7 key strategies for coaching a business owner who wants to sell presented by susan rosner

7 Key Strategies For Coaching a Business Owner Who Wants To Sell

Presented By Susan Rosner

THE OWNER WILL EVENTUALLY LEAVE

There Is Only One Thing in Business That Is Certain

Potential Exit Strategies

Sell to a Third partyBe AcquiredMerge

Go PublicHave a family member take overEmployee Buy-outGo out of Business

Current Situation

Only 25% of businesses that are “For Sale” actually sell

Privately Held Business with Sales of $500K to $25M

Unrealistic expectations Business isn’t marketable

7 Key Strategies1. Align Personal and Business Goals with the market

reality2. Educate the business owner on what drives a

company’s value and how they can control it 3. Conduct an in depth Business Analysis from the

“outside in”4. “Quarterback” the development and implementation

of a realistic exit plan with key advisors5. Implement value enhancement strategies6. When the time is right-Implement a strategy for

selling the business7. Keep the business owner focused on what’s important

Strategy #1Align personal and business goals with the market reality

Key Alignment Areas

Financial Does the owner know how much they have

to “net” after taxes to support their lifestyle after the sale of the business?

Key Alignment Areas

Business Is the business ready to sell for premium

value? Is the owner ready, willing and able to

implement enhancement strategies to increase value?

Key Alignment Areas

Emotional What’s the “After business” plan? How will family/partner dynamics influence

the decision to sell?

Actions:Financial Review current personal financial plan Determine how important the sale of the business is to

the personal financial planBusiness “Quick review” of financials to determine potential

range of valueEmotional Develop options for transition and post-sale plans Uncover impact on sale to family and partners

Take a Moment

To write down your questions about Strategy #1

7 Key Strategies1. Align personal and business goals with the market

company’s value and how they can control it

Case Study

Revenues Company A Company B

2005 $12,000,000 $12,000,000

Net Profit on Tax Return $ 225,000 $225,000

Case StudyRevenues Company A Company B

200320042005

$6,000,000$8,000,000$12,000,000

18,000,00015,000,00012,000,000

Total Debt $1,000,000 $400,000

Average age and value of equipment

3.5 years -$1,500,000

10 years-$100,000

Owner’s vacation 8 weeks 1 week

Owner’s Salary and Benefits $1,500,000 $200,000

Net Profit on Tax Return $ 225,000 $225,000

Adjusted Net Profit $1,725,000 $425,000

Adjusted Net Profit

Net profit from Tax return Plus Owner’s discretionary income Plus non-cash deductions Plus rent (if owner owns the property) Less reasonable salary to replace the owner Less market rent

Desirability Measures

Financial health Industry Competition Local economy Management Employees Customer base Condition of FFE Reputation

Customer Orientation Sales Management Ease of operation Technology Legal

Requirements/Licenses

Location/lease Product and Service

Offered

What this all means……

To drive value you must attend to those things

which Builds revenue and profit Build long term desirability

Actions:

Calculate adjusted net profit for last three years Review financial trends for at least three years with the owner

Look at year over year comparisons available from internal accounting system or their accountant

Complete the business check-up assessment with the owner Use owner’s industry knowledge to benchmark performance Identify missing critical information and develop a strategy

with the owner for collecting (internal or external) Explore areas that drive company value and how the business

owner controls these areas

Take a Moment

7 Key Strategies1. Align personal and business goals with the market

company’s value and how they can control it 3. Conduct an in depth business analysis from the

“outside in”

Strategy #3

Conduct an in depth business analysis from the “outside in”

Market valuation Marketability assessment

Market Valuation

14 valuation methodologies Valuations may vary depending on the

buyer Valuations for business sale are different

than valuations for other purposes! Businesses over $1,000,000 in sales

must have a business valuation

In Reality

Valuations are an art and a science Valuations are a critical negotiation

tool Price must pass the test of

reasonableness A buyer must be able to have an

acceptable ROI after debt service and buyer requirements

Valuation Methodologies & Valuation Methodologies & TechniquesTechniques

Forced O rderly

Liquidation Approach

Asset Based

CapitalizedEarnings

EarningsM ethods

CapitalizedCash Flow

DiscountedCash Flow

Cash FlowM ethods

EarningsBased

M arketCom parables

G oing Concern Approach

Valuation Approaches

Marketability Assessment

Strengths Weaknesses Opportunities Threats

Types of Buyers

High Net Worth Buyer Strategic Buyer Synergistic Buyer Investment Buyer

Actions: Complete a market valuation Complete an industry benchmark

analysis Use a SWOT analysis to assess the

company from different buyers perspectives

Develop value enhancement strategies

Take a Moment

7 Key Strategies

1. Align personal and business goals with the market reality

2. Educate the business owner on what drives a company’s value and how they can control it

3. Conduct an in depth business analysis from the “outside in”

4. “Quarterback” the development and implementation of a realistic exit plan with key advisors

Strategy #4

“Quarterback” the development and implementation of a realistic exit plan with key advisors

Exit Planning Getting the business owner started is the

hardest part Exit Planning should be started at least 3 to 4

years before the owner wants to retire

Exit Planning

Select advisory team Facilitate a strategic exit planning

meeting with advisory team Document the specific tasks to be

required to achieve objectives agreed to Assign responsibilities for each task Set dates for completion Make sure everything gets done Review Yearly

The Advisory Team Accountant Tax attorney Estate attorney Transaction attorney Business consultant/coach Business intermediary

Business broker M&A advisor Investment banker

Exit Planning Consultant*

Actions: Review the importance of Exit planning with

the Business Owner Research and Select Exit Planning team Initiate initial meeting

Take a Moment

7 Key Strategies

1. Align personal and business goals with the market reality

2. Educate the business owner on what drives a company’s value and how they can control it

3. Conduct an in depth business analysis from the “outside in”

4. “Quarterback” the development and implementation of a realistic exit plan with key advisors

5. Implement value enhancement strategies

Can the Business be Replicated?

Value Enhancers

Clear vision and plan Management depth International exposure Growth opportunities Competitive advantages Properly capitalized History of profitability

Value Detractors

Lack of management depth Lack of focus Personal goodwill Concentration risk (i.e. customer

/geography) Over-leveraged Too small

Actions:

•Review the SWOT analysis results

•Review Value enhancers and detractors

•Review the Business Check-up Assessment

•Identify priority actions

•Develop and Implement Plans for Implementation

Take a Moment

selling the business

Ready To Sell

READY TO SELLsm

Tax Planning

Legal Review

Personal Financial Plan

Human Resources Audit

Valuation and

Deal Structure Analysis

Industry Trend Analysis

Analysis ofPerformance Indicators

Financial PerformanceAnalysis

Ready To SellSm

Ready to Sell

Pre-Due DiligenceThird Party ValuationAdvisory Team AlignmentMarketing Package Development

Offering MemorandumProspectus

Best Offer Marketing

Best Offer MarketingSM

Best Practices• Targeting the right buyers• Creation of a compelling future story

for:– Blind Business Profile– Confidential Memorandum

• Support of Business Advisors• Best Offer Program• Screening buyers for motivation and

financial qualifications • Confidentiality

Search

Approach And

Attract Best Buyers

Target

Research

Partnering To Close

SELLER GOAL Maximize return

BUYER’S GOALMinimize Risk

STRUCTURE

Desirability of Business

TheHUMANFactor

Partnering To CloseSM

Timeline

Activity Timeframes

Ready to Sell Month 1

Marketing Implementation

Month 2

Buyer Visits Month 3 thru 6

Due Diligence Period 60 days from LOI

Closing 60 to 90 days from end of Due Diligence

TOTAL TIME 10 to 18 monthsTimeframes are estimates only

Actions:

•Meet with Key advisors•Help the owner select a business intermediary•Align the advisory team

Take a Moment

Best Practices For The Entrepreneur

Focus on Extraordinary Execution Demonstrate

Adaptability Persuasion and Negotiation Open mindedness Ability to deal with set backs

Critical Shifts

FromMaking a livingWorking in your businessMeasuring FinancialsWorking HardManagingSelf employed

ToBuilding an EnterpriseWorking on you businessMeasuring Strategic ValueWorking SmartLeadingBusiness owner

Actions: Coach the owner on Best practices Coach the owner to work “on” the business

focusing on growth! Coach the business owner that the sale is not

made until closing papers are signed and money is in the bank!

Take a Moment

Thanks For Attending!

To request a link to this Presentation, Business Check-Up Assessment and Audio send me an email with your

feedback about the session:

susan@rrg-net.com

Mergers and Acquisitions, Consulting, Exit Planning

THANKS!

7 key strategies for coaching a business owner who wants to sell presented by susan rosner

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