Exit Planning Opportunities for Business AdvisorsMichael F. Coyle, CBI Principal/Exit Planning Advisor, CenterPoint Business Advisors

IntroductionWiifmNeed for Exit PlanningExit Planning as an Opportunity for Business AdvisorsSeven Step Exit Planning ProcessVideo ScenariosYour Three Big IdeasValuable Walking Away Items

Wiifm #1Exit Planning is a excellent way for all Business Advisors to build client loyaltyBecome the Trusted AdvisorStrengthen the moat around your client

IntroducingMichael F. Coyle, CBIPrincipal, CenterPoint Business Advisors, Inc.Exit Planning Advisor, Business Enterprise InstituteCertified Business Intermediary (CBI) Awarded by the International Business Brokers AssociationMBA Boston College, Carroll Graduate School of ManagementSerial Entrepreneur

CenterPoint Business Advisors, Inc. assists the owners of small to mid-sized businesses in planning for and executing the most important financial event of their lives...the inevitable exit from their business.

The Reality For Business Owners80% of business owners are exiting their business to retire, they are not serial entrepreneurs The principal fear is Will I have enough money so that I can fund my retirement lifestyle without running out of money?

Other considerations may include wealth transfer to the next generation, charitable giving, and minimizing taxes

The Reality For Business Owners (2)Typically 50-75% of a business owners net worth is in their business assets. The balance is in their personal real estate & financial investments Business owners typically only have one chance to transfer their largest asset

The Reality For Business Owners (3)Most business owners have only an anecdotal perception of the value of their business My brother in law knew a guy who had a business like mine that sold for

Relying on this type of perception can lead to large gaps in future wealth and quality of life

The Reality For Business Owners (4)85% of all small business owners do not have an exit plan, a wealth management plan, and/or an advisory team to assist them

Very few start the process early enough to achieve the maximum benefit of exit planning

There Are Only 4 Places Our Clients Money Can GoExit Planning will help them decide where their hard earned assets end up!

Typical Business Owner ConcernsWho should I transfer my business to?Family, Employees, Partners, a 3rd partyWhen is the right time to leave my business?What is my business really worth?What is the right deal structure?Tax avoidance vs. future riskHow do I ensure that I meet all of my future goals and expectations?

Wiifm # 2Create customer satisfaction by helping your clients achieve their lifes goals

The Concept of Exit PlanningFrom The Endless Focused Work in Building a Business

...To Your Clients Achieving Their Lifes Next Goals:

Takes A Cohesive Team ApproachAccounting TeamLegal TeamWealth Planning TeamRisk AdvisorsBusiness AdvisoryIntermediary TeamExit Planning AdvisorYour Client

Wiifm #3New revenue opportunity that is value-based not hourly-based and is proactive and not reactive

Ingredients of a Successful ExitA written Exit Plan based on the owners objectives.An experienced team of advisors to design and implement the plan.Cash flow and a quantified business value.A strong management team in place.Time.

The Exit Planning Process

Step One: Identify Exit ObjectivesWhen a man does not know which harbor he is heading for, no wind is the right wind. - Seneca

Step One: Identify Exit ObjectivesUniversal ObjectivesHow much longer does the owner want to work in the business before retiring or moving on? _________ yearsWhat annual after-tax income does the owner want during retirement (in todays dollars)? $_________To whom does the owner want to transfer the business?Family?Co-Owner?Key Employee(s)?Outside party?ESOP?

Step One: Identify Exit ObjectivesWorking with a Team of AdvisorsNo one professional has all the answers.Diverse skills and talents are necessary.Team approach minimizes time and cost.If properly facilitated and led.

Wiifm #4Working with a Team of Advisors Generates New Referral Clients

Step One: Identify Exit ObjectivesWho is on the Advisor Team?Valuation SpecialistBusiness IntermediaryInvestment BankerBusiness or Management ConsultantBankerExit Planning AdvisorFinancial PlannerInsurance AdvisorInvestment AdvisorBusiness AttorneyEstate Planning AttorneyCPA/Accountant

Step Two: Quantify Business and Personal Financial ResourcesBeauty is in the eye of the buyer.

Business ValueBenefits to the OwnerProvides a baseline business value by projecting cash flow.Measures business and personal resources both today and as a basis for future projections.Allows them to monitor progress toward the stated objectives.

Step Three: Maximize and Protect Business ValueMaking a silk purse from a sows ear.

Step Three: Maximize and Protect Business ValueBenefits to the OwnerGrow business value and intangible value of the business.Reduce income taxes upon sale of business.Protect assets from potential business and personal creditors.Create ability to sell the business.Motivate and keep Key Employees.

Step Three: Maximize and Protect Business ValuePromote Value Through Value DriversFocus on increasing cash flow.Develop operating systems that improve sustainability of cash flows.Solidify and diversify customer base.Implement strategies to grow the company.Improve company performance as measured by industry metrics.Build a solid management team and groom a successor.

Step Four: Ownership Transfer to Third PartiesMaking a mountain out of a molehill.

Step Four: Ownership Transfer to Third PartiesBenefits to the OwnerCash at closing.Eliminate financial risk.No family succession issues.Speed of exit.

Step Four: Ownership Transfer to Third PartiesThird Party Sales Not Just About the BusinessAbility to sell and business value are determined by:Intrinsic Value: the value drivers.Extrinsic Value: the value the market places on the business.Effectiveness of the sale process.

Step Four: Ownership Transfer to Third PartiesCurrent M & A MarketplaceOf businesses with sales of less than $10 million per year, 20 percent are for sale, but only one out of four actually sells.Businesses with sales of $10 million per year arent much better only one-third sell.Above $10 million per year, the odds improve to 50-50.

Step Five: Ownership Transfer to InsidersMaking a molehill out of a mountain.

Step Five: Ownership Transfer to InsidersBenefits to the OwnerAchieves Exit Objective of:Selling to Key Employee Group (KEG).Transferring to a Family Member.Motivates and retains key employees.Planning reduces risk and increases amount of money received.

Step Six: Business Continuity PlanningMaking sure the business continues when the owner doesnt.

Wiifm #5Adhering to your professional standards to help your clients. It is simply the right thing to do.

Step Six: Business Continuity PlanningBenefits to the OwnerObjectives can still be achieved if you dont survive your exit.Retains ownership and control of company if co-owner departs.Can force non-contributing owners to leave the business.Provides consistency between lifetime and death objectives.Ensures survival of the business for the benefit of others.Results in family receiving value of owners interest, in cash.

Wiifm #6Advisory services that are forward looking not rearward looking

Step Seven: Personal Wealth and Estate PlanningWhen the slings and arrows of outrageous fortune befall you, fight back. - William Shakespeare (Hamlet)

Step Seven: Personal Wealth and Estate PlanningBenefits to the OwnerPreserve wealth, minimize taxes using both lifetime and death planning tools. Coordinates and integrates lifetime exit objectives wishes with estate plan.In effect, estate planning becomes part of business and exit planning.

Wiifm #7Services that are not compliance driven and can be scheduled

The Exit Planning Process

The vast majority of owners are unaware there is a specific planning and implementation process that can help ensure they achieve their objectives.Most business owners spend more time planning a family vacation than how to exit from their business.This is not due to a lack of desire or intelligence. It is simply because they dont know how or where to begin.

Wiifm #8Differentiate yourself in the market by assisting your business owner clients with the single most important financial event of their lives exiting their business.

How Much Does this Cost?It depends, on size, complexity & the amount of pre planning a business owner has done in the pastThe process can take 3-7 yearsExit Planning done right has Design, Implementation and Maintenance phasesTypically a business owner will spend 1.5 -3.0% of the value of his/her business in all Exit Planning activitiesROI on Exit Planning

Exit Planning Timeline

Perfect Prospect ProfileBusiness owner between 45-55 years oldOwner controls all or nearly all of the ownershipOwners personal net worth is tied closely to the value of the companyBusiness has $3+ million in annual sales and free cash flow10+ years in business 15+ employeesManagement team in place other than ownerOwner believes the business is marketable but does not know the process of selling a business

Wiifm Summary#1 Build client loyalty, strengthen the moat around your client #2 Create customer satisfaction by helping your clients achieve their lifes goals #3 New revenue opportunity that is value-based not hourly-based and is proactive and not reactive #4 Working with a team of advisors generates new referral clients

Wiifm Summary (2)#5 Adhering to your professional standards to help your clients. It is simply the right thing to do # 6 Advisory services that are forward looking not rearward looking #7 Services that are not compliance driven and can be scheduled #8 Differentiate yourself in the market by assisting your business owner clients with the single most important financial event of their lives exiting their business

Ways to get started with Exit PlanningJoin my Linkedin Group Exit Planning for Advisors: New England Information & networking opportunity Explore the handout materials and try out the questions in the Business Owner Exit Planning Checklist Read How to Run Your Business So you Can Leave It In Style by John Brown Ask about White Papers on Exit Planning topics

Ways to get started with CenterPoint(2)Sign up to receive from me a bi-monthly, advertising free newsletter, Exit Planning Review Invite me to speak to your associates or partners about exit planning as a business opportunity Call me about a specific client opportunity where you wish to discuss exit planning Have me conduct a FREE 90 minute Exit Planning Readiness Assessment for any of your clients you think might benefit from exit planning.

What are Your Big Ideas?A must read reference guide for todays Professional that will be assisting their clients in Exit Planning

*Introduction designed to demonstrate credibility. In MFCs case he can demonstrate that he has experience working in both arenas and mention some of the experience he has had in trying to sell businesses in an envrionment is not designed to do so.