Business Exit Planning

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January 2017 Newsletter

Maybe It's Time To Say UNCLE! Many American households are vexed by their financial condition. They feel like they don't have enough money, carry more debt than they should, are underfunded for retirement or their kids' college education, and aren't confident about their futures. The financial experts – i.e., economists, researchers, and policymake...
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Value Drivers

Have you ever wondered why one business has buyers lining up to pay top dollar while another sits on the market for months or years? What do buyers look for in a prospective business acquisition?

The characteristics buyers seek are called Value Drivers,  and they must exist before the sale process even begins. Value Drivers are characteristics of a business that either reduce the risk associated with owning the business or enhance the prospect that the business will grow significantly in the future. It is your job as the owner to create value within your business prior to a sale.

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Inevitabilities

Owners begin thinking about the Exit Planning Process when two streams of thought begin to converge. The first stream is a feeling that they want to do something else besides go to work every day: either they would like to be someplace else-doing something else-or they simply no longer get the same kick out of doing what they are doing.

The second stream is the general awareness of the following:

-They are close to financial independance
-They are making significant strides toward reaching financial independance.
-They can achieve financial independance today by selling their business.

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Headwinds

Bicycle riders appreciate the importance of avoiding headwinds on a long ride, especially as they approach the end. A headwind causes a rider to either expend more effort or take more time to arrive at a destination. When a rider is already tired, neither option is appealing.

A bike race and owning a business are remarkably similar when it comes to headwinds. As we anticipate the end of our business ownership journeys, the headwinds we face today require us to devote more effort or time to exit our business in style.

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Exit Paths for Business Owners

When business owners start to think about exiting their companies, the number of possible Exit Paths can seem limitless. In reality, there are only eight:

1. Transfer the company to family member(s).
2. Sell the business to one or more key employees.
3. Sell to employees using an employee stock ownership plan (ESOP).
4. Sell to one or more co-owners.
5. Sell to an outside third party.
6. Engage in an initial public offering (IPO)
7. Retain ownership but become a passive owner.
8. Liquidate

Which of these Exit Paths do owners intend to use?

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Business Valuation: 5 Reasons Why It's Important

Few business owners relish spending money on something unnecessary. For most owners, hiring an expert to estimate the value of their companies falls into the unnecessary category. Thus, it is no surprise that owners typically respond to an Exit Planning Advisor's recommendation to get an estimate of value for the company with some variation of, "Now? But I'm not planning to leave for years," or "I built this company, so I know what it is worth better than any so-called expert."

Before you join these owners and scratch business valuation off of your Exit Planning to-do list, consider the following five reasons why you should put an estimate of value at the top of your list.

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C vs. S Corporation

"I expect to exit my business down the road, but is there anything I need to do now?"

Business owners often ask this question because they suspect that they should be doing something about exiting their businesses right now. These owners are on to something.

Someday, every owner will exit his or her business, either by choice or against his or her will (e.g., death, incapacitation). Far too many owners take a reactive approach to Exit Planning, beginning the process only after their exits. Additionally, since busy business owners tend to forego the planning necessary to exit their businesses on their terms, only the most motivated owners spend time or money planning for their departures.

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Business Continuity Planning

Successful owners are usually optimistic people, somewhat averse to dwelling on the more unpleasant aspects of Business. Contemplating one's demise certainly qualifies as an unpleasant aspect. Consequently, advisors tend to use a lot of softer phrasings when they talk about business continuity. They ask, "What happens if the owner 'passes on' or 'leaves the scene?"' They talk about the consequences of an owner's death on the business in theoretical, third-party terms: "Should an owner die,..." Unfortunately, these oblique references gloss over the central fact that you, the owner, must take care of business now in case you (rather than someone anonymous third party) die tomorrow.

This white paper discusses business-continuity planning in a way that you may not expect. Typically, when owners think of business continuity, they do so after being prompted by an insurance or legal advisor who warns that unless they take prudent measures, they will leave their families unprotected in the event of death or permanent disability.

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Employee Incentive Planning

As business owners plan to exit their businesses, they must confront the challenge of incentivizing employees - specifically, management - to stay with the company after they have left. Having a strong established, and committed management team to take the reins once an owner has exited is becoming more of a prerequisite that a luxury when selling or transferring the business to a third party. There are several reasons why a strong management team is essential to a successful business exit for owners.

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ESOP Opportunities

An Employee Stock Ownership Plan (ESOP) is a tool business owners use to achieve many common Exit Objectives: 1) Provide partial or full liquidity for existing shareholders; 2) Leave the business gradually; 3) Provide employees with a stake in the future growth of the business; and 4) Keep the business in the community. File Name: wp_esops_opportun...
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Using Short-Term Key-Employee Incentives to Increase Sale Price

One of a business owner's greatest challenges is to attract, motivate, and keep key employees. As owners approach the end of the marathon of exiting their business, often tired and distracted by everything they've done, they begin to assume that it is no longer worthwhile to keep and motivate key employees. However, keeping key employees is not only worthwhile but also necessary if the business is to be sold at the highest possible price.

A basic premise of key-employee incentive planning is to keep the key employee as a long-term, contributing member of the company. Consequently, incentive plans incorporate relatively long vesting schedules and provide benefits that are relatively moderate in the early years but become substantial as the years pass (usually after the employee has participated in a plan for at least five years).

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Transferring Wealth to Children: A Primer for Business Owners

Both business owners and non-business-owning parents want to transfer a monetary legacy to their children, if possible. However, business owners are different in the tools they can use to transfer wealth.


Whether you own a business or not, the fundamental questions are the same:
1. How much wealth do you want to keep?
2. How much wealth do you want the kids to have, and how much is too much?
3. Which tools minimize the estate-and-gift-tax consequences of transferring wealth?

Business owners have to put those questions in the context of their Exit Objective" "How much money do I wish to have after I exit my business?"

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Transferring Your Company to Key Employees

Owners wishing to sell their business to management - specifically, key employees - face two unpleasant facts: Their employees have no money (most likely) and they cannot borrow any, at least not in sufficient quantities to cash out the owner. Thus, each transfer method described in this white paper uses either long-term installment buyout of the owner or someone else's money to complete the buyout. The last method discussed - the modified buyout - uses both an installment buyout and someone else's money.
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Man Tunnels Out From Under Building Using Plastic Pen.

Imagine being trapped under the crushing weight of an office building. For years. No matter what you try, every attempt at escape is thwarted. Tons of concrete, steel, and glass loom over you. You begin to think there’s no way out. Stories like this rarely makes the news, yet they occur much more often than most people think.

Fortunately, this doesn’t have to happen to you – if you know how avoid being trapped in the first place. All it takes is a pen, paper, and the right help.

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Exiting Your Business Can Be A Lot Like Exiting 2015.

Music. Champagne. Fireworks. Noisemakers and party hats. Ring in the new year and ring in a whole new life. Without the nasty hangover. How? By starting to plan for your business exit now. Because no matter how long you’ve been in business, the time to starting planning your exit is immediately.To quote Michael Jordon, “Some people want it to happen, some wish it would happen, others make it happen.” Sure, you can keep putting it off. But there are two very important things you stand to lose: namely, money and control. With some planning you can dramatically increase your ability to hang onto both. There are several options to consider.

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Is Your Business Equipped With An Exit?

Office space. Check. Desks. Check. Chairs. Check. Whether your tools are computer and copy machines or a pickup truck and a power saw, one of the most overlooked essentials is a way out. As a business owner the last thing you want to discover is that you don’t have a way out when you need one. A much better option is to start planning for that exit now. Sure, you can always walk out the door right now if you wanted to, but only if you’re willing settle for a less than ideal payday. The kind of exit we’re talking about keeps you in control of every last detail and lets you leave in style.

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How To Sell Your Business To Your Employees.

Selling your businesses to your best, most loyal and / or most ambitious employees can make a lot of sense: they have something to work toward, the business can continue to thrive, and you can exit with your financial security in tact. How?

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Everything’s Moving Faster. Shouldn’t You?

Now 50 is the new 40. Orange is the new black. And the pace of change is only increasing. So while your career may be off to a great start, the real question is, how do you consistently stay ahead.

Marko Mijuskovic, BA, MBA, MSIS, and CExP™, can help you answer that very important question with two questions of his own. First, where do you want to go? Break out that clean sheet of paper, daydream, create a vision board, drop some crazy numbers into a spreadsheet – do whatever it takes to set some clear goals. “This is the fun part,” chuckles Marko.

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The Seven-Year Itch & How To Scratch It

The Seven-Year Itch & How To Scratch It It was true love right from start. You’ve been committed from day one. You’ve been faithful. You’ve given completely and selflessly. The more time you’ve spent, the more your passion has grown. But lately, you’ve experienced a bit of a plateau. The feelings are still there but the flames have subsided. Maybe you’ve even caught yourself daydreaming about something new.Ladies if this describes your experience as a business owner, you’re not alone.
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Don't let April fools you

DON’T LET APRIL FOOLS YOU

 

For Immediate Release: April 2015 – The most hated day of the year is just a month away. April 14th, otherwise known as Tax Day, is responsible for making grown men weep, corporations crumble, and if evaded, can even land you in prison. Yikes.  

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