“State of Owner Readiness” - Exit Planning Institute...• 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision. (Price Waterhouse)

“State of Owner Readiness”©

Survey Results 2013

© Copyright 2013 Exit Planning Institute


“Are we meeting client objectives?”

- Peter Christman, 2000

� Founded EPI & wrote The $10 Trillion Opportunity in 2005

� Certified Exit Planning Advisor (CEPA) developed in 2007

� 5-day executive MBA style program; 22 subjects & 13 different speakers

� 350+ Advisors across seven countries � Most are CEPAs; some General &

Academic members � Financial Planners, Wealth Managers,

CPAs, attorneys, M&A, Insurance, Lenders, etc.

� 16 community-oriented chapters planned by the end of 2015.

EPI Founder & Board Member

Peter Christman, CEPA The Christman Group

Chicago, IL

EPI Founder & Board Member

Richard E. Jackim JD, CEPA, MBA

MidCap Advisors, LLC Chicago, IL


Delivering innovative learning experiences, performance-enhancing

resources and strategic tools designed to enhance the exit planning profession

EPI is a platform for…

�Creating Awareness �Advisor Collaboration � Continuous Education �Defining Methodology �Research and Thought

Leadership � Practice Development


A global community of advisors that help owners realize their dreams of not only succeeding in business but passing a legacy, protecting and maximizing

family values and wealth, and achieving a fulfilled life in their third act.


Principles of The Three Legs of the Stool

� Maximize the value of the business

� Ensure the owner is personally and financially prepared

� Ensure the owner has planned for the third act of their life

Committed to changing owner outcomes!


What’s Driving the Need?

� “Age Wave” � First boomers turned 65 in 2011; 10,000 turn 65

everyday; the youngest are now 51. � Own 63% of the private businesses in U.S. � 80-90% of their wealth is tied up in their businesses � EPI recent survey confirms: 75% plan to transition over

the next 10 years; 48% in the next 5 years � Represents a transfer of 4,500,000 businesses and over $10

trillion of wealth


How successful are we at transitioning businesses?

• 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision. (Price Waterhouse)

• 70-80% of businesses put on the market don’t sell. (Business Reference Guide, T. West)

• 95% of M&A professionals believe a business owners unrealistic expectations of company value are the biggest obstacle to sale or transfer. (AM&AA)

• Only 30% of all family-owned businesses survive into the second generation; only 12% survive into the third generation; only 3% operate at the fourth generation and beyond. (Family Firm Institute)

• Private companies are not generating returns on investment greater than their costs of capital. (Private Capital Markets Study, Rob Slee)


2.0%

19.7%

43.5%

29.3%

5.4%

What is your current age?

< 40

40 - 49

50 - 59

60 - 69

> 70


38.3%

36.9%

8.7%

6.7% 9.4%

What is your company's annual revenue?

< $5M$5M to $25M$25M to $50M$50M to $100M> $100M


15.7%

68.7%

15%

.6%

How is your business organized? LLC S-Corp C-Corp Other


77.1%

13.2%

4.2% 5.6%

If your company is privately held, what is the ownership structure?

Family Owned (100%)

Family controlled (outsideownership)Family Owned (outsideownership controlled)Outside Ownership(100%)


71.1%

20.6%

6.2% 2.1%

If family owned, how long has your company been owned by the family?

1 Generation2 Generations3 Generations4 + Generations


Retail, Wholesale trade or distribution

Energy

Business/Professional Services

Technology/ Communications

Transportation

Manufacturing

Healthcare

Real Estate

Insurance/Financial Services

Other

What industry are you in?


27.6%

72.4%

Do you have an engaged Board of Directors/Advisors?

Yes No


34.6%

28.6%

36.8%

Are you familiar with all of your transition options?

Yes No Not sure


When are you planning to transition the company?

0% 20% 40% 60% 80% 100%

40 to 49

50 to 59

60 to 69

> 70

1-2 years (20%)

3-5 years (28.2%)

6-10 years (27.4%)

No plans (24.4%)

Overall


14%

78%

8%

Have you established a formal transition advisory team?

Yes No My Board


34.1%

65.9%

Have you completed any formal education related to transitioning your business?

Yes No


15.8%

1%

32.9%

12.3% 4%

2%

32.2%

Who do you see as your most trusted Advisor?

SpouseBankerAccountantLawyerFinancial AdvisorInsurance AgentOther

Who do you see as your most trusted advisor

Most trusted advisor by revenue size

32%

12%

8% 14%

15%

5% 14%

< $50M

Accountant Lawyer PartnerPeers Spouse Fin AdvOther

38%

19% 14%

0%

11%

5% 14%

> $50M

Accountant Lawyer PartnerPeers Spouse Fin AdvOther



What best describes your companies transition plan?

0.0% 50.0% 100.0%

40 to 49

50 to 59

60 to 69

70+

No plan (48.6%)

Plan, No doc or Comm(34.3%)Plan, Doc No Comm (5%)

Plan, Doc & Comm(12.1%)

Overall


Estate Plan (52%)

Financial plan (61%)

Contingency Plan (39%)

Business Valuation (52%)

Value Enhancement

(13%)

Advisory Team (26%)

Tax Plan (35%)

What do your plans encompass?


21.3%

2%

10.3%

2% 29.4% 1% 1%

30.9%

2%

What best describes how you are planning on transitioning?

Internally (familysuccession)Internally (ESOP)

Internally (Management)

Internally (Partners)

Externally (3rdParty/Strat/PE)Externally (Recap)

Externally (Orderly Liqu)

Not sure

Other


Transition Plans by Age

0 20 40 60 80 100

40 to 49

50 to 59

60 to 69

70 +

InternalExternalNot Sure

Transition plans by revenue size

35%

34%

31%

< $50M

External Internal Not Sure

19%

48%

33%

> $50M

External Internal Not Sure



60%

40%

Do you have provisions in place if key personnel or shareholders should get ill, die or otherwise exit the

company?

Yes No


Family issues (25%)

Management (51.5%)

Cash Flow (26.5%)

Profitability (40.4%)

Tax Planning (20.6%)

Other (8.8%)

What are your biggest internal concerns?


Market conditions

(65.4%)

Gov't legislation (54.4%)

Tax changes (40.4%)

Credit availability

(11.8%)

Currency risk (2.9%)

Other (11%)

What are your biggest external concerns?


Which describes your post transition “life after the business” plan?

0.00% 20.00% 40.00% 60.00% 80.00%100.00%120.00%

Written Plan

Informal plan

Idea

No thoughts

InternalExternal

Describe potential changes to your lifestyle following transfer of ownership

No change (57.6%)

Earn-out

(20.3%)

Reduce (10.2%)

Not sure

(11.9%)

Internal Transition

No change (37.3%)

Earn-out

(19.4%)

Reduce (7.5%)

Not sure

(35.8%)

External Transition


What do you plan to do post-transition?

Philanthropy

(47.5%)

Retire (35.6%) Buy

(8.5%)

Invest/ Board (22%)

Consult (32.2%)

Other (10.2%) No

Plans (15.3%)

Internal Transition Philanth

ropy (10.3%) Retire

(20.6%)

Buy (5.9%)

Invest/ Board

(14.7%)

Consult (17.7%)

Other (8.8%)

No Plans

(22.1%)

External Transition


Have you incorporated into your personal financial and estate plans?

Both (62.7%)

Financial (15.3%)

Estate (0%)

Neither (22%)

Internal Both

(27.3%)

Financial (33.3%)

Estate (3%)

Neither (36.4%)

External


Level of employee awareness of the managerial and ownership transition plans.

Internal

Aware -both

Aware -ManagerialAware -OwnerNot awareeither

External

Aware -bothAware -ManagerialAware -OwnerNot awareeither


56.1% 18.2%

25.8%

External: Current understanding of value of

business

Good ideaFormally valued <1 yrNot sure

13.6%

86.4%

External: Pre-transition VE project last 2 yrs

Yes No


Internal Transitions: comparing strategic plans versus strategic moves in next 5 years

25.4%

49.1%

25.5%

Strategic Plan

Yes -writtenNo -informalNo

57% 43%

Strategic Moves in next 5 years

YesNo


External Transitions: comparing strategic plans versus strategic moves in the next 5 years

12%

41%

47%

Strategic Plan

Yes - written No - informal No

75%

25%

Strategic Moves in next 5 years

YesNo



Why is this important?

• Further proof that the opportunity is real – $10+ trillion of US wealth transitioning next 10 years – Significant exit strategy related advisory work

• Use as an educational tool with owner and other advisors – Share with your clients

• Great Business Development Opportunity – Open the door to conversations

Christopher M. Snider, CEPA CERTIFIED EXIT PLANNING ADVISOR

President and CEO [email protected]

14701 Detroit Avenue, Suite 430

Cleveland, Ohio 44107 Main Office: (216) 712-4244

Delivering innovative learning experiences, performance-enhancing

resources and strategic tools designed to enhance the exit planning profession


Delivering innovative learning experiences, performance-enhancing resources and strategic tools

designed to enhance the exit planning profession


Documents

“State of Owner Readiness” - Exit Planning Institute...• 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision. (Price Waterhouse)