The Truth About Business Transition         Are You Ready?
What is Business Transition ?     It consists of planning & implementing the actionsrequired to successfully transfer busi...
Surviving Transitions isn’t Easy               The The oddssurviving a transition from                Theodds of surviving...
The Approaching Wave• Most private businesses will be closed, sold or turned over to   others by 2015• Trillions of dollar...
How Important Will Transaction Proceeds Be To Financing Your Retirement?Do You Have to Sell to Retire?                    ...
Is there a Wealth Gap?    What’s needed          Exit Value        from the                              $$$    business t...
Owners Need to Address the Basics  When?       It occurs at the time of the owner’s              choosing              It ...
When are You Going to Transfer?           When Do You Plan To Exit Your Business? Over 15 years                           ...
What is Your Plan for the Business?                                How Do You Think You Will Exit From Your Business?     ...
How Much will You Get for the Business?                  10
Is this You?•   Working less in the next few years•   Considering how to ultimately leave your business•   Not sure how yo...
Have You Prepared A Transition / Succession Plan?Do You Have a Plan?                                            Yes, Forma...
Why is Transition Planning so Difficult? •   Fear of Loss of Wealth:               “It took me 30 years     to build this ...
What are the Benefits of Planning?    Improved financial stability     Increased business value Maintained employee harmon...
Familiar????   What comes first?   • The Transaction   • The Management of the Transition   • The Strategy for the Transit...
16
Key Issue 1 - Understanding Value Worlds                  17
Looking with Buyers’ Eyes•   Earnings quality & transparency•   Equity risk factors•   Growth strategies•   External facto...
Non-financial Factors Investors Value                                                                                     ...
Key Issue 2 – Contingency Plan                                 What written• If your exit strategy gets                   ...
Key Issue 3 - The Different Stakeholders                     Owner                             Non-family                 ...
Key Issue 4 – The Family“I wish DAD hadn’t left the business toboth of us. It means we’re forced to be inpartnership toget...
Key Issue 5 – The Advisors       Legal,                                          Insurance &     Financial &      Banking ...
Analyzing Your Current Situation                   24
Changing the wayinvestor minded  Are you owner or you view the business           Thinking likeOwner       an owner?      ...
Building the plan based on your objectivesPre-Transition   Transition stage   Post Transition                       26
Business Transfer Spectrum                   Transfer Motives                    Transfer Channels                        ...
How Do I Decide What’s Right for Me?To Family   To Employees      To 3rd parties   IPO, VCs              or Co-owners     ...
Transitioning while Still in the Business• You have choices• You have many options holding  companies, income splitting,  ...
Creating Your Plan                     30
Get Ready•   Spouse Letter•   Set up a team of advisors•   Contingency plan – talk to family and key employees•   Transiti...
Start Now        How Ready are You?Take Our Transition Readiness Survey                  For more information:            ...
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ROCG Business Transition Powerpoint Aug 2011

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ROCG works through the setting of objectives by integrating three circles of focus; Owner, Business & Family
All three areas must be addressed in looking at the business owner’s transition objectives. It is critical to understand & identify the transition objectives for the owner, the business & the family, as well as understand how they integrate with each other.

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ROCG Business Transition Powerpoint Aug 2011

  1. 1. The Truth About Business Transition Are You Ready?
  2. 2. What is Business Transition ? It consists of planning & implementing the actionsrequired to successfully transfer business wealth both while operating the business & upon exit Succession – Replacing the owner as an Operating Officer Transition deals with Transition both the owner’s role Exit – in the business & their Transferring ownership investment in it. of the business 2
  3. 3. Surviving Transitions isn’t Easy The The oddssurviving a transition from Theodds of surviving to the the odds of of surviving to third the founding generation3% the next are fourth generation is to generation is 12% 30%.Given these odds, why don’t owners begin treatingsuccession planning the same as they would treatretirement & estate planning? 3
  4. 4. The Approaching Wave• Most private businesses will be closed, sold or turned over to others by 2015• Trillions of dollars will be transferred as a result• The largest transfer of wealth in our history• There will be fewer buyers than sellers Less than 40% successfully transition their businesses, yet 75% say they need to sell or transfer their business to finance their retirement 4
  5. 5. How Important Will Transaction Proceeds Be To Financing Your Retirement?Do You Have to Sell to Retire? Not Important Critical 16% 15% Somew hat Important 21% Very Important 28% Important 20% © Copyright ROCG Americas, LLC – 2007 Survey 5
  6. 6. Is there a Wealth Gap? What’s needed Exit Value from the $$$ business to live your future lifestyle?Current Value $ 6
  7. 7. Owners Need to Address the Basics When? It occurs at the time of the owner’s choosing It occurs in accordance with the owner’s To whom? wishes for the future ownership of the business For how It occurs with a satisfactory value that much? meets the owner’s wealth objectives 7
  8. 8. When are You Going to Transfer? When Do You Plan To Exit Your Business? Over 15 years 21.31% Over 15 Years 10 to 15 years 21.51% 10 to 15 Years 5 to 10to 10 Years 5 years 29.68% 2 to 52years to 5 Years 20.72% Under 2 years 6.77% Under 2 Years 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Under 2 Years 2 to 5 Years 5 to 10 Years 10 to 15 Years Over 15 Years Series1 6.77% 20.72% 29.68% 21.51% 21.31% © Copyright ROCG Americas, LLC – 2007 Survey 8
  9. 9. What is Your Plan for the Business? How Do You Think You Will Exit From Your Business? Sell to Competitors / Suppliers Sell to Management / Key Employees Sell to Another Partner Wind It Dow n, Liquidate Assets Sell to Family in the Business Gift to Family MembersSell to Family Not Working in the Business 0.00% 10.00% 20.00% 30.00% Respondents 40.00% 50.00% 60.00% Percentage of © Copyright ROCG Americas, LLC – 2007 Survey 9
  10. 10. How Much will You Get for the Business? 10
  11. 11. Is this You?• Working less in the next few years• Considering how to ultimately leave your business• Not sure how you will actually get out Success at transitioning your• Wanting to maximize the value & wealth generated from business uses different skills your business• than building it Unsure of the value of the business to others 11
  12. 12. Have You Prepared A Transition / Succession Plan?Do You Have a Plan? Yes, Formal Written 9% Yes, Informal Not Written 33% No Plan 58% © Copyright ROCG Americas, LLC – 2007 Survey 12
  13. 13. Why is Transition Planning so Difficult? • Fear of Loss of Wealth: “It took me 30 years to build this business to what it is today……… I could lose everything. I need to protect my retirement/wealth” • Fear of Loss of Control: “This is my business. I built it & no one else can run it as well as I have. I am just not comfortable that good decisions will be made, or that proper attention will be given to important details, if I am not here watching over things” • Fear of Conflict: “My two kids both think they should be CEO. They manage differently & have different goals than I. My partner doesn’t want to retire, & his kids are not involved in the business” 13
  14. 14. What are the Benefits of Planning? Improved financial stability Increased business value Maintained employee harmony Prepared my successor Maintained family harmony Financial stability to Business Minimize tax liability Providing for familys future 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 14
  15. 15. Familiar???? What comes first? • The Transaction • The Management of the Transition • The Strategy for the Transition "Hang on...We must be doing something wrong...How does that saying go again?" 15
  16. 16. 16
  17. 17. Key Issue 1 - Understanding Value Worlds 17
  18. 18. Looking with Buyers’ Eyes• Earnings quality & transparency• Equity risk factors• Growth strategies• External factors• Do the words & the music match 18
  19. 19. Non-financial Factors Investors Value Only 1 in 10 can consistently achieve their Strategy’s full Non-Financial Factors potentialValued Most By Investors <10% Strategy Strategy Execution Execution >90% Management Credibility Quality of Strategy Companies Not Delivering Consistently on Strategy Innovativeness Attract Talented 95% of employees don’t understand company strategy People 50% of average employee’s time spent on non- productive work 50% more likely to have turnover Sources: “The Balanced Scorecard” David P. Norton; Arthur Andersen estimate: Corporate Strategy Board research; Measures That Matter,” Ernst & Young, LLP, Gates, Stephen, Aligning Strategic Performance Measures & Results 19
  20. 20. Key Issue 2 – Contingency Plan What written• If your exit strategy gets agreements do derailed…what’s the plan? you have that• If your health fails…what’s provide for the Plan B? orderly• What will you say to your transfer of spouse? ownership if you die or are• Who can take over at a disabled? moment’s notice? 20
  21. 21. Key Issue 3 - The Different Stakeholders Owner Non-family Owners/Investors Owner Inactive Managers Family Family Owners Owners/ Managers Business Family Family Family Non-family Employees Managers & Employees 21
  22. 22. Key Issue 4 – The Family“I wish DAD hadn’t left the business toboth of us. It means we’re forced to be inpartnership together.” 22
  23. 23. Key Issue 5 – The Advisors Legal, Insurance & Financial & Banking Investment Professionals Professionals Owner Business Operations ConsultantsA coordinated A set of appropriate response recommendations AND a team that can implement the plan 23
  24. 24. Analyzing Your Current Situation 24
  25. 25. Changing the wayinvestor minded Are you owner or you view the business Thinking likeOwner an owner? InvestorMinded Minded Thinking like an investor? Time 25
  26. 26. Building the plan based on your objectivesPre-Transition Transition stage Post Transition 26
  27. 27. Business Transfer Spectrum Transfer Motives Transfer Channels Transfer Methods Internal External• Employees • Outside (Retire)• Charitable Trusts • Outside (Continue)• Family • Public• Co-Owners 27
  28. 28. How Do I Decide What’s Right for Me?To Family To Employees To 3rd parties IPO, VCs or Co-owners Transition Objectives 28
  29. 29. Transitioning while Still in the Business• You have choices• You have many options holding companies, income splitting, estate freezes…ESOP’s Charitable Trusts…Gifts…. Dutch Auctions…. 29
  30. 30. Creating Your Plan 30
  31. 31. Get Ready• Spouse Letter• Set up a team of advisors• Contingency plan – talk to family and key employees• Transition plan - as important as a business plan• Business valuation• Measure the gap• Optimize your business• Eliminate as much as possible the business’ dependency on you! 31
  32. 32. Start Now How Ready are You?Take Our Transition Readiness Survey For more information: Lewis Hunter and Jim Molis (904) 731-9222 and (904) 338-3277 Lewis .Hunter@rocg.com Jim.Molis@rocg.com 32

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