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By Holly SwanExecutive Director, Advisor Institute

When a chance encounter with a serial entrepreneur turns into a first meeting, how do you set yourself up for success?  Start by asking thoughtful questions, driven by genuine interest, during the client interview portion of the meeting.

Before the meeting even begins, consider the prospective client's source of wealth. Factor in that serial entrepreneurs:

  • Tend to be young and have a high risk tolerance
  • Build companies to sell and, as a result, don't have an emotional attachment to the business 
  • Focus on the sale from the moment they start structuring the company
  • Can be hyper-focused on tax efficiency 

Instead of thinking "What can I say to look smart?," think, "What can I ask to learn more?" Here are a few questions that can help you differentiate yourself in the conversation with serial entrepreneurs.

"Is your company structured as a C-corp and, if so, do you know if your shares are QSBS-eligible?"

Many serial entrepreneurs, particularly those in the tech industry, structure their businesses as C-corporations, hoping a portion of their shares will be considered Qualified Small Business Stock ("QSBS") under Internal Revenue Code §1202. Owners of QSBS shares may be eligible to exclude the greater of $10 million or 10 times their basis from taxable capital gains.

If your prospective client doesn't know if they qualify, recommend they check with their attorney or accountant.

"Have you put any strategies in place to minimize your income tax liability upon sale?"

Since tax minimization tends to be top of mind for serial entrepreneurs, this is a great way to learn what, if any, additional strategies they've put into place to minimize taxes upon an eventual sale. You may be able to suggest planning options like tax-loss harvesting or charitable giving.

"Have you considered shifting a portion of your interest in the company to your heirs in advance of a liquidity event?"

If the size of an estate after the sale is likely to exceed their unified credit, identifying this issue and connecting prospective clients with an attorney who can help them plan for it is critical.

"As you have planned, have you done any cash flow modeling to determine what type of nest egg you need to support yourself and your family as you move on to your next endeavor?"

Advisors never want the tax tail to wag the dog. Clients need to hold adequate funds in their own name to cover lifestyle expenses. You should not assume that their accountant or attorney has considered cash flow needs and factored them into their plan.

Bottom line: Being prepared with insightful questions will help you learn more about your prospective clients while differentiating yourself as a forward-thinking advisor who appreciates the nuances unique to serial entrepreneurs.