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. Exit Plan Pros Larchmont Associates, Inc. An Introduction to Exit Planning for Business Owners
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Exit Planning Introduction for Business Owners

Sep 13, 2014

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Learn all about Exit Planning from Exit Plan Pros.

Find out how to Grow your business while Planning your exit.
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Page 1: Exit Planning Introduction for Business Owners

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Exit Plan ProsLarchmont Associates, Inc.

An Introduction to Exit Planning for Business Owners

Page 2: Exit Planning Introduction 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!

Page 3: Exit Planning Introduction for Business Owners

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!

Page 4: Exit Planning Introduction for Business Owners

• 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

Page 5: Exit Planning Introduction for Business Owners

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.

Page 6: Exit Planning Introduction for Business Owners

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.

Page 7: Exit Planning Introduction for Business Owners

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.

Page 8: Exit Planning Introduction for Business Owners

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.

Page 9: Exit Planning Introduction for Business Owners

• 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

Page 10: Exit Planning Introduction for Business Owners

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.

Page 11: Exit Planning Introduction for Business Owners

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.

Page 12: Exit Planning Introduction for Business Owners

• 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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Page 13: Exit Planning Introduction for Business Owners

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

Page 14: Exit Planning Introduction for Business Owners

Tom’s ReviewTom’s review included:

• Corporate Valuation

• Corporate Benefits Optimization

• Estate Planning Review

• Retirement Planning Review

• Integration of Business and Personal Plan

Page 15: Exit Planning Introduction for Business Owners

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.

Page 16: Exit Planning Introduction for Business Owners

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.

Page 17: Exit Planning Introduction for Business Owners

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

Page 18: Exit Planning Introduction for Business Owners

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.

Page 19: Exit Planning Introduction for Business Owners

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