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Steve Smith was no different than millions of other baby-boomer business owners in that the thought of leaving his business was never far from his mind, no matter how far away his exit might have been. He daydreamed about transferring the business to his oldest daughter and perhaps to a member of his management team, yet he couldn’t gauge their passion for owning a business and hadn’t tested their management skills.
And, of course, they had no money.
Steve’s company was his economic and financial lifeline. Without its income, his ability to use the business to accumulate wealth, the ability t... Read More
Today, we discuss the essential elements of a plan owners use to transfer a business to insiders that keep the owner in control until he or she is paid the sale price. If you suspect that the children, key employees, or co-owners you would pick to succeed you do not have the funds to cash you out, consider the following 10 elements that make insider transfers successful.
Element 1: Time
A transfer to insiders takes time: time to plan, time to implement, and time for successors to pay the departing owner. Typically, the more time owners take to transfer the company, the less risk they incur and more money they receive f... Read More
In this issue, you'll find an outline of the primary reasons owners choose to exit via sales to third parties. Before you consider that option, you and your company must be prepared for the sale, and the M&A market should be favorable. Creating a written plan that minimizes taxes, allows you to focus on company profitability, and holds your advisors accountable for achieving your goals is key to the successful third-party sale.
If you think that planning for the biggest financial event of your life is a good idea and prefer an approach other than “wait and see,” what can you do to make sure your company is ready to sell when you decide the time is r... Read More
Anyone who has owned and then sold a home remembers the fun conversations you had with your realtor about the value of your property. It might have gone something like this:
You: “We think our home is worth A because our neighbor got B or because we are assessed at C or because we paid D for it 15 years ago and have spent $50,000 fixing it up over the years.”
Realtor: “We think your home is probably worth E, based on these data points.”
You: “Oh, uh-oh. That’s a little lower than where we wanted to be. Maybe selling right now isn’t going to work. If we want to get A for our place, what do we need to do?”
Or maybe your response was this:
You: “Oh,... Read More
In this issue, we attempt to dismantle the most common objections owners make to undertaking the planning necessary to exit their companies successfully. Assuming we are successful in persuading you that Exit Planning not only helps your business while you are in it but also is the best way we’ve found to leave your company to the successor you choose, on the date you choose, and for the amount of cash you want, how do you, as an owner, jump into Exit Planning?
Excuses to avoid Exit Planning include the following:
1. The business isn't worth enough to meet my financial needs. When it is, I'll think about leaving
... Read MoreThis provocative article reminds owners that buyers pay for business value—not for the selling owner’s expertise—and that Exit Planning is the process owners use to make themselves “inconsequential.” In addition to building value, Step Three involves protecting value and minimizing taxes.
In all likelihood, you are absolutely critical to the success of your business. Without you, there is no business.
We want to fix that.
With a little luck and a lot of hard work, we can help you become an Inconsequential Owner.
At some level, all owners understand that they will someday leave the businesses they have created. Let’s assume for a moment that you leave your... Read More
Knowing the value of your company is a fundamental, indispensable element of sound decision- making because it provides you (1) an objective indicator of how much value needs to grow before you exit and how long you must work before exiting, (2) the ability to monitor progress toward your exit, and (3) a basis for estimating (and minimizing) tax consequences of Exit Path alternatives. This article includes a case study and information about various types of valuations.
For many owners, the answer to one question determines whether they can leave their companies: “How much money will I get when I sell?”
This question is... Read More