Exit Planning Opportunities for Advisors
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Exit Planning Opportunities for Advisors

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  • Introduction designed to demonstrate credibility. In MFC’s case he can demonstrate that he has experience working in both arenas and mention some of the experience he has had in trying to sell businesses in an envrionment is not designed to do so.

Exit Planning Opportunities for Advisors Exit Planning Opportunities for Advisors Presentation Transcript

  • Exit Planning Opportunities for Business Advisors Michael F. Coyle, CBI Principal/Exit Planning Advisor, CenterPoint Business Advisors
  • Introduction
    • Wiifm
    • Need for Exit Planning
    • Exit Planning as an Opportunity for Business Advisors
    • Seven Step Exit Planning Process
    • Video Scenarios
    • Your Three Big Ideas
    • Valuable Walking Away Items
  • Wiifm #1
    • Exit Planning is a excellent way for all Business Advisors to build client loyalty
    • Become the “Trusted Advisor”
    • Strengthen the moat around your client
  • Introducing Michael F. Coyle, CBI
    • Principal, CenterPoint Business Advisors, Inc.
    • Exit Planning Advisor, Business Enterprise Institute
    • Certified Business Intermediary (CBI) Awarded by the International Business Brokers Association
    • MBA – Boston College, Carroll Graduate School of Management
    • Serial Entrepreneur
  • CenterPoint Business Advisors, Inc. assists the owners of small to mid-sized businesses in planning for and executing the most important financial event of their lives...the inevitable exit from their business.
  • The Reality For Business Owners
    • 80% of business owners are exiting their business to retire, they are not serial entrepreneurs
      • The principal fear is “Will I have enough money so that I can fund my retirement lifestyle without running out of money”?
      • Other considerations may include wealth transfer to the next generation, charitable giving, and minimizing taxes
  • The Reality For Business Owners (2)
    • Typically 50-75% of a business owner’s net worth is in their business assets. The balance is in their personal real estate & financial investments
    • Business owners typically only have one chance to transfer their largest asset
    Equities Real Estate Business
  • The Reality For Business Owners (3)
    • Most business owners have only an anecdotal perception of the value of their business “My brother in law knew a guy who had a business like mine that sold for…”
    • Relying on this type of perception can lead to large gaps in future wealth and quality of life
    "Paper or Plastic"
  • The Reality For Business Owners (4)
    • 85% of all small business owners do not have an exit plan, a wealth management plan, and/or an advisory team to assist them
    • Very few start the process early enough to achieve the maximum benefit of exit planning
  • There Are Only 4 Places Our Client’s Money Can Go
    • Exit Planning will help them decide where their hard earned assets end up!
  • Typical Business Owner Concerns
    • Who should I transfer my business to?
      • Family, Employees, Partners, a 3 rd party
    • When is the right time to leave my business?
    • What is my business really worth?
    • What is the right deal structure?
      • Tax avoidance vs. future risk
    • How do I ensure that I meet all of my future goals and expectations?
  • Wiifm # 2
    • Create customer satisfaction by helping your clients achieve their life’s goals
  • The Concept of Exit Planning From The Endless Focused Work in Building a Business…
  • ... To Your Clients Achieving Their Life’s Next Goals:
  • Takes A Cohesive Team Approach
    • Accounting Team
    • Legal Team
    • Wealth Planning Team
    • Risk Advisors
    • Business Advisory
    • Intermediary Team
    • Exit Planning Advisor
    • Your Client
  • Wiifm #3
    • New revenue opportunity that is value-based not hourly-based and is proactive and not reactive
  • Ingredients of a Successful Exit
    • A written Exit Plan based on the owner’s objectives.
    • An experienced team of advisors to design and implement the plan.
    • Cash flow and a quantified business value.
    • A strong management team in place.
    • Time.
  • The Exit Planning Process
  • Step One: Identify Exit Objectives
    • “ When a man does not know which harbor he is heading for, no wind is the right wind .” - Seneca
  • Step One: Identify Exit Objectives
    • Universal Objectives
    • How much longer does the owner want to work in the business before retiring or moving on? _________ years
    • What annual after-tax income does the owner want during retirement (in today’s dollars)? $_________
    • To whom does the owner want to transfer the business?
      • Family?
      • Co-Owner?
      • Key Employee(s)?
      • Outside party?
      • ESOP?
  • Step One: Identify Exit Objectives
    • Working with a Team of Advisors
    • No one professional has all the answers.
    • Diverse skills and talents are necessary.
    • Team approach minimizes time and cost.
      • If properly facilitated and led.
  • Wiifm #4
    • Working with a Team of Advisors Generates New Referral Clients
  • Step One: Identify Exit Objectives
    • Who is on the Advisor Team?
    • Valuation Specialist
    • Business Intermediary
    • Investment Banker
    • Business or Management Consultant
    • Banker
    • Exit Planning Advisor
    • Financial Planner
    • Insurance Advisor
    • Investment Advisor
    • Business Attorney
    • Estate Planning Attorney
    • CPA/Accountant
  • Step Two: Quantify Business and Personal Financial Resources
    • “ Beauty is in the eye of the buyer.”
  • Business Value
    • Benefits to the Owner
    • Provides a baseline business value by projecting cash flow.
    • Measures business and personal resources both today and as a basis for future projections.
    • Allows them to monitor progress toward the stated objectives.
  • Step Three: Maximize and Protect Business Value
    • “ Making a silk purse from a sow’s ear.”
  • Step Three: Maximize and Protect Business Value
    • Benefits to the Owner
    • Grow business value and intangible value of the business.
    • Reduce income taxes upon sale of business.
    • Protect assets from potential business and personal creditors.
    • Create ability to sell the business.
    • Motivate and keep Key Employees.
  • Step Three: Maximize and Protect Business Value
    • Promote Value Through Value Drivers
    • Focus on increasing cash flow.
    • Develop operating systems that improve sustainability of cash flows.
    • Solidify and diversify customer base.
    • Implement strategies to grow the company.
    • Improve company performance as measured by industry metrics.
    • Build a solid management team and groom a successor.
  • Step Four: Ownership Transfer to Third Parties
    • “ Making a mountain out of a molehill.”
  • Step Four: Ownership Transfer to Third Parties
    • Benefits to the Owner
    • Cash at closing.
    • Eliminate financial risk.
    • No family succession issues.
    • Speed of exit.
  • Step Four: Ownership Transfer to Third Parties
    • Third Party Sales – Not Just About the Business
    • Ability to sell and business value are determined by:
      • Intrinsic Value: the value drivers.
      • Extrinsic Value: the value the market places on the business.
      • Effectiveness of the sale process.
  • Step Four: Ownership Transfer to Third Parties
    • Current M & A Marketplace
    • Of businesses with sales of less than $10 million per year, 20 percent are for sale, but only one out of four actually sells.
    • Businesses with sales of $10 million per year aren’t much better – only one-third sell.
    • Above $10 million per year, the odds improve to 50-50.
  • Step Five: Ownership Transfer to Insiders
    • “ Making a molehill out of a mountain.”
  • Step Five: Ownership Transfer to Insiders
    • Benefits to the Owner
    • Achieves Exit Objective of:
      • Selling to Key Employee Group (KEG).
      • Transferring to a Family Member.
    • Motivates and retains key employees.
    • Planning reduces risk and increases amount of money received.
  • Step Six: Business Continuity Planning
    • “ Making sure the business continues when the owner doesn’t.”
  • Wiifm #5
    • Adhering to your professional standards to help your clients. It is simply the right thing to do.
  • Step Six: Business Continuity Planning
    • Benefits to the Owner
    • Objectives can still be achieved if you don’t survive your exit.
    • Retains ownership and control of company if co-owner departs.
    • Can force non-contributing owners to leave the business.
    • Provides consistency between lifetime and death objectives.
    • Ensures survival of the business for the benefit of others.
    • Results in family receiving value of owner’s interest, in cash.
  • Wiifm #6
    • Advisory services that are forward looking not rearward looking
  • Step Seven: Personal Wealth and Estate Planning
    • “ When the ‘slings and arrows’ of outrageous fortune befall you, fight back.” - William Shakespeare (Hamlet)
  • Step Seven: Personal Wealth and Estate Planning
    • Benefits to the Owner
    • Preserve wealth, minimize taxes using both lifetime and death planning tools.
    • Coordinates and integrates lifetime exit objectives wishes with estate plan.
    • In effect, estate planning becomes part of business and exit planning.
  • Wiifm #7
    • Services that are not compliance driven and can be scheduled
  • The Exit Planning Process
  • The vast majority of owners are unaware there is a specific planning and implementation process that can help ensure they achieve their objectives. Most business owners spend more time planning a family vacation than how to exit from their business. This is not due to a lack of desire or intelligence. It is simply because they don’t know how or where to begin.
  • Wiifm #8
    • Differentiate yourself in the market by assisting your business owner clients with the single most important financial event of their lives… exiting their business.
  • How Much Does this Cost?
    • It depends, on size, complexity & the amount of pre planning a business owner has done in the past
    • The process can take 3-7 years
    • Exit Planning done right has Design, Implementation and Maintenance phases
    • Typically a business owner will spend 1.5 -3.0% of the value of his/her business in all Exit Planning activities
    • ROI on Exit Planning
  • Exit Planning Timeline
  • Perfect Prospect Profile
    • Business owner between 45-55 years old
    • Owner controls all or nearly all of the ownership
    • Owner’s personal net worth is tied closely to the value of the company
    • Business has $3+ million in annual sales and free cash flow
    • 10+ years in business 15+ employees
    • Management team in place other than owner
    • Owner believes the business is marketable but does not know the process of selling a business
  • Wiifm Summary
    • #1 Build client loyalty , strengthen the moat around your client
    • #2 Create customer satisfaction by helping your clients achieve their life’s goals
    • #3 New revenue opportunity that is value-based not hourly-based and is proactive and not reactive
    • #4 Working with a team of advisors generates new referral clients
  • Wiifm Summary (2)
    • #5 Adhering to your professional standards to help your clients. It is simply the right thing to do
    • # 6 Advisory services that are forward looking not rearward looking
    • #7 Services that are not compliance driven and can be scheduled
    • #8 Differentiate yourself in the market by assisting your business owner clients with the single most important financial event of their lives… exiting their business
  • Ways to get started with Exit Planning
    • Join my Linkedin Group “Exit Planning for Advisors: New England” Information & networking opportunity
    • Explore the handout materials and try out the questions in the Business Owner Exit Planning Checklist
    • Read How to Run Your Business So you Can Leave It In Style by John Brown
    • Ask about White Papers on Exit Planning topics
  • Ways to get started with CenterPoint(2)
    • Sign up to receive from me a bi-monthly, advertising free newsletter, Exit Planning Review
    • Invite me to speak to your associates or partners about exit planning as a business opportunity
    • Call me about a specific client opportunity where you wish to discuss exit planning
    • Have me conduct a FREE 90 minute Exit Planning Readiness Assessment for any of your clients you think might benefit from exit planning.
  • What are Your Big Ideas? A must read reference guide for today’s Professional that will be assisting their client’s in Exit Planning