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Incentive Planning Shortcut

Incentive Planning Shortcut

A shortcut to guide your Exit Planning client in developing a successful incentive plan for key employees requires you helping them to answer just three critical questions:

1. What do you want the key employees to achieve?

Define the goals that the Business Owner wants their key employees to achieve. Examples can include growth in profitability, growth in customer base, increase margins or developing a new line of products or services.

2. How will you know if the key employees have been successful?

Objectively quantify performance metrics to determine whether the key employees have achieved the goals of the Business Owner set. Make sure the goals set are measurable. Examples include profitability increase of X%, expenses controlled as X% of gross revenue, or a target number of customers purchasing above a stated threshold in products or services.

3. What is an appropriate reward for the key employees’ success?

Key employees should “pay for their own benefits.” In other words, their success will generate the revenue/earnings that will not only cover the cost of their incentive bonus but will put additional money in the Business Owner’s pocket. If the key employees participating in an incentive plan are successful, what is the expected financial upside for the company? How much of that financial upside is reasonable to share with incentive plan participants?

Use these three questions to guide early discussions on incentive plan design. Additional details and illustrations for how an incentive plan might operate can follow these initial decisions. Use the Recommendations available in the EPIC™ Software to summarize the incentive plan that will become part of a more comprehensive Exit Plan.

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Identifying Key Employees

Identifying Key Employees

The term key employee can mean different things to different people. However, in Exit Planning, it has a specific meaning. Before you head down the path of identifying key employees in your Exit Planning clients’ organizations and creating Exit Plans that include them (either directly or indirectly), you, your client, and the other members of the Advisor Team should all be on the same page regarding what a key employee is. A true key employee has three critical qualities.

  1. He or she has a direct and significant impact on the business’ value.
  2. His or her combination of skills and experience would be difficult to replace.
  3. He or she will meaningfully participate in the company’s strategic future.

Because of these characteristics, the loss of a key employee will result in financial loss to the company and will delay the owner’s exit from the business.

Your business-owner clients will often include individuals who do not meet the criteria listed above on their list of key employees. Frequently, owners include internal accounting or bookkeeping personnel, office managers, technical project managers, and even CFOs. While these individuals more than likely have an emotional bond with the business owner, they are not key employees for the purposes of Exit Planning. As the quarterback of your clients’ Exit Planning Advisor Teams, it is your duty to redirect your clients toward placing these individuals in the important-employees category, which may even include giving these employees special treatment as part of the overall Exit Plan.

Once the group of confirmed key employees is agreed on by the owner, Advisor Team, and you, you can lead your client through the necessary steps to motivate, retain, and reward these key employees through the Exit Planning Process. You also may recommend including them in ownership, depending on your client’s Exit Objectives.

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Gifts to Employees

Gifts to Employees

Many business owners and some of their advisors believe that making a “gift” of ownership to an employee is an effective way to reward the employee or advance the ownership transfer process. They contend that a gift to an employee can be considered part of the annual gifts that an individual can make (usually called the “annual exclusion”) so that the transfer is not subject to income tax, capital gain or gift tax. They believe that if the transfer is from the business owner personally, and not the company, it will be considered a gift. They are wrong.

In almost all circumstances, a transfer of ownership interest from the business owner to an employee is going to be treated as income to the employee in the eyes of the IRS. The employee is required to pay income tax based on the difference between the value of the property (ownership interest) transferred and the value paid for that property (which is nothing in the case of a “gift”). Not only must income be reported and tax paid on the employee’s tax return, but employment tax withholdings also are required at the time of the transfer.

There are a few situations in which a transfer will be tax-free. These include transfers to the owner’s children who also are employees and transfers of a “profits interest” in a partnership or LLC. Discuss the tax treatment and timing of any transfers of ownership interest with the CPA on your client’s Advisor Team.

For more information on the tax treatment of “property” transferred to employees, look to Section 83 of the Internal Revenue Code and Regulations that are associated with it.

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Family Transfers are a Multi-Step Process

Family Transfers are a Multi-Step Process

Is it possible to create a Component-based Exit Plan for a business owner who has one or more children working in the business and one or more children who are not involved in the business? Maybe not. The range of issues to consider is quite broad.

If your business owner client intends to transfer his or her business to one or more business-active children, he or she will likely require planning in most of the EPIC™ Components in order to create a comprehensive plan that achieves all of his or her goals.

Step One and Step Two – As with all Exit Planning engagements, whether a component or comprehensive, you must first identify what your client wants (Step One-Owner Objectives) and what he or she has (Step Two – Business and Personal Financial Resources).

Step Three – When the successor owner is a business-active child, it is often still important to ensure that the management team surrounding the child who will own the business is of the best quality and is motivated to work for the success of the company. Use Step Three (Maximizing and Protecting Business Value) to help your business owner client leave the strongest and most successful business possible for the successor child to take over.

Step Four – Step Four, transferring business to a third party, does not apply.

Step Five – To transfer ownership during your client’s lifetime, use Step Five (Ownership Transfers to Insiders) to shift ownership with the lowest possible tax consequences.

Step Six – As with all lifetime transfer initiatives, a corresponding and consistent plan for the event of death or disability of the business owner is critical. The planning that you implement in Step Six (Business Continuity) must support the strategies selected in Step Five and Step Seven (see below). Any inconsistency can cause confusion, disagreements, conflict or even lawsuits, none of which are good for the business.

Step Seven – Finally, use Step Seven (Personal Wealth and Estate Planning) to complete the circle by selecting strategies that facilitate the satisfaction of the business owner’s personal financial requirements, completing any transfers to the business-active child and conveying wealth and opportunity to the child or children who are not active in the business.

As you can see, the orchestration of transfers of wealth and business ownership to children who are active in the business, as well as to children who are not, requires a multi-faceted approach. In these situations, use the EPIC™ Fact Finders, the EPIC™ Software and the diverse skills of the members of your client’s Advisor Team to guide your client through the process of achieving his or her objectives for his or her business, employees, children and family.

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Asking The Right Business Continuity Questions

Asking The Right Business Continuity Questions

A comprehensive business continuity plan addresses the interrelationships of business operations, management, personnel, ownership, customers and vendors. You will be working on strategies in all of these areas when you work with your client and his or her Advisor Team to create the Business Continuity Component of a comprehensive plan.

If you find yourself working with a business owner who plans to transition ownership of the company upon his or her death or disability, but has no plans to maintain consistent management through that transition period or has no strategy for consistent communication with the general employee population during that difficult time, consider making a recommendation that facilitates and supports that ownership transition.

In our Business Continuity National Technical Webcast we discuss the essential Business Continuity elements. It is your role as a comprehensive Exit Planning Professional to express to your business owner client the need to plan for the unappealing possibility of his or her own demise. You can start the planning process by investigating and identifying issues with your clients by asking the following questions:

  • Who has the skills to manage the business during a difficult ownership transition following a business continuity event?
  • What are the specific areas of management that must be addressed in order to preserve the value of the business?
  • What are the specific expectations that the transition management individual/team must meet?
  • How will their management performance be measured and quantified?
  • Who will determine whether performance is adequate?
  • Is it necessary for the transition management to delegate any responsibilities during the transition period?
  • At what point will the transition management support be complete?
  • What is an appropriate reward for successful continuity of management?
  • What are the expected concerns of employees following a continuity event?
  • Who will communicate transition plans to employees?
  • What message should be conveyed to employees in order to reduce anxiety?
  • Realistically, will some reduction in employee base be necessary?

The answers to these questions will guide you in working with your clients to identify specific steps that your client wants his or her managers, employees and/or advisors to take in the event of his or her death or disability in order to preserve the continuity, value and stability of the business.

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5 Secrets to Effective Exit Planning Team Leadership

5 Secrets to Effective Exit Planning Team Leadership

Leading a team of professional peers is a definite challenge that can put all of your leadership skills to the test. You’ll be managing a diverse group of professionals who have different areas of expertise and different ways of getting things done. They don’t report to you, and you have little or no authority to direct their work, but you will be accountable for the team’s ultimate product: your client’s Exit Plan.

Among other things, you will be expected to motivate, facilitate, encourage, communicate effectively, build trust, and resolve conflicts, all the while keeping your client in the loop and happy.

It sounds like fun, doesn’t it? But that’s what an Exit Planner does: serves as the team’s quarterback, constantly moving the team down the field toward the business owner’s goal. This coaching tip will give you a few ideas on how to get the job done most effectively.

Secret #1: Make the Team Feel Safe!

Trusted Advisors are protective of their clients for fear that someone will steal them away. Consider this: You—as the client’s CPA, financial advisor, attorney, or another professional advisor—are suddenly confronted by another advisor who seems to be telling your owner-client that you aren’t doing your job, since you’re not advising him or her about the benefits of doing an Exit Plan. That would make anyone defensive.

But what if you got a call from a CPA who introduced himself and asked for your help? He would explain his role as the Exit Planner, briefly outline his Exit Planning Process, reassure you that he was not there to poach your client, and invite you to be an autonomous member of his Exit Planning Advisor Team.

Now, instead of being on guard, you would, at least, be open to meeting and talking about working together. That’s what we mean by making the Team feel safe.

You must be crystal clear that the client’s expert Trusted Advisor (e.g., CPA, financial advisor) will continue in that role as long as he or she feels comfortable doing so. Explain that there may come a time when a professional with specific expertise may be called in, but only after the client’s expert has been consulted. The expert should have the final say about the Recommendations offered and how they will be structured. Your job as the Exit Planner is to proactively coordinate the Advisor Team to reach the client’s goals, not dictate how the Advisor Team members are to do their jobs.

A word here about insecurity: No one wants to look stupid in front of other professionals. Most of the advisors you will have on your Team are accustomed to working alone as individuals, not as members of a cross-functional team (CPAs work alone, attorneys usually work alone, and even wealth advisors and insurance professionals generally work alone). You may not be able to make the anxiety go away, but you can mitigate it with good communication (more about this later).

Your primary job as Team Leader is to get members thinking as a team first and as a group of individuals second. This will go a long way to making the Team feel safe.

Secret #2: Explain the Benefits of Being on the Team!

There are three main benefits to being on the Exit Planning Advisor Team:

  1. They will make money by selling their core products and services.
  2. They will strengthen the bond between the client and themselves.
  3. They will differentiate themselves in the marketplace.

Let’s explore each of these.

1. They will make money selling their core products and services.

The BEI Seven Step Exit Planning Process™ is full of opportunities for professional advisors to sell business valuations, cash needs analyses, and sale-document creation and reviews, along with myriad other professional services. And the neat thing is the client’s advisor doesn’t have to do any selling! The Recommendations outlined in the EPIC Business Owner Road Map list the products and services needed. All the advisor has to do is reference the Exit Plan and begin working.

2. They will strengthen the bond between the client and themselves.

Very few professional advisors talk to their clients about Exit Planning, much less work on a team to actually build and implement a plan. This unique opportunity will place the advisor in a position to have the client’s undivided attention as his or her “resident expert.”

Additionally, whether the owner is interested in an insider sale or a sale to a third party, the advisor sitting on the team will have the inside track in locking down the business relationship with the new owner.

3. They will differentiate themselves in the marketplace.

As noted above, only a handful of advisors are broaching the subject of Exit Planning with their business-owner clients. Advisors on your Team can point to the fact that they have actually participated in the creation and implementation of an Exit Plan. Quite a marketplace differentiator!

Plus, advisors can talk from experience to business owners and other Trusted Advisors in their sphere of influence about doing Exit Planning, a great conversation starter and unique feature to set them apart from the crowd.

Secret #3: Educate the Team

Every team needs a clear vision of what it’s supposed to do. In our case, it comes back to The Phrase That Pays: “We help our business-owner clients plan for the single, most critically important financial event of their lives: the transition out of their businesses.” If the Team understands the mission, everyone can pull in the same direction.

Team members also need to know the “How” and the “What.” Show them the process you will take: Discovery, Assessment, Plan Creation, Implementation. Let them see, touch, and use the tools, like the Exit Planning Workbook and Assessment Report, the Value Driver Report, and samples of a Business Owner Road Map.

Explain that Exit Planning is much more than succession planning, financial planning, or tax planning. It is a holistic approach that encompasses those planning aspects plus a whole lot more, which requires a team of experts who will build a custom plan based on the business owner’s individual needs, wants, and wishes.

Secret #4: Communicate Before, During, and After

Communication is the linchpin that makes The BEI Seven Step Exit Planning Process work. From one-on-one meetings to introducing yourself, building trust and rapport (see Secret #1: Make the Team Feel Safe), and regular team meetings with all hands on deck, regular gatherings keep all advisors up to date and on the same page. And with technologies like GoToMeeting, Skype, and other live-calling applications, it’s easier than ever to communicate concurrently.

Some BEI Members use a cloud-based, password-protected repository for Recommendation narratives that all Exit Planning Advisor Team members can access at any time. Advisors can post their pieces of the Plan for comments and suggestions from others. (The EPIC Software provides custom templates for individual Recommendations for the responsible advisor to follow.)

Meeting etiquette (e.g., starting and ending on time, having an agenda, giving everyone the opportunity to speak) is always a top communication priority.

Secret #5: The Right People

A smoothly running Team is a joy to work with, primarily because of the synergy the “Right People” bring to the table. Here is a short list of attributes of a quality team member:

  1. An expert in his or her field.
  2. Client focused.
  3. Team player.
  4. Confident.
  5. Open to new ideas.

Be on the lookout for prospective Exit Planning Team Members. They are everywhere. However, not every professional advisor is the right fit to be on your Exit Planning Advisor Team!

The elephant in the room is out of the closet: Not everyone you (or the business owner) invite to be on the Team will play nice. Fortunately, most advisors will be easy to work with. Selfish advisors are the exception, but you will have to be prepared to act quickly if an advisor does not work with the client’s goals at the forefront.

If you run into disruptive advisors, sit down privately and talk with them to find out why they are acting disruptively. Is the work overwhelming? Do they not buy into The BEI Seven Step Exit Planning Process? What’s wrong? Maybe you just need to clear the air.

Maybe they aren’t the right fit. If you feel that’s the case, bring your concerns to your client and discuss them calmly, laying out your apprehensions about advisors who are jeopardizing the Team’s effectiveness. Be professional in your approach and demeanor.

Just remember, the decision to fire the advisor must rest with the business owner. Depending on their relationship, you may end up working with the difficult person anyway.

Leading an Exit Planning Advisor Team can be a fulfilling and profitable way to use your relationship skills. Implement these ideas and you’ll find yourself being invited to work with more and more professionals and their clients.

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Consider Key Person Insurance as an Exit Planning Tool

Consider Key Person Insurance as an Exit Planning Tool

Key Person Insurance is a planning tool that many business owners and advisors spend too little time and attention on.  Careful planning includes an analysis of:

Who is the true “key” to the company’s ongoing operations and success?
What is the risk or potential harm to the business if a key person dies?
During what period of time is it appropriate to insure against the risk of loss?
What will happen if a key person departs for a reason other than death?

Key Person Life Insurance is an important tool that should not be overlooked or oversimplified.  Learn more about the use of this strategy in Exit Planning by listening to the Key Person Life Insurance Webcast on the BEI Member Center.

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Tactical Planning

Tactical Planning

Tactics are the means used to achieve an objective, which may involve complex operational patterns, activity, and decision-making that leads to tactical execution. A critical step in The BEI Seven Step Exit Planning Process™ is committing to tactical planning, which is the planning necessary to accomplish owners’ value goals and figure out how they will implement their decisions.

What must owners do to accomplish their value building and exit goals?

Let’s look at a case study involving Stuart Kimmery, a fictional but representative business owner.

Like all owners, Stuart had strengths and interests that he brought to his company. He also had areas of weakness and lacked interest in certain areas.

Stuart knew he needed help building business value, but he didn’t know where to start. First, he got in touch with his Exit Planning Advisor, Kris. During their meeting, Kris asked, “What do you not like to do in your business?”

Stuart replied, “Making collection calls, doing the books, paying bills, and hiring and firing employees. When I started my business, I knew I’d have to do those things, but they really take the joy out of running it. I usually just put those things off or do them half-heartedly.”

Though Stuart understood that these tasks were critical to his company’s success, he dreaded doing them. Fortunately, Kris was familiar with tactical planning and was able to deliver good news to Stuart.

“What if I told you that my Advisor Team and I could help you avoid doing the things you don’t want to do while increasing your business’ value?”

“I’d say you were a liar or a magician,” Stuart chuckled. “But if you really can do that, I’m all ears.”

Based on the goals Stuart had shared with Kris in earlier meetings, Kris suggested that Stuart find people to perform the tasks he didn’t like, and create the systems and procedures to ensure that those tasks were done well and timely. His alternative was to do it all himself, thus working harder and longer.

Kris provided Stuart with a short questionnaire to determine exactly where he should focus his time and attention in terms of growing value. From there, he’d be able to develop specific tactics to increase business value. After determining what Stuart did and did not want to do, Kris and her Advisor Team could work to figure out how to let Stuart do the things he wanted while delegating the things he didn’t like doing to other qualified employees.

The key to tactical planning is finding the best person for each job and letting that person complete the task at hand.

In our experience, we’ve found that there are five common tasks for which tactical planning is a successful solution:

  • Diversifying the customer base.
  • Expanding sales to current customers.
  • Defining and measuring success: setting goals and holding people accountable.
  • Creating a consistent sales and marketing message.
  • Tax planning (entity choice/prospect of increasing tax rates).

Let’s look at some of the questions you can ask to spark tactical planning within these tasks.

Diversifying the Customer Base. Do you know what percentage of sales or income is attributable to each of your customers? If one of your clients accounted for a disproportionate amount of total sales in the past 12 months, you may have difficulty convincing a future buyer of the value of your company’s customer base. Understand that high customer concentration can prevent a third-party sale of an otherwise attractive company.

Expanding Sales to Current Customers. Are you selling all you can to each customer? What can you do to increase sales to existing customers?

Defining and Measuring Success. By which parameters do you measure your company’s success? Consistent achievement of annual sales targets? Ability to penetrate a difficult market? Knowing the answer to this question is important as you grow value because it is the basis for incentive compensation and establishing interim targets the company must reach to grow at the pace needed to meet your values-based goals and Exit Objectives.

Creating a Consistent Marketing and Sales Message. Many owners incorrectly assume that most or all of their employees can accurately describe what the company does. If you have communicated your company’s purpose to your employees, can most or all of your employees accurately describe its unique competitive advantage?

Tax Planning (entity choice/prospect of increasing tax rates). No discussion of tactical planning would be complete without raising the issue of taxes. As your clients work to increase their companies’ value, it is wise to do everything legally possible (and practicable) to protect the value of their companies from unnecessary taxation. You and your Advisor Team can make recommendations about entity structure, using multiple entities for tax minimization or choice of location based on state income tax rates.

These aspects of tactical planning are just a few that you might want to address with your clients. Of course, our Support Team helps you organize and focus your efforts efficiently so your clients can exit in style.

 

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Turning a Lifestyle Business Into a Business Enterprise

Turning a Lifestyle Business Into a Business Enterprise

Many business owners start their companies as lifestyle businesses to support a certain kind of lifestyle that they want. Some found businesses because they have an urge to create and build. Others want to be their own bosses. Still, others want to control their own destinies.

Whatever the reason, many businesses start as and evolve into lifestyle businesses. This is great for business owners, their families, and their businesses in general, but it can be a big challenge when you start to plan for the future of your business.

As you start thinking about planning for your business’ future, you might feel that you can plan while continuing to do business as usual. However, planning for the future success of your business rarely means you can continue doing business as usual. For example, many business owners don’t know what their businesses are truly worth. Not knowing what the business is worth might be a part of business as usual, but it makes planning for future success much more difficult.

Likewise, it may be business as usual for you to capitalize on certain benefits of ownership. Things like perks, bonuses, and even personal clout factor into the kind of lifestyle that you might expect for yourself and your family. As you begin to plan for your business’ future, you may find that those benefits could disappear if you leave the business, which can affect your lifestyle.

One way to address these issues is to turn your lifestyle business into a business enterprise.

When we use the term “business enterprise,” we mean that the business must have transferable value. It cannot simply act as a means to support your lifestyle, because it’s likely that the traits that support your lifestyle have less value to, say, a private equity group or strategic buyer. These traits might include things like your personal relationships with customers or suppliers who know and trust you; handshake agreements; or flexible payment terms for your favorite clients. Additionally, running a lifestyle business typically requires your constant presence to assure that the business actually does support your lifestyle.

Lifestyle businesses support you right now. Business enterprises can support you, your family, and often the business itself, both now and in the future.

If it Ain’t Broke, Why Fix It?

For many lifestyle business owners, the very idea of changing a business that brought them the wealth, success, and fulfillment they’re used to can be jarring. “This business has done great things for me, my family, and my community. Why should I want to change that?”

The answer is simple and a bit brutish: Potential buyers typically don’t care about the owner’s lifestyle.

The things that you might consider “good” aspects of a business—supporting yourself and your family, perhaps maintaining a culture—often don’t matter as much when an outside buyer does their due diligence. Where you see strength, they will find flaws. They may question practices that fail to maximize profits and cash flow, even if those practices line up with your values. These facts might cause you to resist transforming your lifestyle business into a business enterprise.

Many of the same factors apply if you ever consider transferring your ownership interest to an insider, like a manager or family member. Insiders look for the same kinds of factors that outside buyers do in business. While a lifestyle business may adequately support you now, you should think about what happens when you eventually relinquish your ownership interest (whether by choice or otherwise).

Turning a lifestyle business into a business enterprise can be challenging, but there are certain things you can do to begin the transition.

  1. Find or train next-level management: Next-level management can be the catalyst to building on your current success. It’s often an attractive selling point because it shows that the business can run smoothly without you.
  2. Document systems and processes: When your employees know what they need to do to sustain company cash flow and how to do it, it becomes much easier for the business to run efficiently and effectively.
  3. Put yourself in a buyer’s shoes: Consider what you would look for if you were thinking about buying a business. If you discovered a business that supported its owner but also required the owner’s presence at all times, what do you think would happen if that owner wanted to leave the business after you bought it?

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by the Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

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Successful Planning Starts Much Earlier Than You Think

Successful Planning Starts Much Earlier Than You Think

Many business owners believe they have plenty of time to create a successful plan for the future of their businesses. Most commonly, owners think that if they give themselves a few years, they can transform their businesses into whatever they need them to be: whether that means bigger, more valuable, or more easily sold/transferred. And while each business is different and each owner has different goals, one thing is clear: You likely need to start your planning earlier than you think.

Beginning your planning long before you intend to leave your business often lets you choose the conditions of your exit. For example, let’s say that one day, you’d like to sell your business for as much money as possible. To do so, you must know what your current business value is. You must know which factors give your business its value. You must know what the market for a business like yours is and anticipate any flaws potential buyers might find during due diligence.

The same concept is true if you hope to transfer your business to family members or employees. You’ll likely need to determine whether your targeted successors can successfully run the business, along with whether they are even interested in ownership. You may need to construct plans to keep key employees with the company as and after you exit it. You’ll probably want to determine how long it will take for your successors—who are unlikely to have much money—to cash you out for your share of ownership.

If you wait only until you are ready to exit the business to figure these things out, you may not give yourself enough time to address any issues your business may have. This can prolong the time you’re in your business, which can lead to poor performances or burn out. There are many things to consider, but we recommend a three-step process to begin.

1. Set your goals

Setting your goals long before you’re ready to implement plans gives you a target to aim at. The most important goal to set is achieving financial security. Unless you know what it will take for you to leave your business and never have to work again (unless you choose to), all of the other details surrounding your planning become moot. Once you’ve determined how much you’ll need to achieve financial security, you can decide when you’d like to leave the business, how much money you want (not need) after you leave, and to whom you’d like to leave it (e.g., an outside third party or an inside management team).

2. Account for your resources

Knowing what you currently have makes it much easier to determine what you will eventually need. Consider accounting for all of your resources, including the value of your business and any non-business assets. Many owners have a general idea about the resources they have, but when planning for future success, general ideas often aren’t precise enough. Accounting for your resources with precision provides time for you to close any gaps between the resources you have and the resources you need. If you wait only until you’re ready to implement plans to start accounting for your resources, you may prolong the planning process beyond your wishes or find it difficult to achieve your goals at all.

3. Install Value Drivers

Value Drivers are things that increase the value of your business to an objective buyer. For example, regardless of whether you intend to sell your business to a third party or transfer it to an insider (e.g., family), the new owner will likely expect your business to run smoothly without you. If it doesn’t, you may be expected to stay in your business until the business can run without you. One Value Driver that can address this threat is a next-level management team. A next-level management team, by definition, allows the business to run smoothly without its owner.

Another important Value Driver is a documented process for sustaining cash flow. Documentation allows new owners, managers, and key employees to maintain the company’s profits after you’ve left. Without written and easily understood processes, cash flow can become a game of chance, and few buyers want to take chances when buying a business.

If you’d like to talk about when the right time to start planning for you is, please contact us today. Based on your goals and resources, you can begin to create a road map for the business future you desire.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

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