Exit Planning Review™ Newsletter Archive

Issue 165: 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. So let's look at a typical fraud scenario. [read more]

Issue 164: Preserve and Protect Your Business On All Fronts
We kicked off our discussion with the final item - creating value - because today, most owners are so focused on cutting expenses and minimizing risk and taxes that they've ignored their ultimate goal: creating a company with enough value to leave it for an amount of money that will support them - in style - for the rest of their lives. [read more]

Issue 163: Tough Times Crown Cash Flow As King
In the previous issues of this newsletter, we outlined two of the four areas where business owners who want to both survive in today's economic climate and emerge from it poised for growth (or sale) can focus their energies. As you may recall, the areas we have already talked about are creating value and creating revenue. Today, we discuss the third area: quantifying cash flow. [read more]

Issue 162: Increasing Revenues During Tough Times
In the previous issue of this newsletter, we discussed the critical importance of creating value in your company - even during tough economic times. Why should you worry about creating value when you've got more pressing fires to fight? Well, if you hope to sell or transfer your company when tough times end, your company must be valuable enough to attract a buyer and to finance a comfortable life after the sale. [read more]

Issue 161: While Managing Short-Term Issues Don't Forget Your Endgame!
In the previous issue of this newsletter, we outlined the four areas where business owners who want to both survive in today's economic climate and emerge from it poised for growth (or sale) can focus their energies. As you may recall, those areas are: [read more]

Issue 160: Designing Smart Strategies to Meet Today's Economic Challenges
During the past several months, we have been helping business owners meet the challenges presented by recent changes in the economy. In this and the next several issues of The Exit Planning Review™ we will share with you what we are learning from owners and their advisors across the U.S. about which strategies are most effective. Before we begin, however, we hope you will share with us how your company has been affected, how you are responding, and how we can help you meet those challenges. [read more]

Issue 159: Downturn Gives Owners Time to Prepare for the Recovery of the M&A Market
The current recession has given all business owners, quite literally, pause: pause in growth, pause in hiring, pause to reconsider exactly where our companies are heading - or need to head - if we are to meet our owner-based goals. [read more]

Issue 158: Economic Downturn Gives Owners Time to Work on Value Drivers
In a strong Merger & Acquisition (M&A) market, buyers compare the relative strength of your company's value drivers to those of your competitors. In today's M&A market, however, buyers want companies that possess all of the characteristics of a well-run business. Additionally, tighter credit forces buyers to use more of their own capital to buy businesses so they look for acquisitions that carry minimal business risk. Companies with strong value drivers in place carry less risk. Companies lacking one or more value driver(s) simply will not attract interested buyers. This harsh reality means most owners have a lot of work ahead. [read more]

Issue 157: Time to Figure Out What You Need From the Sale of Your Company
The recession has brought a lot of challenges, but it has also brought the luxury of time: time to figure out exactly what you need from the sale or transfer of your company to support a comfortable post-sale lifetime and time to create enough value in your company to achieve your desired sale price. [read more]

Issue 156: Will Your Future Look Like Today?
Near the end of 2008, we noted that the economic downturn had forced many owners to postpone their plans to exit their companies. We then looked at the several actions owners could take to respond to that delay. [read more]

Issue 155: Should You Sell Your Company Now?
Should you sell your company now? Not only does the answer depend on you (how much fire you've got left in your belly) and on your exit goals (can a sale achieve your retirement needs?), it also depends on what you've got to sell, what industry you are in and M&A market conditions in your market segment. [read more]

Issue 154: Want to Build Business Value In A Recession? Think: Acquisition
In an economy when many of us are tempted to bury our heads until the shooting is over, smart business owners are realizing that this may be the perfect time to acquire smaller, less adaptable, less capitalized or less well-managed competitors. [read more]

Issue 153: Protecting Your Company's Value In A Recession
In the previous issue of this newsletter, we talked briefly about how owners can and do build the value of their companies - even during a recession. Some owners will take that approach, but all owners should be, at a minimum, protecting the existing value of their companies. This issue is devoted to explaining a few of the ways you can do exactly that by concentrating on specific items taken from a fiscal year agenda that we use with many business owners. (Meeting annually with your advisors before your fiscal year-end is great way for all of you to keep your planning on track.) [read more]

Issue 152: Keeping the Fire in Your Belly as the Economy Cools
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. [read more]

Issue 151: In Tough Times, What Are Your Options?
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. [read more]

Issue 150: Valuation in Buy-Sell Agreements
In this series of articles about buy-sell agreements, we've talked about what those agreements are, what transfer events they cover, why these agreements must be updated as shareholders and companies grow and change, and why the choices you've made about whether buy outs are mandatory or optional may change over time. In this article, we'll discuss the all-important issue of valuation: the pros and cons of using three common valuation methods. [read more]

Issue 149: As Your Business Changes, Update Your Buy-Sell Agreement - The 30,000 Mile Checklist
In the prior two issues of this newsletter, we've looked at several key elements of your buy-sell agreement and the transfer events that can trigger a buyout. Today, we look at all the types of changes (in you, your partners, your company, your finances and your industry) that can transform that vigorous buy-sell you created years ago into a lumbering, but potentially dangerous, dinosaur. In this issue you'll also find a Checklist that will help you assess the viability of your buy-sell agreement. [read more]

Issue 148: Does Your Buy-Sell Cover Everything it Should?
In the previous issue of The Exit Planning Review™, we discussed what a buy-sell agreement is and why you should dust it off, take a second look at it, and call your advisors to update it. [read more]

Issue 147: Is Your Buy-Sell Agreement Current?
The business continuity agreement is the single most important document that the owners of a closely held business will ever sign. This agreement (also known as a buy-and-sell or buy-sell agreement) controls the transfer of ownership when certain events occur. These events include: the death or disability of a shareholder, an involuntary termination or retirement of a shareholder and even (yes they do happen) disputes among owners. [read more]

Issue 146: Should I Sell My Business Now? Overcoming Common Objections: Part Two
We previously looked at the first two common objections that can influence your timing on selling your business - determining business value and losing employees or customers before you sell. We will follow up on this discussion by looking at the remaining common objections that can affect your decision to cash out of your business and move on to the next stage of your life. [read more]

Issue 145: Should I Sell My Business Now? Overcoming Common Objections: Part One
As we discussed in the past The Exit Planning Review™ article, one of the biggest obstacles in exiting your business is overcoming your objections, many of which tend to be based on misunderstanding the "facts." The objections that tend to hold back owners from selling their businesses are usually based upon some combination of the perspectives listed in this article. [read more]

Issue 144: Should I Sell My Business Now? Why Owners Choose Not to Sell
If you simply are not emotionally ready to sell, if there is still fire in your belly - enough fire to fuel your continued investment in the company - or if you ultimately want to leave the business to family members or employees, then you may not be in a position to sell your business - yet. If you and the business are ready to sell, but you still hesitate, let's look at typical reasons for that hesitation and what you may be able to do about it. [read more]

Issue 143: Should I Sell My Business Now? Being Aware of the M&A Market Important to Successful Business Sale
As we have been discussing in the past few Exit Planning Review™ articles, it is important to take into account personal motives and objective conditions when you are trying to determine the best time to sell your business. For owners who toil long and hard to overcome the endless challenges that test the survival and success of their businesses, the thought of someday selling out for a lot of money seems, at best, a pipe dream. A typical business owner in this situation may think, "Who would want to buy my business?" [read more]

Issue 142: Should I Sell My Business Now? Reviewing Objective Conditions Important to Successful Business Sale
As we have been discussing in the past few Exit Planning Review™ articles, the personal decision to sell your business is usually based upon some combination of the following: [read more]

Issue 141: Should I Sell My Business Now? Examine Your Personal Motives First to Determine Your Readiness: Part Two
The personal decision to sell your business is usually based upon some combination of elements listed in this newsletter. Today, let's look at two personal motives that can influence your timeline of cashing out of your business today and moving on to the next stage of your life. [read more]

Issue 140: Should I Sell My Business Now? Examine Your Personal Motives First to Determine Your Readiness: Part One
The personal decision to sell your business is usually based upon some combination of elements listed in this newsletter. Today, let's look at two personal motives that can influence your timeline of cashing out of your business today and moving on to the next stage of your life. [read more]

Issue 139: Should I Sell My Business Now? Personal Motives and Business Conditions to Consider when Exiting a Business
If you are like many owners, you have spent numerous sleepless nights staring at the bedroom ceiling endlessly speculating about and weighing the outcomes of the answer to one question: "Should I sell my business now?" If you have finished your deliberations, have resolved all of the questions and are prepared to move directly to the sale process, then call our offices today and we will help guide you through the process of preparing your business to sell it for top dollar. [read more]

Issue 138: Succession Planning vs. Exit Planning
With the recent buzz about Baby Boomer business owners preparing to leave their companies within the next few years, there can be confusion about the different terminology used for this planning concept. For instance, many people believe that succession planning and Exit Planning are one within the same and can be used interchangeably when talking about owners who are in the process of leaving their businesses. However, this misconception can end up leaving you unprepared for one of the biggest financial events of your life. [read more]

Issue 137: How Can I Minimize Estate Taxes?
In the realm of Exit Planning and Estate Planning it can be important to understand what estate taxes are, know the tools available to help minimize them, and employ those tools to transfer your estate (including your business) to the "objects of your bounty" upon your death. To conclude this series of Exit Planning Review™ articles, we will focus on the last important area of estate planning for business owners and their families - strategies to help minimize estate taxes when creating such a plan. [read more]

Issue 136: How Can I Help Preserve My Assets from the Claims of Creditors During My Lifetime and at My Death?
This article will focus on the common estate planning concern that many owners have about preserving their assets from the claims of creditors and the litigation process. One of the most frequent questions that we frequently hear from our clients is, "Can I transfer my assets to my spouse to avoid creditors?" Since each owner's situation is different depending on your overall Exit Objectives, there isn't a one-size-fits-all answer. However, we will provide you some guidelines in this article for elements to consider when working with your Exit Planning Professional to accomplish this important estate planning goal. [read more]

Issue 135: Why Should I Use My Business to Fuel the Growth of My Estate Outside My Business Interest?
The remainder of this article will provide additional insight into how to use your business to fuel the growth of your estate outside of your business interests and how to provide for your family's income needs. [read more]

Issue 134: How Can I Provide for an Equitable Distribution of My Estate Among My Children? - Part Two
In the last issue of The Exit Planning Review™, we introduced you to the hypothetical case study of Mike Jones, a 51-year-old owner of a successful scaffolding company and the father of two sons - one of which was active in the business and was interested in taking over the company upon Mike's departure. Since Mike also had a non-business active son in the picture, the issue of providing an equitable distribution of his estate among his children weighed heavily on Mike's mind. [read more]

Issue 133: Estate Planning for Business Owners and Their Families
Parents normally want to give equal amounts of their estates to their surviving children, regardless of how active each child is in the business. The problem with including this provision in a will is that each child may get not only an equal amount of the business, but also an equal amount of the non-business assets. [read more]

Issue 132: Estate Planning for Business Owners and Their Families - Addressing Six Critical Questions
The unfavorable business transition experiences described in this article in the hypothetical case study may have been avoided had the case study's father asked - and answered with the help of an experienced Exit Planning Professional - six critical questions. [read more]

Issue 131: Developing Financial Controls to help Manage your Business
As we have discussed in the past few articles, getting a premium price for the sale of your business can depend, in large part, upon your efforts to adopt and implement value drivers. [read more]

Issue 130 - Value Drivers: Establishing Realistic Growth Strategies
Buyers tend to pay premium prices for companies that have developed realistic strategies for growth. This growth strategy must be communicated to a potential buyer so that the buyer can see specific reasons why cash flow (and the business itself) will grow after it is acquired. [read more]

Issue 129 - Value Drivers: Establishing a Diversified Customer Base
Put on those buyer's shoes one more time and you'll find yourself shuffling past companies with great management teams and excellent systems, but whose cash flow is dependent on one or two customers. Why would buyers spend millions of dollars on a business only to have those customers go elsewhere after they've acquired the company? [read more]

Issue 128 - Value Drivers: Building Reliable Systems Designed to Sustain the Growth of
If your objective is to sell your company for the highest possible price, you must build reliable systems that can sustain the growth of the business. Before we get started on discussing this important value driver, here are a few quick definitions: [read more]

Issue 127 - Creating Value in Your Business to help Get Top Dollar Upon Your Exit
Did you ever wonder why one business has buyers lined up willing to pay top dollar while another sits on the market for months, or even years? What do buyers look for in a prospective business acquisition? The characteristics buyers seek must exist before the sale process even begins. It is your job as the owner to create value within your business prior to the sale. [read more]

Issue 126 - Transferring Management Responsibilities Prior to Your Business Exit: The Importance of Shifting Core Duties Prior to Your Exit - Part Two
We will continue our discussion on the critical management responsibility transition areas that owners need to address prior to their business exit by referring back to our hypothetical business owner, Will Tryon. [read more]

Issue 125 - Transferring Management Responsibilities Prior to Your Business Exit: The Importance of Shifting Core Duties Prior to Your Exit
The next two articles will conclude our series on transferring management responsibilities by discussing which areas of the business you should focus on when developing your plan. [read more]

Issue 124 - Planning for Departing Owners: The Importance of Creating a Plan to Ensure a Smooth Ownership Transition
When you sold your home, you did not hesitate to use a realtor. Exiting your business can be much, much more involved (and financially more significant) than selling your home and it can require sophisticated, experienced advisors to guide you through the process. [read more]

Issue 123 - Planning for Departing Owners: The Importance of Creating a Plan to Ensure a Smooth Ownership Transition
Many business owners find that transferring management responsibility is an important issue for them to address when they are thinking about leaving their business. However, many tend to overlook this important business exit element because they get too wrapped up working in their business rather than working on their business. [read more]

Issue 122 - Planning for Departing Owners: The Value, Funding and Payment Aspects of Lifetime Ownership Transfers
* Agreement upon value. * Funding of the buyout. * Agreement on the payment terms of the buyout. Let's take a look at how these three common elements can be addressed in a buy-sell agreement during situations similar to the Steve Hughes case study. [read more]

Issue 121 - A Surefire Method of Creating Conflict Among Co-Owners: The Importance of Buy-Sell Agreements When Disability or Other Lifetime Ownership Transfer Events Occur
When co-owners are united in striving toward common business goals such as growing revenue, business value and cash flow, the business dynamics can be wonderfully positive and strong. The owners are moving forward together to reach common goals. Contrast that bright picture with what can happen when, suddenly perhaps, the goals of the owners diverge. [read more]

Issue 120 - Business Continuity Agreements: Mandatory Versus Option Buyouts in Buy-Sell Agreements
To get a better idea of the role of buy-sell agreements in the overall Exit Planning Process, we now will discuss the pattern of a typical business continuity agreement and the most important provisions of the agreement. [read more]

Issue 119 - Business Continuity Agreements
In the last issue, we introduced you to the business continuity agreement and we discussed how this document can be one of the single most important items that you, as a closely held business owner, will sign. We also outlined some of the many advantages of a business continuity agreement (also called a buy-sell agreement) in regard to establishing transfer to ownership, valuation techniques, and terms and conditions. [read more]

Issue 118 - Don't Do Business Without This 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. [read more]

Issue 117 - Effectively Transferring Wealth to Children with Reduced Tax Impact - Leveraging the Stock Bonus Plan
A business owner who is primarily concerned with transferring ownership with minimal tax consequences and who has sufficient personal financial resources so that receiving payment for the ownership interest being transferred is not essential may be able to efficiently transfer ownership using a stock bonus. This technique can offer some interesting tax and other advantages. [read more]

Issue 116 - Transferring Your Company to a Business-Active Child - Effectively Transferring Wealth to Children with Reduced Tax Impact
When choosing to transfer your ownership to a business-active child, there are a variety of options available to meet your unique business exit needs. Three of the most common business-active child transfer options include gifting ownership, selling ownership and transferring ownership via a stock bonus. [read more]

Issue 115 - Effectively Transferring Wealth to Children with Reduced Tax Impact
Choosing the most appropriate technique begins with establishing your overall ownership transition objectives - this is the real starting point for any kind of owner-based Exit Planning. In Exit Planning, it is critical for business owners to identify their objectives and resources before proceeding with the Exit Planning Process. [read more]

Issue 114 - Effectively Transferring Wealth to Children with Reduced Tax Impact - Leveraging Tools to Minimize Estate and Gift Tax Consequences
The key to transferring large amounts of wealth was discussed 2000 years ago by the patron saint of estate planning attorneys, Archimedes. Regarding leverage he observed, "Give me a place to stand and I will move the earth." Using leverage to move the earth or to move your wealth is the key to achieving noteworthy results. As we have discussed, each U.S. resident can give away $1 million during a lifetime, as well as $12,000 annually. [read more]

Issue 113 - Effectively Transferring Wealth to Children with Reduced Tax Impact - Determining How Much Money is Appropriate to Leave to Children
For many successful business owners, the question of how to leave as much money as possible to children begs a more important question. Given the huge (and perhaps unexpected) financial success of the business, the real question is how much money should the children receive and how much is too much? [read more]

Issue 112 - Effectively Transferring Wealth to Children with Reduced Tax Impact - Determining How Much Wealth is Needed After the Business Exit
One of the primary decisions every business owner makes when transferring wealth to children is not how to accomplish the transfer, (that's the estate planner's job) but how much wealth to transfer to the children. [read more]

Issue 111 - Effectively Transferring Wealth to Children with Reduced Tax Impact - The Importance of Aligning Objectives Prior to the Wealth Transfer
You may have just realized that you want to transfer a portion of your company's wealth to your children or it may have been something that has always been in the back of your mind. Either way, one of the first questions that parents struggle with answering is, "How much wealth should the children have?" [read more]

Issue 110 - The Importance of Financial Statements in the Exit Planning Process
In this issue, we will look at the different types of financial statements that exist, the costs associated with creating the statements and the importance of these different types when exiting your business. [read more]

Issue 109 - 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 financial stability through sound financial statements is a crucial step in establishing a successful business exit. [read more]

Issue 108 - Selecting the Right Exit Path: Sale to Third Party
In the past two issues, we have discussed the advantages and disadvantages of transferring ownership to children and selling to other owners or employees. The last scenario that we will look at during this Exit Planning Review™ series of articles is the sale to a third party. [read more]

Issue 107 - Selecting the Right Exit Path: Sale to Other Owners or Employees
One of the great advantages of having other owners in your business is that they can be your means for retirement. [read more]

Issue 106 - Selecting the Right Exit Path: Transferring Ownership to Children
As discussed in the previous issue of The Exit Planning Review™, the purpose of Exit Planning is for you to achieve your financial and lifestyle objectives after you leave your business. One of the fundamental objectives that needs to be decided early in the Exit Planning Process is selecting your successor. [read more]

Issue 105 - Planning for Your Inevitable Business Exit
Exit Planning is neither mysterious nor time-consuming. The purpose of Exit Planning is not to sell you a product - it is to achieve your financial and lifestyle objectives. Business owners achieve their Exit Objectives when they leave their companies when they want, to whom they want and with the amount of cash they want. Exit Planning provides owners with the keys to running their businesses so they can leave them in style. [read more]

Issue 104 - Family Business Transfers: Criteria for Choosing a Family Business Consultant
In the last issue of the Exit Planning Review™, we discussed when it is appropriate to enlist the expertise of a Family Business Consultant. We also looked at typical warning signs and indicators that might suggest the need for a Family Business Consultant. After you have determined that you need to bring in a Family Business Consultant to help deal with the emotional and behavior issues associated with family business transfers, the next step is to find one that matches your Exit Planning objectives. [read more]

Issue 103 - Family Business Transfers: How to Determine When it is Appropriate to Bring in a Family Business Consultant
When it comes time to go through the tough areas such as the family dynamics (emotional and behavioral issues) that inevitably arise when any type of change threatens to occur (leadership, control, succession, wealth transfer, etc.), family business consultants help you, your family and your advisory team navigate the nuances of the special passage way, rather than suffer through the otherwise long tumultuous journey around the problem. [read more]

Issue 102 - Family Business Transfers
In this article and in the following series of Exit Planning Reviews™, we will focus on the third objective stated above and discuss the best way to deal with the emotional and behavioral issues associated with family business transfers. [read more]

Issue 101 - Using Short-Term Incentive Plans to Retain Key Employees during the Transfer of a Business - Communicating The Lifetime Stay Bonus Plan
Once an owner recognizes the value of the Stay Bonus or other incentive plan, he or she meets with the Advisory Team (attorney, CPA and financial advisor) to discuss the specific objectives he hopes to achieve. [read more]

Issue 100 - Using Short-Term Incentive Plans to Retain Key Employees during the Transfer of a Business - Developing The Lifetime Stay Bonus Plan
Unlike typical key employee compensation plans, the vesting schedule is also the payment schedule for this Stay Bonus Plan. A manager becomes vested in his or her share at the closing of the sale and receives one-third of the payment at that time, one-third at the first anniversary, and the remainder at the second anniversary of the closing date. [read more]

Issue 99 - Using Short-Term Incentive Plans to Retain Key Employees during the Transfer of a Business - Lifetime Stay Bonus Plan Considerations
Using a sound and thoughtful incentive-based plan for key employees, you can achieve these key employee objectives, as well as your overall Exit Planning objectives. Prior to beginning the Stay Bonus Plan creation process, it is important for you to address the following four Lifetime Stay Bonus considerations. [read more]

Issue 98 - Using Short-Term Incentive Plans to Retain Key Employees during the Transfer of a Business - The Lifetime Stay Bonus
So, how do you ensure that your key employees will remain at their posts, even as you prepare to leave yours? One short-term incentive plan that can be set up to meet your employee incentive Exit Plan objectives is the Lifetime Stay Bonus. [read more]

Issue 97 - Using "Oldco/Newco" to Transfer a Company to Insiders Who Have Little or No Cash: Management Team Transfers
Similar to the family business transfer scenario we looked at last time, "Oldco/Newco" also is a good Exit Plan if you have key management team members who want ownership of the company now or they might leave "Oldco" and form a new, competitive entity. [read more]

Issue 96 - Using "Oldco/Newco" to Transfer a Company to Insiders Who Have Little or No Cash
"Oldco/Newco" is designed to avoid ongoing business operational liability, minimize tax consequences on a sale of business assets, and redirect business cash flow. The most common use of the "Oldco/Newco" concept is in family business transfers. In the family run business scenario, "Oldco/Newco" may work well if the situation does not lend itself to gifting, either outright or indirectly, by using a Grantor Retained Annuity Trust (GRAT). [read more]

Issue 95 - Using "Oldco/Newco" to Transfer a Company to Insiders Who Have Little or No Cash: The "Oldco/Newco" Technique
You have made up your mind that you will transfer ownership of your company to an insider - whether it's your children or key employees. However, you may not be ready to turn over total control of the company just yet. In fact, you may want to make sure you can undo any damage that could result from your successors failing to successfully carry on the business, as well as failing to pay you in full for the business. [read more]

Issue 94 - Using Equity (Stock) to Motivate Your Key Employees
When we suggested the Stock Bonus Plan, however, Stan found two reasons to become very interested. First, Stan liked the idea of forfeiture. We explained that every bonus of stock to an employee could be designed to have a substantial risk of forfeiture. [read more]

Issue 93 - Using Equity (Stock) to Motivate Your Key Employees
Like any other bonus, owners can base a Stock Bonus on a performance standard. (If business makes $X or does "X," employee gets a predetermined amount of ownership.) Alternatively, they can simply assign whatever bonus amounts they feel are appropriate. The stock can be unrestricted or subject to substantial risk of forfeiture. [read more]

Issue 92 - Using Equity (Stock) to Motivate Your Key Employees
In our last issue we met Stan Bartholomew, a 50-year old business owner who wanted to motivate his key employees while beginning to transfer them stock. After reviewing the pros and cons of an Incentive Stock Option Plan (ISO), Stan wanted an alternative. [read more]

Issue 91 - Using Equity (Stock) to Motivate Your Key Employees
Business owners who set up employee incentive plans generally do so to motivate their employees to work harder and smarter. Owners engaged in The Seven Step Exit Planning Process™, however, use employee incentive plans to accomplish a number of additional purposes. [read more]

Issue 90 - Six Reasons You Need A Certified Business Valuation
For business owners, paying non-essential professional fees is nearly as unpalatable as paying unnecessary taxes. If you are convinced that you don't require the services of a certified valuation analyst to value your company, this will not be your favorite issue of this newsletter. [read more]

Issue 89 - How Much Money do You Need?
The third question that we hear from many owners: "I can live on a lot less income once I leave the business." [read more]

Issue 88 - Key Employees and Covenants Not To Compete - Part 2
In our last issue, we looked at the thorny problem that faces owners who have key employees but who have no way of preventing them from competing (or taking other employees or customers) should they leave the company. [read more]

Issue 87 - Key Employees and Covenants Not To Compete - Part 1
The damage to an owner's exit plan and to the business of losing key people is magnified when employees leave and take other employees customers, trade secrets, and long-term vendor relationships. [read more]

Issue 86 - Time: Too Much or Too Little?
Active business owners seldom slow down. We all know that the only things likely to reduce your pace are death or terminal burn-out. This is not to imply that you are not well intentioned; quite the contrary. You are so well intentioned that you've taken on more tasks than you can possibly complete. [read more]

Issue 85 - Business Continuity: Using a low valuation for lifetime transfer events
Today we are going to talk about valuation in business continuity arrangements. As mentioned above, business continuity arrangements must cover both lifetime and death events. Your challenge (and that of your advisors) is to establish a valuation that is consistent for both events. [read more]

Issue 84 - Thinking About Transferring Your Company To Insiders - Part 2
Do you want to reduce your exposure to risk as you depart? How much risk do you want your successor to assume? Do you understand the need for a low enterprise value in this type of transfer? Is one of your objectives is to leave your company immediately? [read more]

Issue 83 - Thinking About Transferring Your Company To Insiders - Part 1
It is not particularly easy to transfer business ownership to key employees, children or other quasi-paupers without taking a great deal of risk. [read more]

Issue 82 - Family Business Transfers - Part 6
How does a parent know whether a child is capable and willing to run and own a business? So that is why with an intergenerational business transfer it is crucial to have a back-up plan. [read more]

Issue 81 - Family Business Transfers - Part 5
For most owners, the business is the primary source of wealth and income. If this is true for you, you should have all of the desired cash in the bank before you transfer control and ownership. [read more]

Issue 80 - Family Business Transfers - Part 4
Upon closer examination, leaving the business entirely to the business-active child (BAC) and making an equitable distribution of the balance of family assets to the inactive children (and perhaps to the BAC as well) is the fairest plan of all. [read more]

Issue 79 - Family Business Transfers - Part 3
In this issue, we take a look at limiting ownership to one child. [read more]

Issue 78 - Family Business Transfers - Part 2
There is a "recipe" for creating a successful intergenerational transfer. It isn't the only recipe that works, but because it depends on six carefully chosen ingredients, its chances for successful completion are greater than others. [read more]

Issue 77 - Family Business Transfers - Part 1
What could be easier than transferring your family business to its natural successor, your heirs apparent, your offspring? [read more]

Issue 76 - An Estimate of Future Company Cash Flow - The Fifth of Five Elements In Successful Exit Planning
In this issue, we look at why securing a professional's estimate of your company's cash flow is crucial to the success of your Exit Plan. [read more]

Issue 75 - A Preliminary Valuation of The Company - The Fourth of Five Elements In Successful Exit Planning
The fourth element of a successful Exit Plan is to know what your company is worth. [read more]

Issue 74 - Choice of Successor - The Third of Five Elements In Successful Exit Planning
The third element that you must put in place to kick off your Exit Plan is to pick a Target Successor. Compared to the list of possible departure dates or the variety of needs at retirement, the list of possible successors is quite short. [read more]

Issue 73 - A Preliminary Financial Needs Analysis - The Second of Five Elements In Successful Exit Planning
You can get started on the second element of making a preliminary analysis of your financial needs. For business owners planning their exits, this analysis is critical. [read more]

Issue 72 -Your Target Departure Date - The First of Five Elements In Successful Exit Planning
We begin here a series of articles that describe the five most basic elements of an Exit Plan. These are the pieces of information that you must decide or collect before anyone can create a coherent or comprehensive Exit Plan. [read more]

Issue 71 - Using A Valuation Specialist In The Sale Or Transfer Of Your Business
Knowing the value of your business is critical no matter who you plan to sell or transfer to in order to leave your business successfully. [read more]

Issue 70 - Seven Reasons Owners Don't Sell To Key Employees - Part 3
If you are considering or in the process of transferring to key employees, we suggest that you pay particular attention to the seven obstacles that can derail this process. [read more]

Issue 69 - Five Reasons Owners Actually Do Sell Their Companies to Their Key Employees - Part 2
In this second part of the series, we discuss the five reasons that owners actually do sell their companies to their key employees. [read more]

Issue 68 - Seven Reasons Owners Want to Sell Their Companies to Key Employees - Part 1
This article begins a three-part series that explains why owners want to sell to their employees. Over the years, we've found that owners choose to transfer their companies to key employees for seven different reasons. [read more]

Issue 67 - Why Should You Exit Plan When You Have No Plans To Exit
Some owners simply find more satisfaction in staying active in their companies, despite age, despite all business achievements and, often, despite enormous financial success. Should those owners leave? [read more]

Issue 66 - Business Continuity - Lifetime Exits - Part 3
What happens when two, or more, non-controlling (usually equal) owners become locked in a bitter dispute but neither is able to fire or get rid of the other? How can a buy/sell agreement be designed to resolve this unfortunate but, all too common, situation? [read more]

Issue 65 - Business Continuity - Lifetime Exits - Part 2
Our goal here is to discuss events that are not funded by insurance; for example, the bankruptcy or divorce of one of the shareholders. [read more]

Issue 64 - Business Continuity - Lifetime Exits - Part 1
The Agreement you draft will likely have extremely important future consequences because it will govern your ability to leave the business on your terms or to acquire a departing owner's interest in an affordable manner. [read more]

Issue 63 - The Loss of Key Talent -- You!
This issues covers the impact and the cascading affect that your death will have on employees and customers. [read more]

Issue 62 - Company's Loss Of Financial Resources
Unless you can replace the financial strength, represented by your financial statement, your sudden death or incapacity may cause other "stakeholders" in your company to reconsider their relationships to your company. [read more]

Issue 61 - Continuity of Ownership
"What would happen to your business if you died or became disabled?" [read more]

Issue 60 - Cash Flow Forecasting: The Ultimate Reality Check
In this issue, we will examine why cash flow is also crucial to those owners who wish to transfer their companies to insiders (employees, co-owners or children) and how to allocate cash flow. [read more]

Issue 59 - Passing The Smell Test
When deciding to sell your business to a friendly competitor is it the right decision? In short, does the contemplated sale pass the "smell test?" [read more]

Issue 58 - Stock Appreciation Rights Plan
A Stock Appreciation Rights Plan meets both the needs of the key employee and of the owner, because it gives employees something that looks like stock, grows in value like stock, and can be turned in for cash just like stock, but is not stock. [read more]

Issue 57 - The Real Tax Advantages of Phantom Stock Plan
Phantom Stock Plans allow employees to reap the financial rewards of ownership without the attendant risk while at the same time carries several significant tax advantages. [read more]

Issue 56 - Phantom Stock Plan -- The Stock Plan That Isn't
As employees strive to make the company more valuable, they make their interest in the Phantom Stock Plan more valuable. Typically, phantom shares corresponding to shares of stock - but not representing actual ownership - are allocated to the participating employees' accounts. [read more]

Issue 55 - Owner Deferred Compensation
With the majority of your compensation at stake then, you must consider (well in advance of any transfer) which form of non-cash compensation - consulting fees, salary or deferred compensation - is the most advantageous to you from a tax standpoint. [read more]

Issue 54 - Tax Planning Begins Now
Expect tax increases. For nearly all business owners contemplating a business exit, this prediction means that the tax bill due on the exchange of your ownership interest for cash is going to rise. [read more]

Issue 53 - Pre-Sale Due Diligence
This article is for those who have ever given thought to selling their companies to a third party. In order for you to attract a buyer to your company, you must engage in the pre-sale due diligence process well before your anticipated departure date. [read more]

Issue 52 - Confidentiality During The Sale Process
"I can't believe it! I decide to sell my business and the next day it seems that half the city knows I'm trying to sell. What affect will that information have on my employees, vendors competitors and customers?" [read more]

Issue 51 - Buying Out Your Partner
The concerns and risks of buying out a departing co-owner can be reduced by taking the three steps described in this issue. [read more]

Issue 50 - Employee Ownership: It Is Not For Every Employee
Your key employees may be able to run the business as well as (or even better than) you can. But they may not possess the entrepreneurial temperament that accepts (and even thrives on) that part of the game known as "risk." [read more]

Issue 49- Incentive Plans for Key Employees - Part 2
Ultimately, your ability to get top dollar for your company depends on your ability to create, motivate and keep good management. [read more]

Issue 48 - Incentive Plans for Key Employees - Part 1
A stable, motivated management team not only contributes to corporate success, it is also key to the business owner's successful business exit. [read more]

Issue 47 - Exit Planning Myths
Don't believe the myth that someone will tell me when it is time to start planning for your business transition. It is dangerous to wait for others to take the first step. You need to take the initiative, but how? [read more]

Issue 46 - What Your Advisors Should Know
What professional advisors have the qualities, experience and training necessary to help you make that transition successfully? [read more]

Issue 45 - Exit Planning Myths
Don't believe the myth that someone will tell me when it is time to start planning for your business transition. It is dangerous to wait for others to take the first step. You need to take the initiative, but how? [read more]

Issue 44 - Minimizing A Lender's Risk When Financing A Sale
Banks strive to minimize their risk and one way to do so is for buyers to take advantage of the Small Business Administration's (SBA's) loan guaranty programs that can protect the lender bank against loss in case of default. [read more]

Issue 43 - Sold! To The Highest Bidder
Rather than grabbing the highest bidder by the throat, a better approach begins with determining what cash amount you want and what you need in order for a sale to proceed. [read more]

Issue 42 - Tainting The Marketplace
So, you've decided to become a seller. You have determined that even though market conditions are not absolutely ideal, your company is saleable. [read more]

Issue 41 - Going It Alone
So what if you've never sold a business before? You know what you want from the sale of yours. You know your business better than anyone else. Who better to lead the charge than you? [read more]

Issue 40 - Your Banker: The Forgotten Advisor Team Member
While bankers may be cautious by nature, they do need to make money. In fact, like all other business people, bankers are eager to continue profitable relationships. If the sale or transfer of your business is unlikely to disturb that profitable relationship, your banker is vested in helping your execute that transfer. It should come as no surprise that banks value the profitable relationship even if you are not part of it. [read more]

Issue 39 - Systems: Value Drivers? Yes! Between The Owner's Ears? No!
A business system is a repeatable process that employees understand and use to achieve a desired purpose. Owners implement human resource, marketing, organizational, administrative, financial, accounting, lead generation, and sales systems. [read more]

Issue 38 - How Much Is All This Exit Planning Going To Cost?
A well-trained Advisor Team should make you money, not cost you money. This is not to suggest that your attorney or accountant, for example, is going to pay you money or that you aren't going to end up paying for their services. But, compared to little or no planning, a carefully planned and implemented Exit Plan will usually result in substantial income, gift and estate tax savings as well as a significant reduction in the risk of non-payment from the buyer. [read more]

Issue 37 - My Lawyer Told Me Not To Do It!
It is not uncommon for business owners to call one of their advisors to complain, "My lawyer (or CPA or financial advisor or insurance professional) told me that I should not even think of transferring my business to my child and key employees but I want to do it anyway. Can you help me?" [read more]

Issue 36 - Family Succession Planning Via Sale To Third Party
Many business owners facing imminent exit have the enviable but difficult choice of either selling the business to an outside third party and achieving instant financial security or, conversely, transferring the business to loyal motivated key employees or family. This is nothing more, or less, than a clash of exit objectives. [read more]

Issue 35 - Has Your Child Earned Ownership Interest In Your Business?
When considering a transfer of your business to a child, don't underestimate the value of using experienced consultants and advisors. Their counsel, experience and input is perhaps never more important than when dealing with your own family. The need for independent, non-emotionally-charged advice is critical. Having worked with other family businesses, these consultants along with your other advisors can offer practical advice. [read more]

Issue 34 - Selling To Insiders
If you contemplate transferring your business to an insider (employees, children or co-owner) and you want to get paid the value of your business, then, generally speaking, the value of your business cannot exceed four times the true cash flow of the business (as illustrated in the previous issue of The Exit Planning Review™). [read more]

Issue 33 - Cash Is King
The favorite phrase of investment bankers, and sellers of all kinds, is, "Cash is King." After all, when one is selling anything, cash removes the seller's risk in the transaction. When selling a business to a cash buyer, that buyer wants to know exactly how much cash the business is producing. [read more]

Issue 32 - Estate Planning or Exit Planning?
It is worth repeating that the same analysis given to lifetime transfers (benefiting you) needs to be given to a transfer occurring at your death (benefiting your family). Since both lifetime Exit Planning and Exit Planning at death are based on the same premises (exit objectives and valuation) it is relatively easy to develop a consistent outcome. [read more]

Issue 31 - Winning The Beauty Contest
When owners decide to sell their companies what makes them choose one suitor - or buyer - over all the others? What is it that sets winning buyers apart from all the wannabes? [read more]

Issue 30 - Due Diligence
No one buys a company without first learning everything there is to know about that company. That learning process is known as due diligence. During due diligence a buyer, his accountant, his lawyer and any other professional advisor he employs examines every aspect of every contract, procedure, relationship, plan, agreement, system, lease, manual and financial document. [read more]

Issue 29 - First Things First: Prioritizing Your Objectives
Prioritizing your objectives will help you fix your overall path. For example, if you want out soon with cash, but your business cannot be sold today, do you wait until market conditions improve or sell now to your employees? While prioritizing your objectives is not easy, it will make decisions like this much clearer. [read more]

Issue 28 - The Annual Planning Meeting
Readers of this newsletter understand that Exit Planning is an on-going process. It begins with establishing your objectives and a valuation of your company and ends with your successful exit. Along the way, you and your Team of Advisors look at preserving the value of your company, protecting that value from creditors and increasing overall value. [read more]

Issue 27 - Eight Ways To Exit Your Company
If, however, you wish to "leave your business in style," you must work through a three-step process of selecting your path. During this process you will synthesize or harmonize your exit objectives with the characteristics and capabilities of your company as well as with the external realities of the marketplace. [read more]

Issue 26 - Characteristics of a Well-Prepared Buyer
Assuming that all business owners (except for those forced to liquidate) will eventually sell or transfer their companies, attention is often focused on how to be a well-prepared seller. Setting exit objectives, making the best choice of business entity (C or S Corporation), building business value and selecting a skilled Team of Advisors are some of the most important items on the "Savvy Seller Checklist." [read more]

Issue 25 - Exiting Your Business Without Leaving It
More and more frequently, business owners are telling their advisors, "I'd like to back away from my business. I'd like the freedom to do whatever I want, whenever I want. I don't want to worry about money. But if I sell, I'm unlikely to get enough cash in today's merger and acquisition marketplace. If I could cash out, where could I invest and generate a reasonable rate of return? [read more]

Issue 24 - Using Multiple Entities To Save Tax Dollars
The total cost in terms of on-going accounting and legal fees is less than $1,000 per year in most circumstances. Not a bad return on investment! It is clearly necessary to consult with your Advisory Team, beginning with the financial professional who provided you this newsletter to see if this type of planning is appropriate for you, your family and your business. [read more]

Issue 23 - Protecting Your Nest Egg
"Why do I need to create multiple entities to protect my assets?" Steve Pierce, owner of Pierce Floral Shops, asked. "I already have all of my business interests in a Limited Liability Company. Doesn't that protect me and my business?" [read more]

Issue 22 - Putting All of Your Eggs in One Basket
We have all heard the old proverb that it's dangerous to put all of your eggs in one basket." But does the proverb apply in the world of business ownership? Specifically, is it a valid warning or just a worn-out cliché? It seems to make good sense to concentrate all of your business effort and ownership in one entity rather than creating multiple entities to own your business and its operations. [read more]

Issue 21 - Having Your Employees Cash You Out of Your Business: Time is Money
Many, probably most, business owners would like to sell their businesses to their employees, but for one nagging problem: Their employees have no money. The desire to sell out to employees collides with the overarching need for financial security. Owners simply cannot risk selling a business to employees who have no cash. [read more]

Issue 20 - Getting Started In The Exit Planning Process
If you're already taking action to leave your business, ask yourself if you are approaching your exit in a methodical, logical, rational manner. Most owners do not undertake the necessary thought and planning that underpins good ownership transitions because they don't know how to begin or exactly what to consider and analyze. [read more]

Issue 19 - Vesting: Handcuffing Key Employees To Your Company
Too often, owners discover that the compensation plans they've put in place for key employees are sadly inadequate only when those key employees leave their companies for greener pastures. The departure of one or more of these key employees not only complicates your daily business life, but it slams shut the door on your exit plans. [read more]

Issue 18 - Characteristics of Successful Employee Bonus Plans
Too often, owners discover that the compensation plans they've put in place for key employees are sadly inadequate only when those key employees leave their companies for greener pastures. The departure of one or more of these key employees not only complicates your daily business life, but it slams shut the door on your exit plans. Without experienced management in place, it is extremely unlikely that you will be able to leave your business in style. [read more]

Issue 17 - Bonus Incentive Plans for Key Employees
The purpose of installing a bonus plan for your employees is simply to motivate them to help you reach your exit goals. While owners differ in when they want to leave their companies or how they wish to leave, the underlying goal is consistent: to leave the company in style. This is the goal that any employee incentive plan should support. [read more]

Issue 16 - Finding The Right Advisor
It is the job of your Exit Planning advisor to help you plan and implement your exit strategies by asking the questions that help you to clarify your goals. Experienced Exit Planning advisors ask the right questions so that you know where you are going, who is going to help you get there and the route you are going to take. [read more]

Issue 15 - Transfer Your Business And Avoid The Deal Killer: Taxes
When you started your business, you may have had issues on your mind other than choosing the best corporate entity form for an eventual sale. Now that you are thinking about your exit, however, entity choice (C or S corporation) has become critically important. [read more]

Issue 14 - Protecting Assets
To a man, each reported that selling out was the "best thing possible for me and for my family." That said, each owner approached the sale differently and each has pursued different interests in its aftermath. [read more]

Issue 13 - Former Business Owners Express No Regrets About Selling Out
To a man, each reported that selling out was the "best thing possible for me and for my family." That said, each owner approached the sale differently and each has pursued different interests in its aftermath. [read more]

Issue 12 - Sole Owner Continuity Plan
For sole owners, the vital question is: how do you prevent these employees from leaving? The answer: bribe them. Your business must create a plan to compensate them at a substantially increased level (usually 50% to 100% more than they ordinarily receive) and guarantee that payment with cash. [read more]

Issue 11 - ESOPs: Exit Opportunity for Business Owners
An ESOP is a qualified retirement plan, typically a profit sharing plan, that must invest primarily in the stock of the sponsoring employer. It is subject to a number of legal requirements. [read more]

Issue 10 - Transfers to Insiders
When transferring your company to insiders, a Low Value puts Big Dollars in your pocket. [read more]

Issue 9 - Why Business Owners Fail To Plan
Sound familiar? In our experience, the primary reasons owners hesitate to begin the planning process are: [read more]

Issue 8 - Preserve Wealth: Give it Away!
The last step in your Exit Plan is Wealth Preservation Planning. But that doesn't mean you should wait until you are out of the business to begin actively preserving your wealth. In fact, if you wait until the value of your business is converted to cash, it's too late to realize all of the benefits of wealth preservation. [read more]

Issue 7 - Planning for a Rainy Day
There is nothing worse for a business than to have its owner suddenly die . . .especially if it's your business. [read more]

Issue 6 - Transferring the Business to Children or Employees: A Recipe for Disaster?
It should be obvious that a business cannot be successfully transferred unless the new ownership is capable, nor can we expect the transfer to be successful if the business itself lacks the ability to provide an ongoing stream of income with which to pay for the business acquisition. [read more]

Issue 5 - Getting Top Dollar For Your Business
What is a good way for you to get top dollar for your business? First, consider selling to an outside third party, not to an insider such as a child, key employee or co-owner. Outside third parties typically have the cash and the ability to pay a higher earnings multiple for your business. Secondly, proceed through planning steps prior to putting your company on the market. [read more]

Issue 4 - Working On - Not In - Your Business
A number of years ago, I met with Diana Duff, the owner of Major Machining, Inc. (MMI), a machine shop. She wanted out. I suspected that her severe case of "early onset burnout" was due to the departure of her three-person management team six months earlier. These employees had not just left the company, they had set up a competing machine shop funded by the many MMI customers they took with them. [read more]

Issue 3 - What Is My Business Worth?
For many owners, the answer to one question determines their eagerness and ability to leave their companies: "How much is my business worth?" This question is indeed critical and answering it is the second step of your seven-step Exit Plan. [read more]

Issue 2 - Setting Exit Objectives
"When a man does not know which harbor he is heading for, no wind is the right wind." So said Seneca almost 2,000 years ago. Today, speaking to business owners he might say, "Exit Planning for business owners must start with knowing your exit goals and objectives; otherwise, failure may be inevitable." [read more]

Issue 1 - Why Exit Planning?
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 mean millions of dollars to you when you ultimately leave your company. [read more]