by focusing on these areas that the eyes of a buyer are going to look at.

Speaker 1: 14:44

I think that's such an important point. Can you expand upon that? So what I heard you just say was that it's not even necessarily about creating more revenue in your business in order to potentially increase the sale value of your business by a significant percentage. As a business owner, I want to maximize my revenue and that's going to be the driver for the sale of my business, but what you're saying is something different.

Speaker 3: 15:05

Yeah, growth is certainly one of those aspects that a buyer is going to look at. They want to see a path for growth. You have to be able to articulate that path to growth to a buyer once the ownership changes hands and the finance profitability. All the traditional financial measures are still important, but there are two out of maybe eight or nine that are important to a buyer. So having a bigger business but if it's dependent on you, that's not valuable. It could be a smaller business that isn't dependent on you that actually goes for a higher dollar amount in the transaction.

Speaker 3: 15:40

Really focusing on these areas that a buyer, from their perspective, that's important to them, is going to increase your value. And that's where the freedom point comes into play, where determining your freedom point, your business value today may be there. You may already be at your freedom point. It's important for you to know that because you're going to make decisions differently once you hit your freedom point, once you know you're at your freedom point. If you're not there, then working on this value building exercise is very important because it could significantly by up to 70% increase the value of your business. Just by taking your score from an average which is 59 out of, I think, something like 50,000 business owners have completed this value builder score and the average score is 59. Taking it from 59 to 80 is going to increase your business by up to 70%.

Speaker 1: 16:32

Yeah, as a business owner, I'm intrigued and I believe it's the assessment you just referenced in your book. You have links and resources and all those good things in the book that someone could do, because I would want to know where am I at? Business owners are competitive, right. It's like a goal oriented competitive. I need to know where I'm at today, where I'm going to be, and I need to have a plan to get there. You also work with CPAs and accountants in a collaborative way. So for a CPA or accountant that's listening to this and maybe has these clients business owners that they work with but they're looking for the right partner to work with in the way that you're expressing, I'm sure, a little bit about that, who is the right fit for you in terms of a professional relationship?

Speaker 3: 17:17

We work in a proactive planning team with other advisors from different disciplines Most of them are in the accounting area, but some are in legal and business advisory as well and we look at it as having a proactive planning team right where the accountant and the wealth management is on the same page and they're going through a discovery process for each client and determining what is important to them and then creating an inventory of opportunities for them to work on together from a tax standpoint, a business advisory standpoint, risk mitigation and a number of other areas as we talked a little bit about earlier. Probably between that accountant and wealth manager they can handle 70% or 80% of what most business owners need.

Speaker 1: 18:10

Is there any question that they haven't asked you so far that you think is important to this conversation?

Speaker 3: 18:14

We've talked a lot about mostly the business aspect and tax strategy, but resale wealth management, we think, is just a huge opportunity. We saw a study by an organization called Accelerating Entrepreneurial Success, which surveyed successful business owners planning to sell in the next five years and only 6% were actively taking steps to maximize their personal or family wealth through the sale. And we just find that that is a missed opportunity for many business owners, where they're entrenched on running the business and achieving the desired sale, that they miss a lot of opportunities from a tax standpoint, from a wealth transfer standpoint, advanced planning that could be put in place that could secure a lot more wealth for themselves and their families.

Speaker 1: 19:04

Alright, final question. So for someone who's listening to this interview and either they want to get a copy of your book or they want to reach out to you, where is the best place for them to go?

Speaker 2: 19:11

You can get a complimentary copy of the book at exitbydesignbookcom and you can find more of our contact information there. If you're interested in having any kind of conversations, perfect.

Speaker 1: 19:23

Joe, any final thoughts on your end before we wrap this up?

Speaker 3: 19:27

No, I think we covered a lot, Paul, and hopefully that the listeners got some good information from the interview.

Speaker 1: 19:33

Yeah, I think so. I think it's really fascinating and interesting just how you integrate all these different things and just to see what that really means in real life. And I know you are and you will continue helping a lot of business owners secure that freedom point, which is so important to all of us, and to really live a great life. So thank you so much for your time today. I really appreciate it.

Speaker 2: 19:53

Yes, thank you. It was nice talking to you, thanks for having us, Paul.