Transitions Digest

By Holly A. Magister, CPA, CFP®

Without a single doubt, there is only one obstacle or “deal breaker” that I have come across over the years that is insurmountable.  And it always surprises the Seller.  “What could that be?” you are wondering.
 
Well, before we get to that, let’s talk a bit about what makes a business valuable after the Seller departs for his/her golden years in retirement. 
 
A Buyer wants a business that will sustain itself in good times and in bad times.  Recently, we all have learned what those “bad times” feel like in more ways that most of us can count.  Those bad times have brought havoc to virtually every industry across every nation.  Long term sustainability requires a business cash flow to have a “quality” about it.  Positive cash flow is not sufficient; instead it must be cash flow that will endure.  (Cash flow quality will be covered in a subsequent article.) 
 
A Buyer wants a business that is not riddled with conflicts, lawsuits, and the like.  Essentially a poor reputation in the marketplace and local business community is very unattractive.  Nonetheless, it is typically not a deal breaker.  Many Buyers will take on such a challenge hoping their own ethically sound business practices will repair and rejuvenate the business and its future prospect for success.
 
A Buyer wants the Seller to be truthful about its past operations and future opportunities.  This is why we recommend you hire the best accounting firm you can afford to assist you in preparation of your financial statements if you intend to sell your business in the next three-to-five years.

A Buyer wants to know that the day the founding Entrepreneur receives his/her equivalent to the corporate “golden parachute”, that the business will continue to operate without a misstep.  Indeed, this is where deals break down.

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In all my years working closely with founding Entrepreneurs, I still find it highly unusual to find one truly preparing their business for that day.  Most Entrepreneurs are very good at doing many tasks.  You know them too…Jack of all trades!   It is their innate ability to do many things well that gave them the courage and energy to start their business in the first place.   No one is better suited to succeed in a business endeavor than someone who can handle many tasks coupled with endless stamina.  And for most founding Entrepreneurs, delegating anything to others is difficult at best!

Regardless of the stress that delegation to others may cause the Entrepreneur, it is wise and necessary to begin the process of delegation sooner than later.  When a buyer looks seriously at a business for its long term financial opportunity, they want a business that operates without the founder.  And they want to know that it has been operating without the direct contribution of effort from the Entrepreneur for a reasonable period of time. 

When the situation is not one where the business operates through the efforts of key management and other employees, many Buyers lose interest and walk away.  If they are willing to take on the challenge to replace the efforts and talents of the Entrepreneur post sale, the price paid is either reduced or contingent on future success of the business.  Neither consequence is a good one! 

Unfortunately, when the Entrepreneur receives negative feedback from a potential Buyer regarding the need to “replace” the CEO, they often say “I wish I knew the importance of this issue years ago”.   Don’t underestimate this matter and be one of those disappointed Entrepreneurs.

 Let us know your insights by commenting on our blog post below.  

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

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.

Posted on October 29th, 2009 under Building Value, Entrepreneurship, Exit Planning, Exit Planning Digest. Tags: business planning, Exit Planning, exit strategy, planning for retirement, process of selling a business, sell a business, sell businesses, sell my business, selling a family business. Comments: None

By Donna Billings, PCC and Jane Patterson, CPPC

You’ve decided it’s time to sell the business. You have an offer. Your advisors are telling you it’s a fair price.  But something is holding you back. 

It’s not unusual for a business owner to come to the brink of sale and then pull back, believing that a better offer is just around the corner.  You ask yourself, “What’s the hurry?” But we know this can be dangerous thinking because for each company there is a time and season to sell when the maximum market value of the company has been reached.  Prospective buyers lose interest because they’re not convinced that a deal is possible.  And, morale and productivity are affected when employees are placed in and out of uncertainty.

At Enterprise Transitions, we recognize that the sale of your business is a significant decision with consequences for yourself and your family, employees and customers. Our team of financial and legal experts works with you to assess when the time is right to sell and evaluates and negotiates offers to ensure the best price.  We also recognize that there are other, non financial, aspects that you are considering, such as:

• What are your goals for the future, personally and professionally? Is it time to retire, and if so, what might retirement look like for you?
• How will you transition from your role as business owner to what’s next? 
• What about your employees?  How can you help them transition to new ownership?

These are legitimate and important questions for all business owners. So we offer a team of professionally trained and experienced executive coaches to help our clients explore these and many other related issues.

What is coaching? Coaching is a partnership designed to help you achieve professional and personal goals which, in turn, enhances your effectiveness and quality of life. Coaches are trained to listen, to observe and to provide support.  A coach may share experience, expertise and information. Primarily a coach asks powerful questions and guides their clients to confront situations, solve problems and make decisions.  Although our coaches have a great empathy for and understanding of human behavior, coaching is not therapy.

How can you benefit from coaching? The Wall Street Journal reported that more than 60 percent of executives at Fortune 500 companies now work or have worked with an executive coach. Studies show that more than 93% of executives who have received coaching would recommend it to others, realizing an average ROI of 5.7 times. The coaches affiliated with Enterprise Transitions are highly trained professionals with extensive leadership and business experience in strategic planning, career transition, organization development and more. Importantly, each of our coaches is an entrepreneur themselves, running a successful coaching business.

Your company has been your life for many years.  You and your family have sacrificed. You’ve built a good business and stuck with it through thick and thin. You’ve built a reputation by making tough decisions.  You’re proud. And you should be. If something is holding you back from the decision to sell your business, price might not be the only issue. Contact us to arrange for a confidential session with an executive coach to explore more fully the next step.

(This is the first of a three part series which will explore the benefits of executive coaching for business owners during the emerging, acquisition, exit planning and/or business sale stages.)

Posted on August 25th, 2008 under Uncategorized. Tags: acquisition, business sale stages, coaching, emerging, Exit Planning, facing retirement, family business, how to retire, planning for retirement, process of selling a business, process of selling a family business, retire, retirement, retiring, selling a business, selling a family business, selling business, thinking of selling business, when to sell a business. Comments: 1

By Donna Billings, PCC and Jane Patterson, CPPC 

You did it! After endless hours negotiating, you finally got “The Number” - the amount of money you consider a fair price for your business.  When the sale closes you’ll have enough for the kind of retirement life you’ve been waiting for:  Freedom. Security. Quality of life.

But something is holding you back.  Money isn’t the issue.  And you know the company will be in capable hands. Even your family is behind you 100%. You hate to admit it, but what’s most on your mind is, “What will I do if I retire?”

You’re not alone.  We’ve heard that question from many clients, especially an entrepreneur who has invested his/her entire life running his/her own company.  On one hand, the good news is that people are retiring earlier than ever (age 58 today, which is down from age 65 in 1990) and living longer (women age 84 and men 81). The bad news is that a recent study revealed that 81% of retirees feel they should have planned better for what they would do in retirement.

One client characterized her first year of retirement as “a roller coaster ride of ups and downs, great times and wasted time.” For many, this is the first opportunity in a long time to make meaningful choices about the future. But choosing can be difficult because there are tough questions to face: “What really matters to me? Who is important to me? What do I really want to do with the time that’s left in my life?”

To plan or not to plan, that seems to be the question.  Yet, it’s somewhat of a Catch 22, isn’t it? You shouldn’t retire until you know what you want to do but you don’t know what you want to do until you retire! For one entrepreneur, retirement without knowing exactly where, what and how he/she will spend his/her time is out of the question. For another, he/she can’t wait to simply live in the moment.

What do we think about retirement planning?  At Enterprise Transitions, we know that each client has a unique personality and circumstances. We simply don’t believe there is just one right way to retire. Our executive coaches work with a client (and often family members) to design a retirement lifestyle that meets the client’s particular needs and goals.

We know that the only mistake you can make in retirement is to try to do it like someone else. You’ve earned the chance to live life your way and by working with an experienced executive coach, you’ll explore how you make the most of this next stage of life. You’ve earned it!

(This is the second of a three part series exploring the personal impact on business owners during the emerging, acquisition, exit planning and/or business sale stages.  Executive coaches Donna Billings and Jane Patterson, are available for a private consultation to discuss your retirement transition.)

Posted on August 25th, 2008 under Uncategorized. Tags: acquisition, business sale stages, coaching, emerging, Exit Planning, facing retirement, family business, how to retire, planning for retirement, process of selling a business, process of selling a family business, retire, retirement, retiring, selling a business, selling a family business, selling business, thinking of selling business, when to sell a business. Comments: None