Exit Planning Strategy Workbook - Beene Garter LLP

EXIT PLANNING STRATEGY WORKBOOK Pick the right exit strategy for your business before you need to sell.

This strategy workbook is designed for business owners who, at some point, will exit their business. This workbook will help you identify what you want and need from your eventual transition. It includes: •

An overview of three common sale types

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Key factors of each sale

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Questions to ask yourself to help you establish your priorities

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Strategy discussion tools

EXIT PLANNING STRATEGY WORKBOOK

OPTION 1 | EXTERNAL TRANSFER What is it? A sale to a strategic buyer (e.g., large company in your industry) or a financial buyer (e.g., private equity firm) Mechanics: Hire an investment banker or broker to market the company widely and publicly, approach select buyers quietly, or approach people in your network Key questions to ask yourself: 1. Can my business easily function without me?

2. How many potential buyers are there for my company?

KEY FACTORS Does this maximize value?

Yes

Timing of cash flow

Lump sum/possible earnout

Impact on brand/legacy

Rests with the buyer

Future success factors

Condition of company at sale and capability of buyer

Preparation/timing

Extensive due diligence, process may take 6+ months; ideally, the company is in strong shape

The buyer wants

Lowest price, highest quality, low risk

Risk factors to seller

You may have to assume all liabilities (e.g., asset deal), the public process may disrupt business, employees, etc.

Owner’s role after sale

Owner may be retained for 3-5 years to consult

Cost/complexity

Many professionals are involved (broker, lawyer, CPA, etc.)

Use this section to jot down any additional questions or items for consideration.

EXIT PLANNING STRATEGY WORKBOOK

OPTION 2 | INTERNAL TRANSFER What is it? A sale or gift to the management team or a sale to employees Mechanics: Certain managers are willing and able to buy the company (management buyout, MBO), or certain employees are willing and able to buy the company (Employee Stock Ownership Plan, ESOP) Key questions to ask yourself: 1. Is my management team motivated and capable of buying and running the company successfully?

2. Are my employees motivated and capable of running the company successfully?

KEY FACTORS Does this maximize value?

Not typically

Timing of cash flow

Typically over time

Impact on brand/legacy

Rests with next operators/employees

Future success factors

Buyers’ ability to finance purchase price, the condition of the business, and the acumen and drive of buyers

Preparation/timing

May have less due diligence, a MBO can be faster than an outside sale

The buyer wants

Low purchase price, great team, resources to grow

Risk factors to seller

Management or employees may not be capable of successfully driving growth, and the sale may fail.

Owner’s role after sale

Owner may serve as a consultant during transition period

Cost/complexity

Higher complexity and long-term commitments with ESOPs

Use this section to jot down any additional questions or items for consideration.

EXIT PLANNING STRATEGY WORKBOOK

OPTION 3 | FAMILY TRANSFER What is it? A sale or gift to family inside or outside the business Mechanics: The company redeems existing owner(s), minority owners (family) become majority owners, family buys in with cash, or owner gifts shares to family Key questions to ask yourself: 1. Does your family want to participate in running the business?

2. Are the key family members as capable as an external hire would be at performing their job functions?

KEY FACTORS Does this maximize value?

No

Timing of cash flow

Typically over time

Impact on brand/legacy

Rests with the next generation of family

Future success factors

A capable, interested next generation

Preparation/timing

May have less due diligence, developing talent can take years

The buyer wants

Easy buy-in terms, a company that isn’t saddled with debt

Risk factors to seller

Your family may not be as capable as an outside manager.

The company may not be able to service debt easily.

Owner’s role after sale

Defining the role can be tricky due to legacy and family dynamics

Cost/complexity

Lower complexity logistically, but higher interpersonal complexity

Use this section to jot down any additional questions or items for consideration.

EXIT PLANNING STRATEGY WORKBOOK

EXIT STRATEGY | SELF-EVALUATION Please answer the following questions as they apply to you. Rank them based on importance using a scale of 0 to 5.

0 = not important, 5 = extremely important

YES/NO I want/need a lump sum payout from the sale of my company.

I want/need the sale proceeds paid over time.

I want/need to get the highest possible sale price for my business.

Brand and legacy are very important to me after I sell.

I have three years or more until I need to sell my business.

I have a workforce that I trust to run my company.

I have a management team that I trust to run my company.

I have family members that I trust to run my company.

I have a workforce that’s interested in running my company.

I have a management team that’s interested in running my company.

I have a family member(s) that’s interested in running my company.

There are external buyers that might want to buy my company.

My family members in the business have the financial ability to buy my company.

My management team has the financial ability to buy my company.

My company is able to support an internal or family sale of the company.

I want to minimize the complexity and cost of the transition.

I want to stay involved with my company after the transition.

RANK

EXIT PLANNING STRATEGY WORKBOOK

EXIT STRATEGY | NEXT STEPS Thank you for taking the time to think about your company’s future and answering important questions about your transition. Now that you’ve completed this workbook, we invite you to schedule a complimentary one-hour strategy session with our succession planning expert, Eric Larson.

Please bring this workbook to your strategy session. You can also share it with Eric before your session by emailing it to elarson@beenegarter.com.

Use this section to jot down any additional questions or items you’d like to address in your strategy session.

ERIC LARSON Partner CPA/ABV, ASA, CBA, CMA, CFE Eric has 22 years of experience and is highly skilled in the fields of financial valuation, transaction negotiation, merger and acquisition representation, and corporate financial analysis.

He’s helped many companies and owners successfully navigate their transitions. He realizes that maximizing the overall value of the transition - including all costs and benefits - can be more important than just focusing on getting the highest dollar value.

Eric can do more than identify the right type of sale for you and your company.

He can also value your business, discover potential successors, provide strategies for transferring ownership, and create an effective transition plan.

616.235.2751

elarson@beenegarter.com

EXIT PLANNING STRATEGY WORKBOOK

EXIT STRATEGY | STRATEGY DISCUSSION This page will be used in your one-on-one strategy session if you choose to meet with Eric Larson. No action is required at this time.

EXTERNAL TRANSFER

INTERNAL TRANSFER

FAMILY TRANSFER