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Planning For Business Succession

Derek Hess is a Tax Partner in Duffy Kruspodin’s La Jolla office with a focus on business consulting and taxation matters for privately held companies in real estate, construction, manufacturing and distribution, and service-related industries. In addition, he has extensive experience working with high-net-worth individuals, pass-thru entities, and M&A transactions. 

Russ Alan Prince: Tell me a little bit about the type of clients that you work with. 

Derek Hess: I started with the firm out of college as a new staff about 15 years ago, around the same time Josh Bodenstadt—the Partner-in-Charge in San Diego—started at the firm as a Principal. Being new, due to staffing and timing, I ended up frequently working with Josh directly. It was a unique experience because usually as a first-year staff, there are other managers working between you and a Partner.

As a result, I received an opportunity to work on most of Josh’s clients which included many in manufacturing and distribution, construction, and professional services. The work included a considerable amount of audit and tax work and that’s where I began my industry experience. It’s those types of clients who are looking for full year-round service, not just annual tax return compliance, that I prefer to work with.

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Prince: Tell me about some of the other services you provide your clients 

Hess: I provide various consulting-level outside CFO-type services for my clients. My current practice is fairly involved with numerous business owners and if it’s a larger engagement, I’m really involved, so it’s common for me to speak with them often. Speaking with clients frequently allows me to answer important questions that arise throughout the year.

Prince: Do you have an expertise or focus for your practice? 

Hess: With my history of working in certain industries, my focus has been on S Corps, C Corps, and other current operating entities. It’s so interesting seeing all the different types of products or services a business can be successful in. 

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Prince: Since you work with so many clients who are operating entities to what extent is resale and post-sale transition planning part of your practice?

Hess: It’s a big part of my practice. It’s something I enjoy a lot in the operating company space. Operating companies have a lifecycle—the startup phase and then the day-to-day. Then, at some point, there’s a transition—internal or external. 

That’s where we can come in and advise our clients, as the experts on how to structure something to make it the most beneficial to them both in the short term and long term. There’s a lot of work done before a transaction happens. If you’re smart about it, you prepare, and after the transaction happens, that’s where the post-planning comes in. The scope will change depending on the client, who they are, and where they are at in their life stage. 

There are other opportunities we can provide to them, such as long-term planning and introducing them to our DK Family Office team. I really enjoy working with Homer who heads DK Family Office on delivering leading-edge strategies to these clients, because a lot of the operating entity clients I work with will go through a transition at some point and I want to make sure they optimize their financial situations.

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Prince: Can you give us an example?

Hess: With Homer, we’re addressing the situation of one of my larger client groups. They work in the utility industry space providing services to utility companies. They have a partner who is a public company, and they are considered a minority-owned business. 

Technically, my client owns the majority stake in the company, but, they also know, they’re dealing with a public company, and it can be challenging working with them. This company is now in the second generation, and the first generation founded it and did an outstanding job. 

I have and continue to advise them through transitions. The second generation has made a lot of improvements to the business and it is now three times the size it was under the first generation. However, the challenge has been dealing with this public partner and some of the legacy history of the first generation. Our goal is to assist them in creating the best possible financial outcome, not only for themselves and their families but for their families’ families. 

RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine ( and Chief Content Officer for High-Net-Worth Genius ( He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.

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