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The Exit Planning Review™ is a free newsletter designed for business owners and their advisors. It is an advertising-free, highly informative newsletter delivered via e-mail with discussions about specific topics that directly affect business owners. To subscribe, please complete the form.


Past Newsletters

Where’s the Incentive in Your Incentive Plan?
Too many incentive plans have been implemented by businesses, only to find that the participants in the plan felt no “incentive” to perform in any particular way. By getting back to the basics of key employee incentive planning and trying to put the incentive back in the incentive plan, we are more likely to achieve our goals.
Improve the Odds for a Successful Third Party Sale
As Baby Boomers age and retire, an ever increasing number of businesses will become available for sale. Those that are prepared tend to fare better than those who fly by the seat of their pants when it comes time to sell. This article illuminates three aspects of the intersection between Exit Planning and third party sale transactions in order to help business owners prepare for a sale transaction well in advance.
Why Owners Choose Not To Sell
There are good reasons owners don’t sell their businesses. And then there are the not-so-great reasons: procrastination, fear of the unknown and fear of losing the known. Procrastination applies to owners who don’t know how to plan, who imagine that they can always sell at a future date or who think their businesses are so strong that no planning is necessary. This article urges readers who recognize themselves to call you and outlines ways you can help them.
Can You Afford To Sell To Your Employees?
A case study illustrates the clash between an owner’s desire to sell to employees and the employees’ lack of cash. This issue lists the three goals of any good transfer-to-employees plan, an explanation of the two-stage plan design and the four employee transfer requirements: business value, time, a cooperative bank and strong management team.
3 Keys to Identifying a “Key” Employee
Employees, through the training they receive, the processes they follow and the skills they bring to the table, often represent a critical (and sometimes the only) defining factor in the transferable value of the business. But what do we mean when we call someone a “key” employee? There are some defining factors that separate a truly key employee from all others.
Your Exit Timeline
If forced by circumstances beyond your control, you could likely exit your business within a year. Some business owners are here today and – literally – gone tomorrow, but usually not by their own choice. But leaving in style – with adequate cash and having achieved whatever other goals you have set— that takes time, far more than most owners expect. How much time? There are several Exit Planning activities that come together to create an owner’s Exit Planning timeline.
Eight Ways to Exit Your Company
Given the right circumstances, one of eight paths to leave your company may be appropriate for you. The process of determining exactly which path is best presents an obstacle to many owners. If, however, you wish to “leave your business in style,” we suggest that you work through this three-step path selection process.
Working Backwards Still Takes You Forward
Business owners are often caught in a seemingly never-ending cycle of decisions to make and things that need to get done. Jumping onto a rapidly spinning carousel can be daunting, so it is sometimes easier to busy ourselves with other things, off to the side. But planning for the future of your business and executing those plans is the only way to slow the carousel down and turn the never-ending circle into a direct path to your goals.
Dust Off and Review Your Buy-Sell Agreement
The business continuity agreement can be one of the single most important documents that you, as a co-owner of a closely held business, will sign. The following Acme In-Law hypothetical case study illustrates the importance of a well-crafted buy-sell or business continuity agreement.
Elements of a Plan to Sell to Insiders
Today we discuss 10 elements that make insider transfers successful and keep the owner in control until he or she is paid the sale price. These are important issues to consider if your desired successors do not have the funds to cash you out.
Knowing Business Value is a Very Good Place to Start
Most owners look to the value of their businesses as the chief source of liquidity for their post-exit lives. Therefore, most owners need to know the value of their companies now so they can be smart about creating greater business value in as short a time as possible. Knowing the value of your business today is critical whether you plan to leave your business tomorrow, or in five years.
Put Your Objectives in the Driver’s Seat
Unless you set and prioritize your exit goals or objectives, you may have too many, or they might conflict, but in either case you may not make much headway. Prioritizing your objectives will help you choose your overall path and gives you a framework for decision making.
Exiting Your Business is a Process, Not a Mystery
You may be able to envision your life beyond business ownership, but you may not have a clear picture of how best to “leave your business in style.”
Death And Taxes vs. Preserving Wealth – The Final Exit Planning Contest
Unless owners plan for the protection of their wealth before they have it in hand, they cannot take advantage of all of the potential benefits of the tools in the wealth preservation arsenal. A case study illustrates how an owner used one of those tools, a Grantor Retained Annuity Trust, to achieve financial security, provide for his family and minimize taxes.
Buy-Sell Agreements Should Protect You, Your Co-Owners And Your Company
A case study illustrates the dilemma that many owners face when they (or a partner) want to leave the business only to find that the buy-sell agreement they drew up years ago makes it impossible to do so. Readers are urged to review four key provisions in their agreements to determine if those agreements treat both the remaining and the departing shareholder fairly.
Business Continuity Solutions for Sole Owners
A case study illustrates what can happen to an owner’s business and his or her family when that owner fails to make contingency plans should she or he not live long enough to leave the business in style. This article outlines some simple steps sole owners can take to ensure that the companies they worked so hard to create don’t disappear if they do.
Avoiding Disaster in Business Transfers to Insiders
Transferring your business to insiders (family members or key managers) is not without risk, but those risks can be minimized given ample time to do careful planning and to build business value. This issue addresses the three biggest owner risks and outlines ways to minimize each.
Are You and Your Company Candidates for a Third Party Sale?
In this issue you’ll find an outline of the primary reasons owners choose to exit via sales to third parties. Before you consider that option, you and your company must be prepared for the sale and the M&A market should be favorable. Creating a written plan that minimizes taxes, allows you to focus on company profitability, and holds your advisors accountable for achieving your goals is key to the successful third party sale.
Building Value is the Win-Win-Win of Exit Planning
This provocative article reminds owners that buyers pay for business value—not for the selling owner’s expertise—and that Exit Planning is the process owners use to make themselves “inconsequential.” In addition to building value, Step Three involves protecting value and minimizing taxes.
What Is Your Business Really Worth?
Knowing the value of your company is a fundamental, indispensable element of sound decision making because it provides you: 1) an objective indicator of how much value needs to grow before exit and how long you must work before exiting; 2) the ability to monitor progress toward your exit; and 3) a basis for estimating (and minimizing) tax consequences of exit path alternatives. This article includes a case study and information about various types of valuations.
Selecting Your Exit Goals
The starting point for any plan is to define its goals. In Step One, owners answer three questions: 1) How much cash do they need to exit in style? 2) When do they want to exit? and 3) Whom do they want to succeed them? A case study illustrates why setting objectives, understanding how one objective affects another, creating a plan, and taking action to reach goals are critical components of a successful exit.
Exits Are Inevitable. Failure Is Not. Plan A Successful Exit
All owners will one day exit their companies and all want that exit to be on their terms. This article introduces steps in The Seven Step Exit Planning Process™ and describes the features of an Exit Plan that make a successful business exit more likely. These include: 1) making and executing a plan well before the desired exit date, 2) putting in place measurable goals, but retaining flexibility; and 3) using a proven process.
Building Business Value In The Exit Planning Context
Building value is a great use of an owner’s time, but it isn’t Exit Planning. Value building as part of Exit Planning covers four important issues: current value, value needed at owner’s exit, developing tactics to close the gap between current and desired value, and creating a strategy to transfer value in the most tax-efficient way possible.
Business Owners Who Take Time to Plan Exits Increase Chances of Success
This issue is perfect for owners who object to Exit Planning because they believe they can’t sell their companies today or anytime soon. A case study describes an owner who realized—only after being approached and rejected by a buyer—that his failure to create a management team and growth plan, to install comprehensive systems, and to increase cash flow left him little to sell. This article encourages owners to start working now to make their businesses attractive to buyers.
Can You Afford To Ignore Your Business Exit?
Many owners who wouldn’t dream of operating without business plans completely overlook how Exit Plans enable them to take action in the face of unanticipated events. Only exit planning offers the opportunity to exit in style despite the glut of sellers, dearth of buyers, and vagaries of the market and investment world. This issue is chock-full of important statistics.
No Regrets for These Former Owners
Three former owners answer the question, “What is life like after you leave your company?” Each exited in a different way and each crafted a unique post-business life, but all agree that there’s more to life than running a successful company.
Exit Planning Pays Long-Term Dividends
Investment banker Kevin Short describes how Steps 1, 2, and 3 of The Seven Step Exit Planning Process™ can separate sale transactions that close from those that completely derail. Short uses examples from his practice to show how exit planning could have saved owners millions of dollars.
The Necessary Beast – Due Diligence
Due diligence has an often deservedly bad reputation among business owners. Some buyers use the process to drive down a seller’s asking price or to stiffen the purchase terms, but it is also a buyer’s means of learning about an acquisition. This article shows prospective sellers how preparing for due diligence–well before a buyer starts it– can save sellers time, effort, money, and possibly the transaction.
Using an Intermediary in a Third Party Sale
Consider the possibility that you might just be the worst possible person to sell your company. Why? As the one most emotionally attached to your business, you will likely find it difficult (if not impossible) to negotiate with a prospective buyer in a detached, dispassionate and effective manner. Experienced transaction professionals anticipate and manage the inevitable lulls and storms that few owners have the stomach to endure.
Stepping Away From the Store
Faced with limited prospects in today’s merger and acquisition market, owners often wonder if, rather than exiting, they can back away from their companies. They contemplate treating their companies as investments that they continue to own. This issue looks at how owners back away and let others run the business without transferring ownership and control.
Living With Your Buy/Sell Agreement
Buy-Sell Agreements typically work well in the event of a shareholder’s death but are dismal failures in the case of a lifetime transfer. A case study illustrates how two owners reached an impasse when their buy-sell (designed to handle the death of an owner) failed them when one wanted to leave the company.
Lifetime Ownership Buyout
When the interests of co-owners diverge, as they do when one owner wants to, or must, leave for any one of a variety of reasons, few buy-sell agreements are equipped to handle the four major issues that arise: 1) Agreement on business value, 2) Funding for the buyout, 3) Agreement on the payment terms of the buyout, and 4) Payment to the departing owner with minimal tax consequences. A case study illustrates how owners’ interests clash when a buy-sell agreement fails to address the cash implications of an owner’s lifetime departure.
Equality and Fairness in Transfers to Kids
This case-study-based issue examines important considerations for any owner thinking about transferring ownership interest to a child active in the business. We examine the issues of Equal vs. Fair, the value of using experienced, unbiased advisors, and offer a framework owners can use to make their own decisions.
Characteristics of a Well-Prepared Buyer
Owners hate to waste time negotiating with prospective buyers who just aren’t serious about the transaction. This issue identifies seven characteristics that separate the “lookie-loos” from serious buyers.
Characteristics of Bonus Incentive Plans
Key employees aren’t just key to the profitable operation of a business, they are also key to the owner’s successful departure. How then, does an owner keep key employees on board? This issue summarizes four important elements of a successful Employee Incentive Plan.
The Importance of Financial Statements in the Exit Planning Process
Whether you plan to transfer your business to an insider or sell to a third party, demonstrating your company’s financial ability through sound financial statements is a critical step in successfully exiting your business. This issue outlines the top five reasons why this is true.
Using Exit Planning Advisors
It is the job of the experienced Exit Planning advisor to ask you the right questions so that you decide where you are going, who is going to help you get there and the route you are going to take. Your answers help your advisors plan and implement the exit strategy that will best meet your goals.
Loss of Key Talent – You The Owner
If owners die or become disabled prior to their planned exits, their companies face many of the same problems they would have had a key employee died. In this issue we outline the problems that can confront both sole-owned and co-owned businesses and, more importantly, outline suggested remedies to those problems.
My Lawyer Told Me Not To Do It
Many professional advisors caution owners to avoid transfers to insiders as too risky. In this issue, a case study illustrates how one owner created a plan to transfer his company to a child and key employees based on the three questions every owner in this situation must answer: When do you want to leave? How much money will you want or need when you leave? What do you want to do for your key employees and other children?
Can You Sell Your Company to an Outside Third Party?
This issue tackles three misconceptions many owners hold about sales to third parties: 1) Sales to third parties are less risky than transfers to insiders; 2) Buyers will appear when an owner is ready to sell; and 3) There’s no risk in waiting for a third party to appear.
Bonus Incentive Plans for Employees: What’s the Point?
Rewarding employees for performance and wanting to stay competitive in the marketplace are good reasons to install bonus incentive plans, but the best reason for these plans is: to motivate employees to reach an owner’s goals. Details of successful plans vary but all directly link increases in cash flow or income to the employees’ rewards.
Cash Flow Forecasting: The Ultimate Reality Check
Whether owners plan to sell their businesses to third parties or transfer them to insiders, they must create accurate models of future cash flow. Third party buyers will likely base their offers on some multiple of cash flow and insiders (who rarely have other sources of cash) will use cash flow to pay sellers for their ownership.
Six Estate Planning Questions for Business Owners
A case study illustrates how an owner’s failure to ask and answer six key questions can destroy his or her family and business. Use this article to help owners understand the importance of coordinating their estate plans with their business succession goals.
Buying Out Your Partner
In this case-study-based article, readers learn what tasks they need to accomplish whether they are the owner who wants to exit or the co-owner who wants to stay active in the business. We examine the remaining partner’s alternatives and what must be done to lay the foundation for any lifetime exit.
The Importance of Time in an Employee Buy Out
A case study illustrates the clash between an owner’s desire to sell to employees and the employees’ lack of cash. This issue lists the three goals of any good transfer-to-employees plan, an explanation of the two-stage plan design and the four employee transfer requirements: business value, time, a cooperative bank and strong management team.
Fraud: Do You Know It When You See It?
The subject of employee dishonesty is a delicate one. Owners generally want to trust their employees, and given all the other battles owners fight on a daily basis, they are often not as vigilant as they can or should be. Vigilance requires an investment of time and money in return for an uncertain payoff.
Quantify Your Resources: The Ultimate Exit Test
This issue uses a case study (Peter Daniels) to introduce readers to Step 2: Determining how much cash they need from the sale of their businesses to exit in style. For most owners, there’s a gap between what their businesses are worth today and what value they need from those businesses when they sell. This issue urges readers to call their advisors for help closing that gap.
Preparing for Your Exit, Planning for Your Inevitable Business Exit
Is planning for the most important financial event of your life worth your time? Most owners answer “yes” once they know that Exit Planning is not mysterious, time-consuming, nor just a clever way to sell you another product. It is, however, a means to help owners achieve financial and lifestyle objectives: 1) Leaving on the date you choose; 2) Receiving the amount of cash you want; and 3) Choosing your successor.
Which Comes First? Estate Planning or Exit Planning?
While there isn’t one right answer, owners who see that the two processes share the same goals begin to appreciate how they can leverage the time and money they spend on their Exit Plans into the design of their estate plans. To help make the choice about where to start, we urge owners to consider two issues: 1) Estate taxes are (currently) easier to avoid than income taxes, and 2) estate planning techniques often involve funding from life insurance proceeds whereas exit planning techniques often involve the owner’s own funds.
Using A Buy-Sell Agreement to Maintain Control, Save Taxes and Set Fair Value
In the previous issue of this newsletter, we made a strong case for creating a buy-sell agreement for co-owned businesses. To summarize, if owners agree in advance of any transfer event about how to appraise business value, and about the terms of payment, they can avoid the heated and often damaging negotiations that can occur when one owner leaves the company. In this issue, we continue making our case by outlining several other advantages of a (well-drafted and recently-reviewed) buy-sell agreement.