Business Exit Planning

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Successful Transfer of The Family Business

​What could be easier than transferring your family business to its natural successor: your heirs apparent, your offspring? If some of your first guesses were peace in the Middle East, increasing honesty in politics, or convincing a teenager that he or she might be wrong about something, you have probably witnessed your share of family-business transfer disasters. 

Statistics widely quoted by Estate Planning writers indicate that "only" one-third of all family-owned business are passed on to the second generation, and "only" 10% of family-owned businesses are transferred to a third generation. Experience indicated that those statistics are wildly optimistic and overstated.

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Business Growth by Acquisition

This white paper is dedicated to the owner seeking to exit his or her business in style. Acquiring other businesses is a tool that business owners use when growing their own businesses. The operative word is growing since the purpose of growing your business through acquisition is to increase the value of your existing business.

Recall the first three Steps of The BEI Seven Step Exit Planning Process:
1. Set Exit Objectives
2. Determine the value of your business
3. Increase the value of your business

This white paper will help you accomplish Step Three.

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December 2017 Newsletter

Better Benchmarks for Financial Balance!  While every personal economy is different, key aspects of successful wealth management can be articulated with simple benchmarks which, if followed, give you a solid chance of surviving or thriving under most circumstances. Many of the personal finance metrics still in use today trace their origins to ...
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November 2017 Newsletter

How would you pay $50,000 in medical bills, due over the next six months? Much of the planning in personal finance is focused on the future, like how much needs to be saved to retire, and how much of what's saved can actually be spent. But the future has a slim chance of coming to fruition if the financial challenges of the present aren't adeq...
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October 2017 Newsletter

We are captivated by events in which small, ordinary actions produce extraordinary results. In the financial world, this delight and wonder is often directed toward compounding, the way invested money can seemingly multiply itself. But sometimes we are so intrigued by the extraordinary aspects of compounding that we overlook the ordinary actions th...
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September 2017 Newsletter

Just because you have a plan doesn't mean it will work. An integral feature in many personal financial programs is a projection of future accumulations, and the retirement income this accumulation could provide. This projection is derived from a combination of the number of years (to accumulate and decumulate), the amount of money (either deposited...
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August 2017 Newsletter

You are not so smart-but you can get lucky! I f you want to be successful, you should emulate successful people. Seems logical, right? But David McRaney, author of the 2011 book, "You Are Not So Smart," says the successful – great athletes, wealthy business owners, popular entertainers, powerful politicians – may not know the secrets to their succe...
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July 2017 Newsletter

                        Professional Assistance = Time Management How much of our time is spent merely existing instead of living? This was the question posed by Arnold Bennett in his 1910 book "On Living." Bennett, a novelist and maga...
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June 2017 Newsletter

                                   The Same Retirement in Feet & Meters ! B oth the English and Metric systems provide accurate measurements of distances, weights and volu...
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May 2017 Newsletter

Financial Ideas That Have "Jumped The Shark"!    I n September 1977, the hit TV show "Happy Days" started its fifth season. Since its debut, the situation comedy about 1950s-era high schoolers had seen a once-minor character, Arthur Fonzarelli – "the Fonz" – become a pop-culture icon for his leather jacket and cool demeanor. The season-op...
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April 2017 Newsletter

                       Can You Be Trusted with Your Money? An underlying assumption in much commentary about personal finance is that most people are terrible with money. Financially illiterate, manipulated by marketing, distracted by present co...
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March 2017 Newsletter

Knowing the Reasons NOT to! When it comes to assessing your relationship with the professionals that provide input and products for your financial transactions, one of the things you might want to evaluate is how well these people can explain the reasons not to do something, especially the things that they most often recommend or support. Some exam...
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February 2017 Newsletter

Capital Management: Your Economic Edge over Automation! Whatever you're doing right now to earn a living, there's a good chance much of your work could eventually be done by a machine. In fact, some futurists predict machines will do all our work. On first exposure, this may seem ridiculous. But both history and current developments make a reasonab...
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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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