Small to medium sized (SMB) business owners need a plan for exiting their business. Over 50% of business owners plan to exit their business in the next 10 years. Don't be left out in the cold with no one to sell your company to.

1. AVOID THE TRAIN WRECK: SUCCESSFUL
OWNERSHIP TRANSITIONS
Paula Workman White, CCIFP

2. THE OPTIONS
1. Transfer to family
2. Transfer/sell to an employee(s)
3. Sell to a 3rd Party
4. Liquidate
5. Combination of above

3. • Trends and Pitfalls
• Main Causes of Wrecks
• What Success Looks Like
AGENDA

4. TRENDS AND PITFALLS

5. • Majority of Business Owners plan to exit in the next
decade
• At $6 Trillion, it is the largest wealth transfer in
history
• 76% businesses do not have a plan in place
Why Not?
• 48% feel they are indispensable or lack qualified
successors
• Children are no longer interested in taking over
• 30% say they are focused on growing the business
TRENDS
Based on the Securian Financial Services Study 2014

6. RISKS OF NO (OR WEAK) PLAN
Restaurant
Contractor in town
The longer you wait to develop a plan, the greater the probability you will not succeed
in protecting and extracting the wealth you created.

7. • “When you talk about succession, I get fearful of something
going wrong and losing my reputation or my hard-earned money.”
• “I know I need to prepare, but I don’t even know where to start.”
• “Not a big deal, ‘Bob Jr.’ is taking over when I am ready.”
WHAT I HEAR FROM CURRENT OWNERS

8. BASIC CHALLENGES
• Lack of time
• Lack of expertise
• Complexity or multiple shareholders
• Balancing liquidity (cash) demands

9. MAIN CAUSES OF TRAIN WRECKS
• Unresolved conflict among owners
• Lack of leadership skills among emerging owners
• Failure of prior owners to “let go”
• Poor cash management of new ownership
• Little or no planning
Leads to 70% Failure rate

10. WHAT SUCCESS LOOKS LIKE

11. BENEFITS OF A PLAN
Benefits to Owner(s)
• Better sleep at night
• Control of destiny
• Pride in accomplishment
• Professional goals aligned with personal goals
Benefits to Organization
• Long-term sustainability and growth
• Minimizes exposure to unexpected, untimely events
• Employee development and retention

12. 1. “House in Order”
• Clean, accurate financial information
• No “showstoppers”- tax issues/lawsuits
• Diversified customer base
2. Solid earnings & cash flow
3. Leadership Succession
THE PREPARED COMPANY

13. BASICS OF A PLAN
1. The Who
2. The When
3. The Worth

14. THE WHO
Traditionally, successors are named because:
• They want to run the business (or are family)
• They have management experience
• They have the technical knowledge
• They have the money/credit needed to buy out the owner

15. SUCCESSOR OPTIONS
• A Successor-Owner
• A Successor-Manager

18. We are ‘Wired’ differently
• How we Lead
• How we Operate
• How we Make Decisions
• How we View Success

19. GAME CHANGER
• Future leadership likely is not the same as exiting leadership
• Does not disqualify candidates
• May include additional candidates
• May need more than one candidate
• May need to adjust the rest of the executive team

20. THE WHEN
• How long does the owner want to stay involved?
• How can we honor their goals while minimizing risk to the company and
maximizing wealth of the owner?
• The minimum track or “runway” is usually 2.5 years for transfer to next
generation, sale to employee(s), or sale to 3rd party.

21. THE WORTH
• Is a Company Valuation needed?
• Lowest defensible vs. max value
• How frequent are valuations needed in future?
• Does the owner want to ride the wave? Or cash out now?
• What increments will be the payouts?
• What medium will be used (stock/cash) to transfer ownership?
• How can we minimize Uncle Sam’s cut?

22. HOW TO BEAT THE STATISTICS
• Open, honest, & frequent communication
• Leadership, both emerging and exiting
• Strong functional capabilities (marketing/sales, ops, fin/admin)
• Written plan with realistic timeline
• Consider personal goals of all parties
• Mindful of future business success
• REASONABLENESS!!

23. Planner
Financial/Cash
Flow
Legal
Documents
Tax Strategies
Personal
Wealth
Wills & Estates
Leadership
Succession
Financing

24. • Significant asset
• Why do I care about my successor?
• More of an art than a formula
• Avoid the ‘stop and do’ mentality
SELLER BEWARE

25. WHEN TO PLAN?
• “One intense hour… will do more than dreamy years.”
- Henry Ward Beecher
• Each day you wait to start = $1,000s in lost valuation
• Each day you wait to start is 1 less day you have at your
next “destination” …

26. If you don’t know where you are going,
you could end up someplace else. -Yogi Berra

27. Industry Value Guide:
• “Rule of thumb”
valuation
• Industry benchmarks
• Industry trends
Leadership Succession Planner:
• Proprietary
• Step-by-step
EXCLUSIVE RESOURCES
Paula Workman White
paula@workmanwhite.com
(512) 844-9660
www.workmanwhite.com/resources