Your Advisor Team is very important when exiting your business. You should have a variety of experienced professionals asking you the necessary questions to determine clear objectives. Let’s discuss how you can get started using your Advisor Team efficiently.
As you near the time when you will leave behind the daily worries and stresses of business ownership, have you defined your successful exit? Do you know where “there” is, much less how to get there? Unless you set and prioritize your exit goals or objectives, you may have too many, or they might conflict, but in either case you may not make much headway.
At some point, you may want to transition out of (exit) your business. You know you can’t do it alone and suspect that you need the assistance of others. Who, exactly, are those “others?” What professional advisors have the qualities, experience and training necessary to help you make that transition successfully?
Planning for an owner’s exit is, at it’s core, a multi-disciplinary approach. It is simply too difficult for one professional to do it all. Ask your current advisors about their experience, read and learn, and ask other professionals for suggestions.
Whether you plan to sell your company to a third party or transfer it to key employees, co-owners or children, your banker can provide the cash necessary for a smooth transition. In all scenarios, banks strive to minimize their risk.
In today’s recovering Merger and Acquisition marketplace, an all-cash buyer is as rare as a balanced federal budget. Those buyers who do arrive at the closing table with cash in hand may not be over-burdened with huge bagfuls.
So, you’ve decided to become a seller. You have determined that even though market conditions are not absolutely ideal, your company is salable. This scenario is reminiscent of a little boy who cried “Wolf!”
So what if you’ve never sold a business before? You know what you want from the sale of yours. You know your business better than anyone else. Who better to lead the charge than you? Don’t mislead yourself. You may be the worst possible person to sell your company.
Fellow business owners, let’s be honest. We fear our bankers. On a daily basis, we may give them little thought. When time comes to tell them we’re planning to exit our business, or when we need money, however, we may experience feelings ranging from mild anxiety to outright panic.
Dawn and Preston Slater, owners of a machine shop with $7 million in annual revenue, sat down and announced, ”We have decided to leave the business as soon as possible. We’ve got our management team in place and want to execute a transfer of the entire business in the next six to 24 months. It has been a great run but we are burned out. What do we do next?”
In the previous issue of Exit Planning ReviewTM, fictional owner, Dennis Bradenton, had called his accountant to ask her to help him transfer his company to his management team. No stranger to Exit Planning, his accountant assembled all of Dennis’ advisors and launched a complete Exit Planning process.
There are three major questions that should be asked of you before any person on your team of advisors can give you the answers you need to plan your Exit Strategy. Without these key questions, there is no way your team of advisors can determine which direction you want to go with your exit!
Are your exit strategies clashing? Let’s take a closer look at how to minimize risk while attaining your departure objectives and keeping your experienced management team with the company after you sell.
There are clear determinations you can make to form the basis for what is “fair” with respect to both the business-active child and other children. These determinations and the independent, non-emotionally-charged advice from your team of advisors can help you make educated decisions.
If you sell to an insider, you’ll find that the future cash flow potential of your business determines and limits what you can expect to receive. Let’s look at how cash flow determines the sale price to insiders.
It may not be uncommon for a business owner to hear that one of his friends sold her business for a “six times multiple.” That owner’s first question to his own advisors typically is, “Can I get the same type of multiple if I sell my business?” The answer is, “yes and no.” To understand these answers, we need to understand exactly what is being multiplied.
It is worth repeating the same analysis given to lifetime transfers to a transfer occurring at your death. Since both lifetime Exit Planning and Exit Planning at death are based on the same premises, it can be relatively easy to develop a consistent outcome.
You’ve cultivated your business to perfection over many years of hard work, but now that it’s time to sell, how do you choose a buyer? A savvy buyer understand’s your exit goals and will find a creative way to meet you there, or at least find a middle ground.
The due diligence process requires extraordinary amounts of time and attention so it is best initiated as soon as you, the owner, decide to sell the company. Your team of advisors should help you gather all of the significant documents and remove obstacles in the path towards closing. Do your due diligence early and thoroughly to help avoid unnecessary detours on the road to closing and to protect yourself afterwards.
As you near the time when you will leave behind the daily worries and stresses of business ownership, have you defined your successful exit? Since many owners haven’t defined where “there” is, they may not know how to get there. Organizing your ambitions clearly will ease your path towards your own Exit Strategy.
Readers of this newsletter should understand that Exit Planning is an on-going process. It begins with establishing your objectives and a valuation of your company and ends with your successful exit. Along the way, you and your Team of Advisors look at preserving the value of your company, protecting that value from creditors, and increasing overall value.
Here we discuss some potential Exit Strategies. With the help of advisors you can establish thoughtful objectives to help make your goal a reality. Use our 3 step process to help you and your team of advisors to strategize your exit route.
Now that you are a well prepared seller, what does a well prepared buyer look like, and why should you care? You need to be able to recognize a serious buyer while exiting your business. Does this buyer have clear objectives? Do they have an experienced team of advisors? These are all things to consider when selling your company.
Exit Planning can help you to orchestrate a successful, permanent exit; however Intermediate Exit Planning can help you to forge a path towards and exit without giving up ownership.
Not only does the use of multiple entities protect your assets, it also distributes your taxable income. Here we see how second-generation business owner manages to have his business pay for his children’s education on a tax-deductible basis.
Protecting your assets requires more than an Limited Liability Company (LLC), which many business owners do not realize. By spreading your assets over multiple entities you can better control liability and risk.
Using multiple entities can solve many problems that business owners face. For a growing business, the use of multiple entities is good tax-planning, good continuity planning, and good asset protection planning.
Selling out can be an easy and successful Exit Strategy with planning, timing, and your Key Employee Group. If this Exit Strategy is right for your business, your team of advisors can help you create the right incentive plan and determine which employees are suitable for ownership.
Understand that there is a proven Exit Planning process. There are a few preparation steps that you must take before you dive into exiting your business. You must begin The Exit Planning Process by first determining your objectives.
Sometimes referred to as ‘golden handcuffs’, these strategies will financially link your management team to your business, even after you have left it. The success of your bonus plan can only benefit you during your exit.
While planning your Exit Strategy, it is important to realize that without your experienced management team you do not have a business to sell. Let’s take a look at what incentive plans will sufficiently motivated your management to reach performance standards.
You want your company to be more profitable and you want to keep key employees tied to your business while you plan your Exit Strategy. Both your goals and your employees goals can be attained with the use of incentives.
While operating as a C corporation during your growth years allows you to take advantage of lower tax rates, this can drastically change when you begin your exit planning strategy. Let’s take a closer look at how your entity choice will affect the taxes that you may face after the sale of your company, and how to convert it if necessary.
Exit Planning assumes that good business are not only profitable and well managed, but that they are protected from liability risks. However, many business owners expose their assets without even realizing it. Here we discuss four steps to keeping your assets protected while selling your business.
Selling your business means moving into a new era of your life. The anxiety surrounding the sale of your company may cause you to hesitate at first, however retired life may not be as boring or meaningless as you suspect.
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