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Exit Planning Overview

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Overview of a 7 step process for planning your future Business Exit.

Overview of a 7 step process for planning your future Business Exit.

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  • What is exit planning ? Well, it’s pretty simple. We follow a systematic process. We have seven steps and these seven steps do not necessarily occur in this order but we do need to ensure that we accomplish all of them. The one step that must happen first is Identifying Exit Objectives. In this step, it is our job to determine exactly what you want to accomplish in leaving your business, and that oftentimes goes far beyond the basic objectives - when you want to leave, how much money you will need, and so forth to - to other objectives . Once we understand your objectives in leaving your business, our next step is to Quantify your Business and Personal Resources, in terms of your objectives. In other words, the value we place on the business and what you take from the business financially may be two different things. Our job with the valuation step is to control the tax consequences . Our third step, Maximizing and Protecting Value, is an equally important step. Here, this is the place where we preserve value from the grasp of your silent business partner, the IRS. We need to protect value from current and future creditors and we also need to and most importantly need to promote value, grow value in your business throughout this transition process, and we’ll talk quite a bit about that today . Steps four and five really go together . Are we selling this business to a third party for cash? Are we selling this business to a insider , family member, key employee, key employee group? Are we selling it an insider for a note? Our sixth step is Business Continuity Planning, or the “what happens if you gets hit by a bus” step. Here we ensure that your family will benefit from your life’s work if, if something should happen to you. Finally, we have our Personal Wealth and Estate Planning step, and this is where we ensure that the wealth your have accumulated and the wealth you take from the business accomplishes your goals and those of generations to come. Quite honestly, what we’re doing here is trying to minimize the tax consequences to both the owner and your family in the transfer of that wealth. So, let’s dive in and take a look at each of these steps independently and get a better grasp on the kinds of things that you should do if you are going to successfully, and I mean successfully under your terms, leave your business (NEXT SLIDE)

Exit Planning Overview Exit Planning Overview Presentation Transcript

  • The Exit Planning Executive Briefing Presented by Bill Black, Certified Exit Planner Exit & Retirement Strategies, Inc. (866) 370-3774 Email: BillBlack@Exit-Retire.com A member of Business Enterprise Institute’s Network Of Exit Planning Professionals™
  • Ingredients of a Successful Exit
    • An 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 Seven Step Exit Planning Process™
      • Step 1 – Identify Exit Objectives
    Step 2 – Quantify Business and Personal Financial Resources Step 3 – Maximize and Protect Business Value Step 4 – Ownership Transfer to Third Parties Step 5 – Ownership Transfer to Insiders Step 6 – Business Continuity Step 7 – Personal Wealth and Estate Planning
    • “When a man does not know which harbor he is heading for, no wind is the right wind.”
    • - Seneca
    Step One: Identify Exit Objectives
  • 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.
  • Step One: Identify Exit Objectives
    • Who is on the Advisor Team?
    • Financial Planner
    • Insurance Advisor
    • Investment Advisor
    • Business Attorney
    • Estate Planning Attorney
    • CPA
    • Valuation Specialist
    • Business Broker
    • Investment Banker
    • Business or Management Consultant
    • Banker
    • “Beauty is in the eye of the buyer.”
    Step Two: Quantify Business and Personal Financial Resources
  • Business Value
    • Benefits to the Owner
    • Provides a baseline value by projecting cash flow.
    • Measures business and personal resources both today and as a basis for future projections.
    • Allows you to monitor progress toward the stated objectives.
    • “Making a silk purse from a sow’s ear.”
    Step Three: Maximize and Protect Business Value
  • 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.
    • “Making a mountain out of a molehill.”
    Step Four: Ownership Transfer to Third Parties
  • 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
    • 20 percent of businesses 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.
    - 2005 Business Reference Guide by Tom West
    • “Making a molehill out of a mountain.”
    Step Five: Ownership Transfer to Insiders
  • Step Five: Ownership Transfer to Insiders
    • Benefits to the Owner
    • Achieves Exit Objective of:
      • Selling to Key Employee Group (KEG).
      • Transferring to a child.
    • Motivates and retains key employees.
    • Planning reduces risk and increases amount of money received.
    • “Making sure the business continues when the owner doesn’t.”
    Step Six: Business Continuity Planning
  • 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.
    • “When the ‘slings and arrows’ of outrageous fortune befall you, fight back.”
    • - William Shakespeare (Hamlet)
    Step Seven: Personal Wealth and Estate Planning
  • 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 planning.
  • How the Exit Planning Process Works
    • 1. Information
      • We collect your information and goals and build “your story”
    • 2. Education
      • We develop a list of strategies for you to consider
      • We refine the list with you to a TOP 10 list
    • 3. Collaboration
      • We work with your Advisor Team to get consensus and develop a complete a Final Strategy Playbook
    • 4. Implementation
      • We assign tasks to your Advisor team members for completion
  • In Summary At some point, every owner leaves his or her business - voluntarily or otherwise. At that time, every owner wants to receive the maximum amount of money in order to accomplish personal, financial, income and estate planning goals
  • Next Steps
    • Take a free assessment survey to determine your readiness for exit planning and establish Priority Planning Areas. Available online at http://www.surveymonkey.com/s/ExitPlanning
    • Subscribe to our free E-Newsletter on Exit Planning at http://short.to/87zc
    • Email to request a telephone consultation [email_address]