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$1,490,837At Age 68
$6,894,743At Age
94
44
How Much Do You Need to Live Happily Ever After?How Much Do You Need to Live Happily Ever After?
Your Business’ After-Tax Value TargetYour Business’ After-Tax Value Target
Your Rough Happily Ever After NumberYour Rough Happily Ever After Number $ ________$ ________
Less Your Target Personal Income Producing AssetsLess Your Target Personal Income Producing Assets (_________) (_________)
Your Business’ After-Tax Value TargetYour Business’ After-Tax Value Target $ $ ______________
Convert Your After-Tax Value Target to Pre-TaxConvert Your After-Tax Value Target to Pre-Tax $ $ ______________(Divide by 1 minus the anticipated effective tax rate)(Divide by 1 minus the anticipated effective tax rate)
Your Business’ EBITDA TargetYour Business’ EBITDA Target
Your Business’ Pre-Tax Value TargetYour Business’ Pre-Tax Value Target $ ________$ ________
Divided By Your Business’ Valuation MultipleDivided By Your Business’ Valuation Multiple ________ ________
Your Business’ EBITDA TargetYour Business’ EBITDA Target $ $ ______________
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The Importance of Tracking Value
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The Importance of Tracking Elements of Value
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Transfer Option Value Transfer Option Value RangeRange
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Transfer Options and Transfer Options and MethodsMethods
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2xx9 2x10 2x11 FCST FCST FCST
NET INCOME (15% Growth) $ 6,250 $ 8,812 $ 12,507
ADD BACK:INTEREST EXPENSE 1,000 1,000 1,000 TAX EXPENSE 2,000 2,000 2,000 DEPRECIATION EXPENSE 12,000 12,000 12,000 AMORTIZATION EXPENSE 2,000 2,000 2,000
OWNERS PERSONAL EXPENSES ANDADJUSTMENTS FOR NORMALIZED PAY 0 0 0
EBITDA $ 23,250 $ 25,813 $ 29,507
INDUSTRY MULTIPLESLOW 3.0 3.0 3.0 HIGH 5.0 5.0 5.0
ESTIMATED ENTERPRISE VALUATIONLOW $ 69,750 $ 77,438 $ 88,521 HIGH $116,250 $129,063 $147,534
LESS: INTEREST BEARING DEBT ($30,000) ($35,000) ($40,000)
NET EQUITY VALUATIONLOW $ 39,750 $ 42,438 $ 48,521 HIGH $ 86,250 $ 94,063 $107,534
What might successful execution look like?
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Value managementValue management can be used to guide the business can be used to guide the business towards its value target within the desired time frame. towards its value target within the desired time frame.
Leadership, incentive systems and reliable reporting Leadership, incentive systems and reliable reporting systems help create the framework necessary for systems help create the framework necessary for sustainable growth.sustainable growth.
Link Exit and Business StrategyLink Exit and Business Strategy Align management objectives and compensationAlign management objectives and compensation Improve your information reportingImprove your information reporting Plan to achieve a higher valuation multiplePlan to achieve a higher valuation multiple
And don’t forget to:And don’t forget to: Obtain higher investment rates of returnObtain higher investment rates of return
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Protect the valueProtect the value created through risk management created through risk management and tax minimization strategies.and tax minimization strategies.
Review the Business Risk Management ChecklistReview the Business Risk Management Checklist Review the Business Contingency Planning ChecklistReview the Business Contingency Planning Checklist Tax MinimizationTax Minimization
-Strategic Uses of Cash-Strategic Uses of Cash-Estate Planning-Estate Planning
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Manage the Planning and Implementation ProcessManage the Planning and Implementation Process
Exit planning requires the participation of multiple Exit planning requires the participation of multiple parties who are informed and work together. parties who are informed and work together.
Advisory TeamAdvisory Team Project Managers – Internal/ExternalProject Managers – Internal/External CPACPA BankerBanker M & A AttorneyM & A Attorney Estate Planning AttorneyEstate Planning Attorney Insurance AdvisorInsurance Advisor M & A Specialist/BrokerM & A Specialist/Broker Investment AdvisorInvestment Advisor Financial PlannerFinancial Planner OtherOther
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Thank You!