Your Business: Legacy or Liability?

Maximize return and limit risk when you sell a business

Using Business Transition Planning

Plans Are Useless, but Planning?

“In preparing for battle, I have always found that

plans are useless but planning is indispensable.”

Dwight D. Eisenhower

Reality: Owners Don’t

Plan for Transition!

• Denial of your mortality

• Fear of an undefined future

• Fear of losing identity

• Think it’s too early to plan

• Fear the process is complicated/expensive

Debilitating illness or death

Divorce

Inheritance by family – management and/ or ownership

Sale of business to a third party

Transfer to a business partner

Sale to the company management team

Business Merger

Just shutting down!

Types of Transitions

Elements of Successful

Business Transition

1. Determine Your Required Net Proceeds

2. Get A Realistic Valuation And Cost Estimate

3. Business Improvements to Close the Gap

4. Plan to Minimize Taxes and Fees

5. Develop a Formal Transition Plan

80% have over 50% of their wealth in their business

70% do not have a business succession plan

Over 60% do not know the true value of their business

Reality: The Facts About Business Owners

Planning To Sell?

5 million businesses

Will go up for

sale in the next

5 years

Only 1 in 4 of

businesses for

sale are sold

ODDS AT THE CRAPS

TABLE AT A CASINO?

50-50

41% of Owners Plan For Their Kids To Take over the Business, But …

Only 30% of inherited

businesses survive into

the second generation

Planning for Inheritance?

And only 12% into the 3rd generation!

Another FACT

The value of executinga successful transition planhas been determined toSUBSTANTIALLY exceed$1000 per hour for thetime spent by the owner.

Assess Plan Execute

Getting It Done In 6 Months

Phase III

45-60 Days

• Inventory

competencies

• Individual

development

• Accountability

• Measure

Phase II

45-60 Days

• Future Goals

• Gap Analysis

• Performance

management

• Action Plan

Phase I

30-60 Days

• Owner

Commitment

• Establish Team

• Baseline

Assessment

Business Owner

BusinessLawyer

Accountant

Business Broker

Financial Planner

Business

Advisor

Transition Coach

Family

Estate & Tax

Planning

Building A Transition Team

0 2 4 6 8

<$499K

$500K - $1 M

$1M - $2M

$2M- $5M

$5M - $50M

2.6

2.9

4.3

4.5

5.4

Average EBITA Multiple

EBITA Multiple for SCORE >80

Calculating Value Based on EBITAIncreasing “Sellability”

Source: “Built To Sell”, 2012

Transition Planning Guidelines

• Create a Positive Vision of the Future

• Define roles and responsibilities

and put them in writing

• Keep everyone in the loop throughout

the process

• Seek external advice from consultants to

resolve issues objectively

• Communicate a clear action plan to

all stakeholders

Business risk exposure – economy, industry, individual

Business “resilience” and stability

Business performance

Availability of financing

Maximizing net value – taxes, fees, assets

Ownership structure

Key Transition Valuation Issues

To obtain a more extensive slide presentation, aplanning worksheet, or to discuss your plan

contact me atArt@Ohio BusinessHelp.com

(937)985-0481

OrganizationsInternational Business Brokers Association www.ibba.orgInternational Succession Planning Association:

http://www.ispassociation.org/Family Business Institute: www.familybusinessintit.reachlocal.com

Publications:Built to Sell http://www.thesellabilityscore.com/The Family Business Crisis, by Wayne Vanwyk

“www.thebusinesstransitioncrisis.comFamily Business Succession: The Final Test of Greatness

McClure, Stephen LEvery Family’s Business, 12 common sense questions

by Thomas Dean. www.everyfamiliesbusiness.comNOLO Guide to Selling A Business by Fred Steingold www.nolo.com

Additional Resources