Transitions Digest

Part 4

Recently I took my nine year old daughter and a carload of her friends to our town’s Volunteer Fireman’s Carnival for an evening of ferris wheels, funnel cakes, and laughter–of course!  It was a Friday night after a long week.  Truly, I would have benefited from a simple dinner at home to unwind from the week.  Sound familiar?  However, I intuitively knew that the laughter of those children was most important and desperately needed…so off we went.
 
As the girls were getting out of the car, they caught sight of the ferris wheel in the distance and the excitement erupted into chaotic squeals, giggles and laughter.  I found myself feeling a bit nervous for their safety as the other cars were moving in and out of the parking spaces nearby.  I regained their attention and reminded them that they promised me to apply the buddy system to keep safe.  All was well…
 
In typical fashion, the Fireman’s Carnival delivered all that was anticipated.  It rained all week, so the grounds were like a mud filled sponge and no amount of hay can fix that.  It always rains during the week the carnival comes to our town.  The children never take notice of the condition of their shoes.  It is all about the laughter. 
 
When I was nine, I loved carnival rides too.  Another mother and I were lamenting the fact that somewhere between the age of 21 and childbirth the ferris wheel went from thrilling to terrifying.  How does that happen?  I think it is just about the same time that we adults forget how to laugh. 
 
Among my successful Entrepreneur clients, I observe that they know how to keep all of their troubles in perspective.  Simply put, they have not forgotten how to laugh!  And given the times we live in, they have been laughing a lot!  Don’t get me wrong, they do not disregard reality or not take their business or life seriously. They keep perspective and know the value of childlike laughter! 
 
After an evening of laughter, it was time to return home with our funnel cakes “to go”.  Dad and big brother were waiting for them.  As we returned to our car, we found ourselves “in trouble”.  No, I am not kidding.  As we approached my car, a Policeman asked me if I was Holly Magister and if that was my car?  Never a good question when posed by a Police Officer!  His cruiser cornered me and my car in and his spotlight was squarely on me!  “Yes, officer.  What is wrong?”  I replied.  My panic-struck heart was pounding and my nine year old began to cry.
 
Truly, my first thought was that someone died and they were trying to find me to deliver the news.  What else could it be?  My daughter thought I was going away in handcuffs forever because that is what she sees on TV.  She never saw a Police Officer that close before–one that knew my name.  They were looking for my mom!
 
The Officer told me that “the white SUV next to me suffered a “door ding” and he was there to investigate the accident.”  “Is this truly necessary?”  I asked the young man who was standing next to his prized mode of transportation.  (Okay, if you have read my earlier blogs, you know that I ask this question a lot!) With no reply to my question, I asked it another way… “Did you have to call the Police?”
 
It turns out that the nine year old’s chorus of squeals, giggles and laughter muffled the sound of the “door ding” that the neighboring SUV suffered several hours earlier.  And the young man felt that he needed the protection of the Police to make certain that justice would be done.  This young man discovered his “door ding” and decided to wait for me to return to my car.  He waited more than two and one half hours! 
 
The Police Officer informed me that it was his “job to determine if the door ding was inflicted with malicious intent or by accident.”  I replied, “I do not know any nine year old that would have malicious intent of any kind and I am grateful for that!”  He was not pleased with my reply and further informed me that he “did not want this to get ugly”.  Regardless of the absurd situation, I decided to save my sharp tongue and sarcastic sense of humor so the Officer did not feel compelled to take me away!  Besides, the funnel cakes were getting cold.
 
Today, I learned that the body shop did not consider the SUV’s injury to be a “door ding”, instead it was a “paint transfer”.  And it would take only $554.73 to make it go away!
 
The white paint from the SUV that was “transferred” onto my blue car was undetectable after a $6.00 wishy wash at the gas station.  What a bargain!  But here is the best part…after my car was washed, the shine revealed no less than 11 “door dings”.  Real ones! 
 
As I share this story with you, and more recently my family, I am reminded of the numerous “door dings” we endure as Entrepreneurs, parents, and humans for that matter!   And I believe that it is the endurance and perspective gained along the way, not the removal of the door dings, that make the difference!  To know that the door ding the white SUV suffered was because of a child’s excitement and laughter put a smile on my face.  Are you smiling?
 
As for my door dings, all eleven of them, they are not going away!  They serve to remind me daily what really matters… endure, keep perspective and remember to laugh every chance you have!
 
Let us know your insights by commenting on our blog post below.  

Holly A. Magister, CPA, CFP
Enterprise Transitions, LLP

Read Previous Articles in the Series:

Part1:Troubled Waters Part 1
Part2: Troubled Waters Part 2
Part3: Truly Necessary in Troubled Waters

Posted on September 15th, 2009 under Building Value, Business Growth, Economy, Entrepreneurship, Exit Planning. Tags: Entrepreneur, Entrepreneurship, successfull entrepreneur. Comments: 3

Are you like many business owners?

• A majority of closely held and family owned businesses will change hands within the next five years¹; but
• Many Business Owners may not have taken active steps to transition out of ownership.

Again, if you are like many of our readers, the reasons for failing to plan
may be:

• You may have simply been too busy working in your business to be working on it — at least until now.
• You may be unsure of how to begin Exit Planning, who to use or even where to begin. Those uncertainties can be addressed today.

This issue of The Exit Planning Review™ and every subsequent issue will encourage you to work on — not in — your business. Your education about the Exit Planning process begins now. Proper knowledge and preparation can possibly mean millions of dollars to you when you ultimately leave your company. Start Exit Planning today and you can help to avoid the sad (but too common) fate of the hypothetical business owners of T J Construction.

Years ago, I met with Jim and Tim McCoy, two owners of a thriving construction company. What I assumed would be a business planning meeting, turned out to be a “We’re getting out of business, how do we do it?” meeting. As successful as they were, they were tired of the government regulations, changing tax codes and day-to-day grind of running a multi-million dollar company.

A sale to a third party was not an option because Tim and Jim were not willing to stay on after a sale — and they had failed to develop a strong management team, which any savvy purchaser would require as a condition of purchasing the company. Transferring ownership to a group of key employees was also out of the question. None had been groomed to take on this type of responsibility and nothing had been done to fund this type of buy out.

Both owners were too young to have business active children so their only option was to liquidate.

Jim and Tim’s highly profitable company had little worth beyond the value of its tangible assets. After the sale of those assets, dozens of the employees lost jobs, the business disappeared, and Jim and Tim left millions of dollars on the table.

How can you help to avoid Jim and Tim’s fate? By engaging in an Exit Planning process that you control. An Exit Planning process begins by asking yourself the questions that follow. Your Exit Plan will begin to be created as you answer each of the following questions affirmatively:

1. Do you know your retirement goals and what it will take — in cash — to reach them?
2. Do you know how much your business is worth today, in cash?
3. Do you know the best way to increase the income stream generated by your ownership interest?
4. Do you know how to sell your business to a third party and possibly lower your taxes?
5. Do you know how to transfer your business to family members, co-owners, or employees while lowering taxes and potentially enjoying financial gain?
6. Do you have a continuity plan for your business if the unexpected happens to you?
7. Do you have a plan to help secure finances for your family if the unexpected happens to you?

These questions are almost misleadingly simple to ask, but to answer them affirmatively requires thought and action on your part.

Creating and implementing your Exit Plan may be the most important business and financial event of your life.

Subsequent issues of The Exit Planning Digest discuss all aspects of Exit Planning. The provider of this Newsletter (Holly A. Magister, CPA, CFP®) offers you unbiased information about what you may need to know. Subscribe to our free Exit Planning educational newsletter to learn more about how to grow and/or plan for your business exit.

1Winsby, Roger. Axiom Valuation, 2003.

Posted on August 15th, 2009 under Economy, Exit Planning, Exit Planning Digest, Mergers and Acquisitions. Tags: Economic Downturn, mergers and acquisitions, Pay Equity Groups, Value Drivers. Comments: None

By Holly A. Magister, CPA, CFP®

Do you know what is truly necessary?
 
With the multiple changes in the marketplace over the past six months or so, many Entrepreneurs find themselves overwhelmed.  They are reacting to client demands, changing vendor and employee relationships, increasing costs, and dwindling resources–financial, human and even their own energy.  They go home at the end of the day not truly knowing if they made any progress.  And that day was likely a 12-to-15 hour day! 
 
Does this sound familiar?  If so, know that you are in good company!
 
As you endure the chaos, it is impossible to have the insight to recognize what is truly necessary and what is distracting you from your best work and opportunities.  Unless, you stop and make a point of asking yourself “is this truly necessary?”
 
In many cases, Entrepreneurs spend inordinate amounts of time dealing with the matters that really mean the least to their future success.  And by doing this, they are expediting their failure.  Do you fear failure?
 
To ensure success, you must take time to reflect on matters that are critical and clearly understand and focus on the matters that are truly necessary every day.  As far as those matters that are not truly necessary, stop addressing them now! 
 
When you recognize how distracting those unnecessary matters are, you will quickly recognize the numerous expenses you will be able to eliminate when you let go of the unnecessary.  That is the good part!   When you eliminate the unnecessary, your life is simplified, some (maybe many) of your expenses are eliminated and your profit increases!  In my experience, “eliminating the unnecessary” has the potential to transform your business, your outlook as an Entrepreneur, and you.
 
Over the past few weeks, I have been sharing my insights through this blog series about how successful entrepreneurs are navigating the troubled waters we all share.  Successful Entrepreneurs are courageous as they consider their numerous options, they utilize their resources and eliminate the unnecessary.  And without exception, they understand the importance of the last principle…they find the humor in the situation.  In very simple terms, they laugh.  They apply this principle often!
 
I will share more about humor in my next blog posting.  In the meantime, stop and ask yourself “what am I doing today that is not truly necessary?”  Let us know your insights by commenting here.

Read the Previous Articles in this Series

Troubled Waters Part 1
Troubled Waters Part 2

Posted on May 20th, 2009 under Building Value, Business Growth, Economy, Exit Planning. Tags: Entrepreneur, Increasing Costs, Profit, Profitability, Simplify, Successful Entrepreneur. Comments: 1

By Holly A. Magister, CPA, CFP®

As you navigate these troubled waters, what resources do you draw upon?

Many good-intentioned entrepreneurs confuse being courageous (the subject of my last blog) with the notion that during difficult times they must become Lone Rangers in order to survive.  What I have observed is the truly successful entrepreneurs do the exact opposite.  They instinctively recognize the value of their resources and know exactly when to draw upon them for help.  Instead of retreating to their early days of entrepreneurship, where they were “rugged individualists” by necessity, they call upon the people, companies, and other resources from the past that have consistently provided them with “best of their breed” performances.  And if for some reason, they do not have access to such a resource in their time of need, they find them.  Someway, somehow they find them.
 
As your business is occupying its position in the marketplace today, the world is changing.  Really, really changing.  Stop for a minute and ask yourself the following question: “What is different today in my marketplace than one year ago?”  If you cannot list at least three differences, your head is buried in the sand.  And if that is the case, you have permission to stop reading this now.
 
With your list of three (or more) differences, you have the place from which you should start to work.  You must deal with these differences NOW to survive today AND thrive in the future.  This is where those valuable resources (old and new) become critical.
 
So how do you know if the resources you have drawn upon in the past, or are considering for your current and future needs, are truly “resourceful”?  Or do they simply go through the motions?  I recommend asking yourself if those resources have delivered, kept promises, or maybe even exceeded your expectations. Are they creative and capable of providing a point of view that may not be popular?  Is their advice, service and attitude one that makes you feel as if they truly are concerned about YOU?  The truly valuable resources in your world should not be afraid to make changes to the way they deliver their products and services to you.  They should be flexible, open-minded and capable of adapting to the troubled waters we are all sharing.  Technology and the knowledge base is changing and growing rapidly.   Your resources should be adopting these advances and excited to share with you the benefits from doing so.
 
One of my favorite quotes of Warren Buffett is “You never are hit by the bus that you are looking at.”  How so true, on so many levels!
 
The successful entrepreneurs that I work with have been run over by more than a few busses.  The difference between the successful ones and the rest is the attitude they carry as they react to the situation and the resources they have to draw from to help them.
 
Before you pull out your PDA to call upon your resources, we need to make certain you are applying them to the things that really matter.  And that leads me to the subject of my next blog–principal number three–Eliminate the Unnecessary.  In the meantime, think about your resources…Are they resourceful?
 
Read Trouble Waters Part 1

Posted on May 8th, 2009 under Building Value, Business Growth, Economy. Tags: Building Valuable Businesses, Business Growth, Business Resources, Economy, Entrepreneur, Growth Resources, Successful Entrepreneur, Warren Buffett. Comments: 1

By Holly A. Magister, CPA, CFP®

The first quarter of 2009 was brutal on virtually all fronts. During my twenty-five years of practice working with Entrepreneurs, I have never witnessed more chaos in the marketplace. Never.

Clients, vendors, employees and other resources that once were reliable relationships, a “known quantity” so to speak, have made moves that no one would have predicted–even 90 days ago. So, here you are…the Entrepreneur without a roadmap. What is one to do?

I believe that as an Entrepreneur you must apply four principles as you navigate these troubled waters…Find Courage, Draw from your Resources, Eliminate the Unnecessary, and Look for the Humor. Without doubt, looking for the humor may be the hardest principle to apply because nothing appears to be very funny at this point. We will get to that principle, however today’s blog is intended to highlight the first principle Courage.

In one of my recent blogs, I shared my belief that it is critical to Make No Assumptions. The first principal “Finding Courage” is necessary if you plan to “Make No Assumptions”. Not all Entrepreneurs are capable of making no assumptions and frankly the real winners are the ones who have enormous amounts of courage!

What does courage look like? In my travels, I have found numerous courageous Entrepreneurs. They know they must be brutally honest with people they love. Sometimes they must remove an employee that simply is not (and has not been) productive. Often they truly love that employee. I hear comments like “This is really tough, he is my son’s best friend since grade school…We all went to their daughter’s wedding.” But the truth is this employee is not cutting it and he is the bad apple in the barrel. You know who they are. You do not have to think about it for even a minute. Nonetheless, that bad apple is spoiling your barrel!

Courageous Entrepreneurs also know they are the driver of their business. It was their dream and their vision that drove them to start the business and it their passion that drives them to navigate these troubled waters today. They know they must follow their gut about clients, vendors, employees, and their other resources as they move forward. Yes, the input from others is important. However, the courageous entrepreneur knows deep down inside the people whom are valuable to them and their business.

One of my mentors is recovering from brain cancer surgery and continues to work with me as my coach. His incredible courage teaches me. As he was returning to his work with me only three months post-surgery, he wrote the following note and I want to share it with you: “Find the resources, make the time, come dressed to play, and be ready to win. If a fifty-six-year-old guy with a brain tumor thinks it’s important enough to dress up and come play, you should just come to see if I can still throw the ball.” He is the epitome of courage and one of my most precious Resources.

I will cover principal number two…Draw from your Resources…on my next blog. Until then, I know you will be courageous in those troubled waters.

Read Troubled Waters - Part 2

Posted on April 13th, 2009 under Building Value, Business Growth, Economy. Tags: Business Resources, Economy, Employees, Entrepreneur, Entrepreneurs. Comments: 1

The Exit Planning Review™ Bi-Monthly Newsletter

Are you like many business owners?

• A majority of closely held and family owned businesses will change hands within the next five years¹; but
• Many Business Owners may not have taken active steps to transition out of ownership.

Again, if you are like many of our readers, the reasons for failing to plan
may be:

• You may have simply been too busy working in your business to be working on it — at least until now.
• You may be unsure of how to begin Exit Planning, who to use or even where to begin. Those uncertainties can be addressed today.

This issue of The Exit Planning Review™ and every subsequent issue will encourage you to work on — not in — your business. Your education about the Exit Planning process begins now. Proper knowledge and preparation can possibly mean millions of dollars to you when you ultimately leave your company. Start Exit Planning today and you can help to avoid the sad (but too common) fate of the hypothetical business owners of T J Construction.

Years ago, I met with Jim and Tim McCoy, two owners of a thriving construction company. What I assumed would be a business planning meeting, turned out to be a “We’re getting out of business, how do we do it?” meeting. As successful as they were, they were tired of the government regulations, changing tax codes and day-to-day grind of running a multi-million dollar company.

A sale to a third party was not an option because Tim and Jim were not willing to stay on after a sale — and they had failed to develop a strong management team, which any savvy purchaser would require as a condition of purchasing the company. Transferring ownership to a group of key employees was also out of the question. None had been groomed to take on this type of responsibility and nothing had been done to fund this type of buy out.
Both owners were too young to have business active children so their only option was to liquidate.

Jim and Tim’s highly profitable company had little worth beyond the value of its tangible assets. After the sale of those assets, dozens of the employees lost jobs, the business disappeared, and Jim and Tim left millions of dollars on the table.

How can you help to avoid Jim and Tim’s fate? By engaging in an Exit Planning process that you control. An Exit Planning process begins by asking yourself the questions that follow. Your Exit Plan will begin to be created as you answer each of the following questions affirmatively:

1. Do you know your retirement goals and what it will take — in cash — to reach them?
2. Do you know how much your business is worth today, in cash?
3. Do you know the best way to increase the income stream generated by your ownership interest?
4. Do you know how to sell your business to a third party and possibly lower your taxes?
5. Do you know how to transfer your business to family members, co-owners, or employees while lowering taxes and potentially enjoying financial gain?
6. Do you have a continuity plan for your business if the unexpected happens to you?
7. Do you have a plan to help secure finances for your family if the unexpected happens to you?

These questions are almost misleadingly simple to ask, but to answer them affirmatively requires thought and action on your part.

Creating and implementing your Exit Plan may be the most important business and financial event of your life.

Subsequent issues of The Exit Planning Digest discuss all aspects of Exit Planning. The provider of this Newsletter (Holly Magister, CPA, CFP®) offers you unbiased information about what you may need to know. Subscribe to our free Exit Planning educational newsletter to learn more about how to grow and/or  plan for your business exit.

¹Winsby, Roger. Axiom Valuation, 2003.

Posted on March 4th, 2009 under Economy, Exit Planning, Exit Planning Digest, Mergers and Acquisitions. Tags: Economic Downturn, mergers and acquisitions, Private Equity Groups, Value Drivers. Comments: None

by Holly A. Magister, CPA, CFP®

Have you notice lately, that what used to be “tried and true” is no longer?  It seems everywhere I turn, I am observing changes– major changes in some cases.  While this constant state of change causes many people stress, during such phases of major change, we grow the most.

Many complain about the stock market mess, unemployment applications on the increase, bad mortgages and foreclosures,  …I could go on and on…but I will spare you.  The truly resourceful people among us are fully engaged by the opportunities because they are making no assumptions.  And from only that position, they are clearing seeing opportunities.

Joseph A. Schumpeter, an Economist defined phases of massive change, such as the one we are experiencing,  followed by innovation as “Creative Destruction”.  I find his choice of words for what we are experiencing instructive.  In order for our economics to improve, all of our assumptions must be “destroyed” in order for us to be “creative”. 

Are you experiencing massive changes in your life and the world around you?  If so, then it is necessary to let go of those assumptions for progress to be made.

Every day I have the pleasure of working with some of the most wonderful, resourceful Entrepreneurs that I could hope for.  And every one of them is excited about the endless opportunities they are embracing every day.  Every one of them, without exception.  These Entrepreneurs do not need a government bailout or economic stimulus package to improve their situation.

They make no assumptions and find opportunities abound.

If the changes around you are overwhelming, stop and ask yourself “what are the assumptions that I am holding onto that are preventing me from finding the opportunities for my future growth?”  Be honest with yourself and you just may find yourself as excited about your future as I am.

Posted on February 6th, 2009 under Business Growth, Economy. Tags: Business opportunities, creative destruction, Entrepreneur. Comments: None

The Exit Planning Review™ Bi-Monthly Newsletter

Faced with a barrage of bad economic news, business owners wonder first how they will survive in what promises to be a tough environment and then, if they’ll be able to leave their companies when they planned. Before we can help owners to answer that question, let’s look at their three options: (1) hunker down until the market recovers; (2) actively work to build business value; or (3) sell now for whatever you can get.

Before we look at the pros and cons of each option, remember that there is no “right” or “one-size-fits-all” answer. You and your advisors need to sit down and look at your particular circumstances before choosing the path that is right for you.

Option One: Batten Down the Hatches

• How old are you and how long do you want to work?
• To whom did you plan to transfer your company: a third party? children? key employees?
• Exactly how much money do you need from the sale of your company to support a comfortable retirement?

These are the questions that you and your advisors must answer as you analyze whether this strategy is the right one for you.

We find that owners who have time on their side (they are nowhere near retirement age) are looking at this option as their best one. Before you join them, we hope you’ll finish reading this newsletter.

How long do you want to work?

If your original exit plan was to transfer your company to your children and they are approaching transfer age, you may wish to move your exit date forward. As the value of your company falls (on paper) it is a perfect time to consider beginning a gifting program and to transfer the company to your children while still reaching your financial and other objectives. A lower business value reduces gift tax complications and income taxes if you decide to sell part of the business to children. Additionally, simply transferring part of the business to children need not ultimately reduce the amount of money you receive from the business.

To whom do you plan to transfer your company?

If your original goal was to transfer your company to your employees, this is an optimal time to begin that transfer. For example, a lower stock value means lower overall taxes in a well-designed transfer because more of the company’s cash flow can be paid directly to you rather than being used by the employee to buy your stock.

This number varies from owner to owner depending on the type of retirement one chooses (annual world cruises or a simpler lifestyle) and on the value of the owner’s other assets (real estate, retirement plan accounts, stock portfolios, etc.). Another variable among owners is the type of assumptions they made about growth and income in their investment portfolios. If your original assumptions need to be a little more conservative, remember that you will need more money/capital from the sale of your company.

How much money do you need from the sale of your company to retire?

Option Two: Build Business Value

In boom times, building the value of a company drives every business owner. What many owners don’t recognize, however, is that tough times provide no reason to abandon that goal in favor of riding out the storm. In its recent study of 400 companies, Diamond Management & Technology Consultants looked at what led to success or failure during the last recession (1998-2004).

Diamond found that just over half improved their gross profit margins because they:

1) made targeted rather than blanket cost-cuts; 2) were smart about automation, customer relationships and investments; 3) managed vendors to reduce and variabilize their costs; and 4) focused on core strengths. (“Don’t Waste A Crisis: Emerge a Winner by Applying Lessons From the Last Recession,” Diamond Management and Technology Consultants, Chicago, IL, October 13, 2008).

• Is this the time for you to cut back or to commit additional resources to marketing?
• Could your company benefit from hiring the top-notch talent that is becoming increasingly available as your competitors downsize?
• Is this the time to acquire smaller, less adaptable, less capitalized or less well-managed competitors? In this buyer’s market we see not only lower purchase prices, but also much more attractive seller-based financing and earn-outs.
• Have you designed incentive plans for your management team that reward long-term employment and provide short-term incentive to increase your bottom line? There are many ways to structure incentive standards so that they support your goals in a changing business environment.

These are the questions you and your advisors must ask and answer as you decide how to proceed.

Option Three: Sell Now

There are several types of owners who are choosing to sell their companies today rather than hunker down or actively build value. These include:

• Owners who just don’t have the fire in the belly to go to work each day ready to fight another battle.
• Owners who have “sale-able” companies that if sold at today’s less exuberant multiples, will support a comfortable retirement.

If you recognize yourself in either of these two categories, you will want to read the last issue of this newsletter series, “Should You Sell Your Company Now?” In it, we will look at what makes your company valuable to buyers in today’s Merger & Acquisition market.

Subsequent issues of The Exit Planning Digest discuss all aspects of Exit Planning. The provider of this Newsletter (Holly Magister, CPA, CFP®) offers you unbiased information about what you may need to know. Subscribe to our free Exit Planning educational newsletter to learn more about how to grow and/or plan for your business exit.

Posted on December 1st, 2008 under Building Value, Economy, Exit Planning, Exit Planning Digest. Tags: build business value, business brokers, business for sale, changing economy, exit objectives, exit planners, Exit Planning, Exit Planning Digest, retirement goals, should you sell your company now, Strategic Exit Planning, valuation, valuation methods. Comments: None

The Exit Planning Review™ Bi-Monthly Newsletter

With this issue of The Exit Planning Review™ we begin a discussion of how owners of mid-sized business are making decisions about their futures in a quickly changing economy.As exit planners, we consistently urge business owners to take the initiative when planning their exits. Today, we apply that perspective to encourage business owners to go beyond panicked headlines and take a clear-eyed look at their options in light of their: (1) exit objectives, (2) companies and (3) current M&A conditions in their marketplaces before they decide if their exits must be moved forward or delayed.

Each owner is different: some are so close to retiring that they can taste it, while others have years to work before they can even think about leaving the limelight. Some owners have a sense that hidden in this recession there just might be opportunities to be grabbed. Others are looking to protect what they’ve built and want nothing more than to survive. Some owners have invested outside of their companies, while for others their companies are, by far, their largest asset.No matter your situation, you and your advisors have some serious work ahead of you. This series of newsletters will examine three components of your decision-making process: your exit objectives (especially your target exit date and how that might need to change), your company (how you can help protect or build its value and its sale-ability) and, should you decide to sell, what you can expect.

Your Exit Objectives

If you suspect that the current economic downturn means that the departure you planned in the next five to ten years will be delayed, you’ve got a lot of company. According to a 2005 PricewaterhouseCoopers’ survey of 364 CEOs of privately held, fast-growing companies, “nearly two-thirds … plan to move on within a decade or less: 42 percent within five years, and 23 percent in five to ten years.” (“Wide Majority of Fast-Growth CEOs Likely to Move On Within Ten Years, PwC Finds.” January 31, 2005.)The question is: What do you do about your target departure date? If you leave it as is, do you spend your energy protecting what you’ve got or actively working to build value?

If you decide to move your departure date forward by selling now, how does that affect your other retirement goals (transferring for the amount of money you want and transferring to the party of your choice)? Is your company attractive to buyers? Are there buyers active in the marketplace? And, how can you get top dollar for your company?

We’ll look at each of these options in upcoming issues of The Exit Planning Review™.

Your Company

As operations become leaner and meaner, is your company more vulnerable than ever before? Specifically, are there things that you can do to protect the value of your most valuable asset, your company? What can you do to help minimize your company’s tax exposure? Is there a way to prevent the departure of your key employees? We will examine how you can help protect value, minimize taxation and protect trade secrets, vendor relationships and referral sources.

After looking at protecting business value, our next issue will look at how owners can build business value during a recession through acquisition. Before you dismiss this strategy as unrealistic for your company, please read about owners who are taking advantage of lower purchase prices (by using seller financing and earn outs) to acquire specific assets (like customer lists and equipment) of smaller, less adaptable, less capitalized or less well-managed competitors.

Current M&A Conditions

In the last issue of this series of newsletters on adapting your exit plan during a recession, we’ll take a look at what is going on in today’s Merger & Acquisition market for mid-sized businesses ($5 million to $250 million of value). We’ll look at which companies are selling, who is buying and what credit is available to finance deals of this size.

As a business owner, you have a number of arrows in your quiver and need not stand impassively on the sidelines during a time of economic volatility. Unlike the “average” investor, you aren’t limited to the single strategy of pulling dwindling assets out of the market. Even if the general economy suffers, your business profitability need not.

Subsequent issues of The Exit Planning Digest discuss all aspects of Exit Planning. The provider of this Newsletter (Holly Magister, CPA, CFP®) offers you unbiased information about what you may need to know. Subscribe to our free Exit Planning educational newsletter to learn more about how to grow and/or plan for your business exit.

Posted on November 24th, 2008 under Economy, Exit Planning, Exit Planning Digest, Mergers and Acquisitions. Tags: business appraisal, business appraiser, business brokers, business changes, business for sale, business planning, buy-sell agreement, buy-sell agreements, buy-sell transfer, buyout, changing economy, companies change, exit objectives, exit planners, Exit Planning, Exit Planning Digest, Exit Planning Review: Valuation in Buy-Sell Agreements, fair market value, m&A conditions, mid-size business, protecting business value, retire, retirement, retirement goals, Strategic Exit Plan, Strategic Exit Planning, target departure date, valuation, valuation methods. Comments: None