Growing, Transitioning, And Exiting A Business
A PROVEN SUCCESSFUL PLANNING PROCESS
Typical Business Life Cycle
No matter where you are on the graph, to meet your individual end goals, focused planning is critical. Start-up Growth Maturity Decline
Time
Purpose Driven Planning
If people are going to become all that they are capable of becoming, it is important that they work hard; but it is also important that they are intentional about the hard work. [Proper] Planning places effort where effort is needed most!
Undirected diligence isn’t efficient.
John Wooden, Coach Wooden’s Pyramid Of Success
The Benefits Of A Professional Team
• Even professional athletes at the top of their game take advantage of numerous coaches and trainers to help them be the best they can be.
• Take advantage of the professional expertise and experience that is available to assist you in your planning and execution.
How Do You Define Success In Business?
• Company’s Revenue
• Profitability
• Industry Recognition
Business Success…What I’ve Learned
It’s
not all about
the money…
It boils down to business owner’s ability to live their dreams, fulfil their life objectives and use the business as a catalyst to achieve these goals
Individual Objectives Planning
The Planning Process Starts With Personal Goals and Objectives Discovery
• What are your and your significant other’s personal non-financial goals and objectives?
• Are you committed to them or are they just ‘it would be nice’ thoughts?
• What brings you the greatest joy and fulfilment?
• What’s the best use of your time and skill set?
• What does your perfect calendar look like?
The Planning Process Starts With Personal Goals and Objectives Discovery
This is a time to….
Dare
To Dream –if not now, when will you begin to live your life? Jack Borland
We are always putting things off until tomorrow. The question becomes…. What happens if there is no tomorrow?
The Planning Process Starts With Personal Goals and Objectives Discovery
• What is your current lifestyle spending?
• What amount would you like it to be in the near future?
• What will be your future lifestyle spending be when you exit the business?
• What are your financial legacy desires?
- Family - Charities
The Value Gap
Is there a wealth gap?
What’s needed from the business to live the lifestyle of your choosing?
Personal Review
After Tax Annual Income What Business Value NEEDS to be (ATI + Legacy) Total Needs + Legacy + Legacy
The Value Gap
IS THERE A WEALTH GAP?
What’s needed from the business to live the lifestyle of your choosing?
• Increase income for current spending needs
• Increase income to help fund retirement lifestyle objectives
• Increase business value to fund retirement lifestyle and legacy objectives
The Planning Process Starts With Personal Goals and Objectives Discovery
With financial and non-financial goals identified…
Review estate documents to see if any updates are needed.
Business Growth and Profitability Planning
Business Planning Driven by Personal Objectives
Your personal goals and objectives, both financial and non-financial, should now be the driver of your business’s strategic planning going forward
The business should work for you …it shouldn’t control your personal life
DON’T LIVE A LIFE OF REGRET
Business Planning Driven by Personal Objectives
• Increase profitability – fund growth and current lifestyle objectives
• Value growth planning – close the value gap
• Owner non-financial objectives planning
- Improve work/life balance
- Align RR that is fulfilling/maximizes skillset
- Other
Business Planning – Greater Profitability/Build Business Value
• Evaluate where you are – SWOT analysis
• Strategic planning to achieve personal goals and objectives
• Develop and strengthen organizational structure
• Scaling planning - Internal growth – new products/services: expand existing footprint
- Strategic acquisition
• Understand business value drivers
• Understand critical success factors – what has to happen/what can’t happen
Business Planning – Greater Profitability/Build Business Value
CONTINUOUSLY ASSESS THE CURRENT STATE VS THE PLAN
• Review goals and objectives
• Set clear business objectives with milestones and criteria for success
• Benchmark financial progress towards goal
• Accountability
• Evaluate and tweak action plan execution
Business Planning – Greater Profitability/Build Business Value
UTILIZE CLEAR SUCCESS CRITERIA & KPIS
• What you can measure, you can manage
• Define your success criteria
• Identify the relevant Key Performance Indicators (KPIs)
• Tie your KPIs and milestones to critical drivers
• Include your managers and team in the process
Business Planning – Greater Profitability/Build Business Value
HAVING THE BUSINESS RUN INDEPENDENTLY FROM YOU
• Will everything be ok if you were away from the business for 30 days?
• Build a management team to run the business and reward them
• In order for it to be a business, it must run itself. Otherwise, it’s a job!
Having A Back-up Plan
DISABILITY OR PRE-MATURE DEATH
• Your business strategy planning should take into consideration possible derailment by changes in circumstance
• Who/what will be in place to take over on a moments notice
What type of written agreements do you currently have in place, providing for the orderly transfer of business ownership in the event of death or permanent disability? What written agreement do you have in place on who will take over the day-to day management?
Transition and Exit Planning
Transition and Exit Planning
• Engage your exit planning team
- M&A advisor
- Transaction attorney
- Investment banker/intermediary
• Pre-due diligence review
• Get your legal house in order
Transition and Exit Planning
WORKING THE DRIVERS OF VALUE
• Normalized earnings and the cash flow from business
Proven Sustainable Earnings
• The multiple used by buyer to value the business (the fewer D’s and more builtins the better)
Reducing Buyer’s Risks
Exit Planning – Building Business Value
VALUES BUYERS LOOK FOR
• Can the business operate independently of the owner ?
• Is there a strong management team?
• Is the right team in place for growing the business?
• Are the systems and processes considered first rate for the industry?
• Has there been consistent revenue growth and profit?
Exit Planning – Emotional
and
Personal WellBeing Planning
WELL-BEING PLANNING
• Your business emotionally gives you:
- A place to belong
- A place to be important
- A place to connect
- A place to go
• Start planning the next phase of your life:
- How will you spend your time?
- Where are you going to get what your business emotionally gives you ?
Have something to walk to verses walking away from
Exit Planning – Emotional and Personal WellBeing Planning
PREPARING FOR THE EMOTIONAL JOURNEY & FEARS
• Fear of loss of control
• Fear of loss of wealth/cash flow
• Fear of loss of identity
• Fear of the unknown – what comes next
• The day after
Planning The Best Way To Exit
Business Transfer Options
TRANSFER MOTIVES
TRANSFER CHANNELS
TRANSFER METHODS
ESOPs Management Buyouts/Ins
Phantom Stock Stock Appreciation Rights Charitable Remainder Trusts Charitable Lead Trusts Outright Gifts SCINs Annuities
INTERNAL TRANSFERS Employees
(Retire) Outside (Continue)
GRATs FLPs IDGTs Buy/Sell Russian Roulette Dutch Auction Right of First Refusal Negotiated One-Step Private Auctions Two-Step Private Auctions Consolidate Roll-ups Buy and Build Recapitalizations Initial Public Offerings Direct Public Offerings Reverse Mergers Going Private
Source: Robert Slee Private Capital Markets
EXTERNAL TRANSFERS
Exit Success Factors
1) It occurs at the time of the owner’s choosing. When?
To Whom?
For how much?
2) It occurs in accordance with the owner’s wishes for the future ownership of the business.
3) It occurs with a value that is satisfactory to the owner in conjunction with his/her wealth objectives.
