From 90% to 10%: The Founder’s Playbook for De-Risking a Concentrated Stock Position

The deal is done. After years of relentless effort, you’ve successfully exited your business, and your net worth has jumped to a life-changing number. It’s a moment of incredible triumph, but it comes with a new, high-stakes financial challenge. For many founders, a huge portion—often over 90%—of their newfound wealth is tied up in a single company’s stock.

This is a great problem to have, but it’s one that can still ruin you. The intense concentration that created your wealth is now the single biggest threat to keeping it. Transitioning from a 90% concentration to a healthier 10% or less isn’t about a single transaction; it’s a multi-year art form that balances risk management with tax efficiency.

The Psychology of Concentration: Why It’s So Hard to Sell

Before diving into strategy, it’s critical to address the human element. Logically, you know that having all your eggs in one basket is risky. So why is it so hard to sell?

Founders are often emotionally attached to the company stock, whether it was their “baby” or the respected acquirer. This creates powerful psychological hurdles:

• Familiarity Bias: You know the company, the people, and the product, so it feels safer than the broader market, even when it isn’t.
• Overconfidence: You believe deeply in the company’s future potential, making it feel like selling is leaving future gains on the table.

These feelings are normal, but they are the enemy of prudent wealth preservation.

The Goal: A Disciplined and Tax-Aware Journey to Diversification

The objective is clear: systematically reduce the concentration risk to protect your wealth from the volatility of a single company. You wouldn’t bet your entire life’s work on a single roll of the dice, but holding one stock is the financial equivalent.

However, the primary obstacle is taxes. Selling a massive, low-basis stock position all at once could trigger a life-altering tax bill. The journey to diversification must be deliberate, disciplined, and above all, tax-aware.

The De-Risking Playbook: 5 Strategies to Go from 90% to 10%

Here are five proven strategies that form the core of a diversification plan. They are often used in combination to create a custom-tailored solution.

1. Systematic Selling Plans

A systematic selling plan involves creating a pre-set schedule to sell a specific number of shares at regular intervals (e.g., quarterly). For corporate insiders, this is formalized in a 10b5-1 plan to satisfy SEC rules. For others, it’s a powerful way to remove emotion from the process and ensure disciplined progress toward your diversification goals.

2. Strategic Tax-Loss Harvesting

As you realize large capital gains from selling the concentrated stock, you can simultaneously sell other positions in your taxable portfolio that are at a loss. These losses can be used to offset your gains, directly reducing your tax liability for the year.

3. Gifting & Charitable Planning

Gifting highly appreciated shares directly to a Donor-Advised Fund (DAF) or other charity is a powerful win-win. You receive a fair-market-value tax deduction for the gift and completely avoid the capital gains tax you would have paid if you had sold the shares first.

4. Hedging with Options

For very large positions, advanced strategies like using options collars can be employed. This involves using derivatives to set a “floor” and a “ceiling” on the stock’s price, protecting you from a major downturn while you gradually liquidate the position over time.

5. Leveraging QSBS (Qualified Small Business Stock)

This is the grand slam of tax efficiency. If your stock qualifies as QSBS, you may be able to exclude up to $10 million or 10 times your cost basis (whichever is greater) from federal capital gains taxes. It’s a complex but incredibly powerful provision that should be explored immediately post-exit.

From Founder to Steward of Your Wealth

The intense, concentrated focus that builds a great business is the opposite of the disciplined diversification that preserves wealth. Making that mental shift is the first and most critical step in your new role as the steward of your family’s financial future. De-risking a concentrated position is one of the most important financial journeys you will ever take, and it requires a sophisticated, personalized plan.

Contact Portus Wealth Advisors to build your diversification strategy and protect the wealth you’ve worked so hard to create.

Call Us: 704-936-0084