Exit Planning Introduction for Business Owners

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Exit Plan ProsLarchmont Associates, Inc.

An Introduction to Exit Planning for Business Owners

OverviewReasons to consider Exit Planning:

• It helps you list and prioritize objectives relating to your business, family and finances.

• Creates a path for you to fulfill your objectives.

• Provides sophisticated advice and solutions to meet or exceed your objectives.

Exit Planning puts you in control of your business and your destiny!

Common Traits of Business OwnersTake this quick test:

• Is your business your largest asset?

• Does day-to-day management take up all your energy leaving you no time to focus on long term strategies?

• Do you feel that your business has not reached its full potential?

• Do you feel like you are on a financial or managerial treadmill?

• Are you missing an Exit Strategy?

If you answered “Yes” to any of these questions, you may benefit from Exit Planning!

• Evaluate your business & personal resources.

• Maximize and protect your business value.

• Assess your business ownership transfer options.

• Plan for business continuity and contingencies.

• Increase your personal wealth and reduce taxes.

Exit Planning Can Help

Business & Personal Resources • Review all financial resources

• Perform a financial needs analysis

• Determine if your resources meet your needs

• Perform a business valuation

• Need a valuation for the “resource and needs analysis.”

• Use the valuation as a baseline for measuring the results of any business value enhancement strategies.

Maximize & Protect Business ValueDesign strategies to:

• Preserve, protect and increase your business value.

• Increase your profitability and cash flow.

• Retain and motivate key employees.

• Decrease Taxes.

• Protect your business assets.

Business Ownership Transfer Options• Analyze transfer options to:

• Management• Family• Third party

• Prepare the company for transfer.

• Minimize taxes upon transfer.

• Disposition of real estate after transfer.

• Timing and cash expectations.

• Relationship to other financial objectives.

Continuity & Contingency Planning• Assure the business survives any

unforeseen catastrophe:

• Build a second tier management team.

• Assure continuity of the management team.

• Prevent a financial meltdown due to partnership buyout or estate taxes.

• Disposition on death or disability.

• Estate tax minimization

• Asset titling and beneficiary designations

• Lifetime wealth management

• Asset protection & risk management

• Integration of business and personal financial and strategic plans

Personal Wealth & Estate Planning

Benefits to Business OwnersSelling to a third party:

• Maximize company valuation prior to transaction.

• Resolve problems that may hinder any transaction, before it is time to sell.

• Minimize tax impact of any transaction.

• Maximize shareholder benefits until the time of the transaction.

• Create contingency plan for you, your family and the business in case of unforeseen loss before any transaction occurs.

Creating Your “Dream Advisory Team”We have a full compliment of experts

• Tax and Benefits Planners

• Estate Planners and Lawyers

• Wealth Managers

• Insurance Planners

• Business Growth Consultants

Costs? Most will provide initial services free of charge.

• 45 years old with a successful control systems integration company for the past 20 years.

• Business required most of profits to be re-invested back into the company.

• No other major assets outside the business .

• Tom also had no:• Strategic business plan• Exit plan• Tax plan• Estate plan

Meet Tom: Exit Plan Pros Case Study

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At the time of the assignment, the company had:

• Revenue of $2,800,000

• EBITDA of $500,000

• Baseline value estimated at $2.0MM

• No major assets outside the business.

Tom’s Company

Tom before his Exit Plan

Tom’s ReviewTom’s review included:

• Corporate Valuation

• Corporate Benefits Optimization

• Estate Planning Review

• Retirement Planning Review

• Integration of Business and Personal Plan

Tom’s Results• Couldn’t afford to sell his business at its

current value and meet all of his personal financial objectives.

• Needed to significantly grow the size of business.

• There were a number of valuation enhancement strategies that could be employed to grow his business.

Business Value MaximizationSome of the strategic options implemented:

• Development of a second tier management team.

• Hiring of a full time controller.

• Created a sales department separate from customer service .

• Improved the costing and reporting systems to better track performance and profitability.

• Expanded geographic area served by the company.

Business Performance After 48 Months

Revenue increased to $8.6MM (from 2.8MM)

Cash flow increased to $2.3MM (from $500K)

Company sold to a strategic buyer for $8MM

2002 2006 $-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$2,800,000

$8,600,000

$500,000

$2,300,000

RevenueProfit

More ResultsBusiness Valuation

Before: $2MMAfter: $8MM Value-added: $6MM

• Professional planning and implementation almost quadrupled the value of this client’s company in 48 months!

• Tom saved $700,000 in capital gains taxes

• Tom also developed an estate plan that saved over $1 million in estate taxes.

• Best of all, Tom converted the illiquid investment in his company into cash.

Closing Comments

• More than 90% of business owners do not have an exit plan.

• Most business owners do not know what an exit plan is.

• An exit plan is an excellent way to gain control of your business and your future.

• It is never too early to begin planning your exit.

Please contact Gary T. Brooks at [email protected]

Or visit www.ExitPlanPros.com/blog for more information