exit strategies for savvy entrepreneurs...5 exit strategies for savvy entrepreneurs 01/14/2011 risa...

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Exit Strategies for Savvy Entrepreneurs

01/14/2011

Risa Baker www.partners31.com

NASMM Annual Conference – St. Pete Beach -‐ January 14, 2011

Risa Baker, CExPTM Partners 31 A Mergers & Acquisi;ons Firm Office: 239.466.2848 Cell: 239.834.9208 [email protected] www.partners31.com


EDUCATE. PLAN. EXECUTE. SUCCEED.


“At any given time, 40% of US Businesses are facing the transfer of ownership issue.” “The primary cause for failure . . . is lack of planning.” SBA

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 and financial goals.

Why Exit Planning?


What is Exit Planning? A process, a system, an approach resulting in the

owner’s transition out of the business. Benefits to Owner:

•  Objectives Determined •  Needs Defined •  Options Discussed •  Owner Prepared

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What is Exit Planning? Successful Exit Ingredients: Ø  A plan based on the owner’s objectives. Ø  An experienced team of advisors to design and

implement the plan. Ø  Cash flow and a quantified business value. Ø  A strong management team in place Ø  Time


Step 1 – Identify Exit Objectives

Step 2 – Quantify 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

The Seven Step Exit Planning Process™


Do you know your primary

objectives in leaving the business?

“When a man does not know

which harbor he is heading for, no wind is the right wind.”

- Seneca

Step One: Identify Exit Objectives

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Universal Objectives •  How much longer do you want to work in the business before

retiring or moving on? •  How much cash do you need when you exit to support the

lifestyle you desire? •  To whom do you want to transfer the business?

Ø Family? Ø Co-Owner? Ø Key Employee(s)? Ø Outside party?



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.

Ø If properly facilitated and led.



Who is on the Advisor Team?

•  Financial Planner •  Insurance Advisor •  Investment Advisor •  Business Attorney •  CPA •  Estate Planning Attorney

•  Valuation Specialist •  M&A Advisor •  Business or Industry

Consultant •  Banker


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Do you know how much your business is worth?

“We should all be concerned

about the future because we will have to spend the rest of our lives there.” ~Charles F. Kettering

Step Two: Quantify Financial Resources


Benefits to the Owner •  Provides a baseline value, a reference point. •  Measures business and personal resources both today and as

a basis for future projections. •  Identifies “GAP” •  Allows you to monitor progress toward the stated objectives.

Step Two: Quantify Financial Resources


Do you know how to increase value? “Too many people today know the price of everything and the

value of nothing.” ~ Alan Larkin

Step Three: Maximize and Protect Business Value

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Benefits to the Owner •  Strategic plan to increase 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.



Promote Value Through Value Drivers •  Focus on increasing cash flow and profitability. •  Develop operating systems that improve sustainability of cash

flow, documents processes and procedures, differentiates. •  Solidify and diversify customer base. •  Implement strategies to grow the company. •  Improve company performance as measured by industry

metrics—Benchmarking. •  Build a solid management team and groom a successor.



Looking for a third party buyer? Know what they want!

“Making a mountain

out of a molehill.”

Step Four: Ownership Transfer to Third Parties

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Benefits to the Owner •  Cash at closing. •  Eliminate financial risk. •  No family succession issues. •  Speed of exit.



Third Party Sales – Not Just About the Business Financials •  Ability to sell and business value are determined by:

Ø Intrinsic Value: the value drivers. Ø Extrinsic Value: the value the market places on the

business. Ø Effectiveness of the sale process.



Current M & A Marketplace •  20 percent of businesses are for sale, but only one out of five

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. •  Always a market for companies that are prepared.


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Do you know how to transfer your business to family members, co-owners, employees?

“Making a molehill

out of a mountain.”

Step Five: Ownership Transfer to Insiders


Benefits to the Owner •  Achieves Exit Objective of:

Ø Selling to Key Employee Group (KEG). Ø Transferring to a child.

•  Motivates and retains key employees. •  Planning reduces risk and increases amount of money

received.

Step Five: Ownership Transfer to Insiders


Have you implemented necessary steps for the business to continue?

“Making sure the business continues

when the owner doesn’t.”

Step Six: Business Continuity Planning

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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.

Step Six: Business Continuity Planning


Have you provided for your family’s security?

“Planning is bringing the future into the present so that you can do something about it.” ~ Alan Larkin

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.

Step Seven: Personal Wealth and Estate Planning

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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 and financial goals.

Conclusion


Conclusion

•  Initiate and Implement Process •  The WRONG Decision is Indecision. •  Winston Churchill observed: “I never worry about action, but only about inaction.”

•  The key is ACTION.


Conclusion—Seven Step Action Plan

•  Acknowledge sooner than later that you will leave your business

•  Determine the value of your business •  Form an Advisory Team •  Examine each of the ways you can leave your

business •  Motivate and keep your key employees •  Ask attorney to draw up Business Continuity

Agreement •  Design an estate plan that meets your personal

objectives

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Thank You For Attending

How May I Help?

Please Contact Us for Information on a Personalized Assessment—Analysis—Action Plan

Presented by

Risa Baker Partners 31

A Mergers & Acquisitions Firm Member Business Enterprise Institute and CExPTM

Office: 239.466.2848 Cell: 239.834.9208

[email protected] www.partners31.com

exit strategies for savvy entrepreneurs...5 exit strategies for savvy entrepreneurs 01/14/2011 risa...

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