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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 Review™
discuss all aspects of Exit
Planning. The provider of this Newsletter (Mark
Kandarian) offers you unbiased information about
what you most need
to know — How To Run Your Business So You Can Leave It In
Style™.
1Winsby,
Roger. Axiom
Valuation, 2003.
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