The document discusses business transition planning and succession. It notes that less than 40% of businesses successfully transition ownership, yet most business owners will need to transfer their businesses by 2015. Proper transition planning is important to maximize business value and provide financial security in retirement. The benefits of planning include improved financial stability, increased business value, and prepared successors. However, many owners fear loss of control and family conflicts. The key issues in transition include understanding how buyers value businesses, having contingency plans, managing different stakeholder interests, planning for family involvement, and coordinating advisors. Analyzing the current situation and building a customized transition plan based on objectives is important.

1. The Truth About Business Transition
Are You Ready?

2. What is Business Transition ?
It consists of planning & implementing the actions
required 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
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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 treating
succession planning the same as they would treat
retirement & estate planning?
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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
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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
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6. Is there a Wealth Gap?
What’s needed Exit Value
from the
$$$
business to live
your future
lifestyle?
Current Value
$
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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
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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
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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 Members
Sell 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
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10. How Much will You Get for the Business?
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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
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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
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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”
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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 family's future
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
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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?"
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16. 16

17. Key Issue 1 - Understanding Value Worlds
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18. Looking with Buyers’ Eyes
• Earnings quality & transparency
• Equity risk factors
• Growth strategies
• External factors
• Do the words & the music match
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19. Non-financial Factors Investors Value
Only 1 in 10 can consistently
achieve their Strategy’s full
Non-Financial Factors potential
Valued 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
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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?
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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
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22. Key Issue 4 – The Family
“I wish DAD hadn’t left the business to
both of us. It means we’re forced to be in
partnership together.”
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23. Key Issue 5 – The Advisors
Legal,
Insurance &
Financial &
Banking Investment
Professionals Professionals
Owner
Business Operations
Consultants
A coordinated A set of appropriate
response recommendations
AND a team that can implement the plan
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24. Analyzing Your Current Situation
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25. Changing the wayinvestor minded
Are you owner or you view the business
Thinking like
Owner an owner?
Investor
Minded Minded
Thinking like
an investor?
Time
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26. Building the plan based on your objectives
Pre-Transition Transition stage Post Transition
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27. Business Transfer Spectrum
Transfer Motives
Transfer Channels
Transfer Methods
Internal External
• Employees • Outside (Retire)
• Charitable Trusts
• Outside (Continue)
• Family
• Public
• Co-Owners
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28. How Do I Decide What’s Right for Me?
To Family To Employees To 3rd parties IPO, VCs
or Co-owners
Transition
Objectives
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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….
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30. Creating Your Plan
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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!
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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
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