selling a business: why a transition plan is essential
TRANSCRIPT
![Page 1: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/1.jpg)
Protecting Your Business Nest Egg
![Page 2: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/2.jpg)
Copywrite 2015 B2BPlanner Ltd.
You have one chance to get it right
![Page 3: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/3.jpg)
We will discussWhy Plan Why Now
Why You Key Planning Considerations
We will not discussValuing a business Selling a businessLegal or financial details
![Page 4: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/4.jpg)
Founded 2003
Meet my client:
Let’s call him Dr. V. He started a business in 2003.World renowned in his fieldLead technical person in the company A few years ago he got cancer and died. I was advising the owners at the time
This transition wasUnplannedVery difficult and stressful Risked the company’s survival
I want you to avoid this situation in yourbusiness or with your clients
![Page 5: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/5.jpg)
Formal operating agreement addressing transfer of ownership on death to partners
X Debt to a minority shareholder
Did not have:X Key man insurance X Team of advisorsX Business continuity planX Staff Succession plan X Knowledge of family about the business
2 year federal research grant from NSF Business advisor able to step in to run business
What Happened?
![Page 6: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/6.jpg)
Why Didn’t Dr. V
Plan for Transition?
Denial of his mortality
Fear of losing identity
Fear of an unknown future
Didn’t have the time
? Excuses:
“It’s too early to plan” (and execute)
“The process is too complicated/expensive”
![Page 7: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/7.jpg)
Debilitating illness or death
Divorce
Inheritance by family
Sale of business to a third party
Transfer to a business partner
Sale to the management team
Business Merger
Just shutting down!
Transitions to Consider
![Page 8: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/8.jpg)
Planning To Sell?Getting out is harder than getting in
5 million businesses
Will go up for
sale in the next
5 years
Today Only 1 in
4 businesses
for sale are
sold
![Page 9: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/9.jpg)
Planning To Sell?
5 million businesses
Will go up for
sale in the next
5 years
1 in 10 may sell
in the future
Of available Capital To buy small businesses
![Page 10: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/10.jpg)
40% of Owners Plan For Their Kids To Take Over … but
Only
30% of inherited
businesses survive
into the second
generation
Planning for Inheritance?
12% survive into the 3rd
generation!
![Page 11: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/11.jpg)
What Is At Stake?
60% of
Owners
Do not know
The true value
of their
business
80% of
owners
have
over 50% of
their wealth in
their business
70% do not have a succession plan!
![Page 12: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/12.jpg)
How Do You Like The Odds?
You CAN change them with a transition plan
![Page 13: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/13.jpg)
The FACT is…
Successful transition plans have PAID the owners$1000-2000 PER HOUR for the time they investedin developing their plan .
![Page 14: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/14.jpg)
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
Increased Selling Value Based on EBITABy Increasing “Sellability”
Source: “Built To Sell”, 2012
![Page 15: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/15.jpg)
Business risk exposure economy, industry, competition
Future Growth Potential
Business “resilience” and stability
industry, size, geographic location
Business performance
Availability of financing
Ownership structure
Factors Impacting “Sellability”
![Page 16: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/16.jpg)
What Position Do You Play?
Business Owner
BusinessLawyer
Accountant
Business Broker
Financial Planner
Business
Advisor
Transition Coach
Family
Estate & Tax
Planning
Transition Planning is a “team” sportThe team …
![Page 17: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/17.jpg)
Assess Plan Execute
Planning Can Be 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
![Page 18: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/18.jpg)
Successful Execution Can Take Years
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Form Team
Fact Gathering
Forecasting
Personal Needs
Valuation
Set Objectives
Transition Plan
ManagementDevelopment
Building Value
Ownership transfer
Additional Payouts
![Page 19: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/19.jpg)
As the transition approaches, business
moves from being an income stream to
becoming a wealth generating asset
![Page 20: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/20.jpg)
6 Steps To A Successful
Business Transition
1. Build Your Team
2. Determine Your Required Net Proceeds
3. Get A Realistic Valuation And Transition Cost Estimate
4. Develop a Formal Transition Plan
5. Plan to Minimize Taxes and Fees
6. Improve the Business to Close any Gap
![Page 21: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/21.jpg)
Succession Planning
happens at every stage of a business’s life-cycle…
![Page 22: Selling A Business: Why A Transition Plan Is Essential](https://reader033.vdocument.in/reader033/viewer/2022042818/55aef1c21a28ab74288b4613/html5/thumbnails/22.jpg)
www.ohiobusinesshelp.com/[email protected]
937-895-0481
I am committed to preserving Entrepreneurial wealth. Contact me to discuss your situation.
Art Helmstetter