welcome to the exit check list: 5 steps to a happy (and
TRANSCRIPT
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Welcome to The Exit Check List: 5 Steps to a Happy (and Lucrative) Exit From Your Business
Presented by: Gelman, Rosenberg & Freedman CPAs and ENNIS Legacy Partners
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HousekeepingGeneral Information/Technical Questions
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This presentation will be recorded and made available to download at
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3
HousekeepingCPE Credit
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Webinar Objectives
Learning ObjectiveTo understand the steps business owners should take now before deciding to
sell or transfer a business
Instructional Delivery MethodsGroup Internet-based
Recommended CPE1.0 CPE Credit
Recommended Fields of StudySpecialized Knowledge
PrerequisitesNone required
Advance PreparationNone
Program LevelBasic
Course Registration RequirementsNone
Refund PolicyNo fee is required to participate in this session.
Cancellation PolicyIn the event that the presentation is cancelled or rescheduled, participants will
be contacted immediately with details.
Complaint Resolution PolicyGelman, Rosenberg & Freedman CPAs is committed to our seminar participants’ 100% satisfaction and will make every reasonable effort to resolve complaints as
quickly as possible. Please contact [email protected] with any concerns.
DisclaimerThis webinar is not intended as, and should not be taken as, financial, tax, accounting, legal, consulting or any other type of advice. Readers and users of this
webinar information are advised not to act upon this information without seeking the service of a professional accountant.
Housekeeping
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The Exit Check List
5 Steps to a Happy (and Lucrative) Exit from Your Business
Co-hosted by
Walter H. Deyhle, CPA/ABV/CFF, MAFF, CExP™, CEPA
Senior Tax Partner and Director of Valuation and Exit Planning Division
Gelman, Rosenberg & Freedman CPAs
Pat Ennis, CExP®, CAP®, CFP®
Founder & President
ENNIS Legacy Partners
Patrick Crosby
Senior Tax Accountant
Gelman, Rosenberg & Freedman CPAs
Presenters Moderator
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GELMAN, ROSENBERG
& FREEDMAN Certified Public Accountantswww.grfcpa.com
www.ennislp.com |
Walter H. Deyhle, CPA/ABV/CFF, MAFF, CExP™, CEPA
Senior Tax Partner and Director of Valuation and Exit Planning Division
Gelman, Rosenberg & Freedman CPAs
Our Team
6
Meet Your Instructors
Pat Ennis, CExP®, CAP®, CFP®
Founder & President
ENNIS Legacy Partners
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Poll Question #1
How many years until you are ready Exit?
A) 1 – 3 years
B) 3 – 5 years
C) 5+ years
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GELMAN, ROSENBERG
& FREEDMAN Certified Public Accountantswww.grfcpa.com
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1. Is your business ready to sell?
Value Builder will tell you
2. Are you personally ready to exit?
The Five Step Exit Check List will let you know
Two Questions Before You Exit Your Business
8
The Value Builder System™ The Exit Check List
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Step 1Get Clear on Why You Are Exiting
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GELMAN, ROSENBERG
& FREEDMAN Certified Public Accountantswww.grfcpa.com
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Get Clear on Why You Are Exiting
10
Push
Pull
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GELMAN, ROSENBERG
& FREEDMAN Certified Public Accountantswww.grfcpa.com
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There May be Factors Pushing You to Exit
11
Push
Pull
STRESS
MARKET HAS PEAKED
NEED TO DIVERSIFY
RETIRE
BORED
HEALTH
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GELMAN, ROSENBERG
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But the Happiest Sellers Have Something Pulling Them Too
12
Push
Pull
START A FOUNDATION
NEW BUSINESS
GET FITTRAVEL
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Make A List of What You Are Excited to Go Do
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Poll Question #2
When was your business last valued?
A) Within the last 5 years
B) More than 5 years
C) Never
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Step 2Align Your Exit Type With Your Why
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Exit Options
16
$
Sell outright Re-capitalization Liquidate COO/CEO
Chairman Transfer to kids Management buy-out
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GELMAN, ROSENBERG
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Align Your Reason to Sell With Your Exit Options
17
Retire Sell to Strategic, Transfer to Kids
Market has peaked Sell to Strategic
Risk Aversion Re-Capitalization
Bored Liquidate
Something else you want to do COO/CEO
Chairman
Sell to Strategic
Liquidate
Health Liquidate
Sell to Strategic
Transfer to Kids
Management Buy-Out
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Step 3Figure Out Your Number
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Three Ways to Come up With Your Number
19
What it is worth VERSUSWhat you need or
What you want
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Figure Out Your Number
20
Retirement
Income you need to fund your lifestyle $100,000
x25
Your nut $2,500,000
Investments outside your business - $700,000
Net proceeds needed from business sale $1,800,000
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Figure Out Your Number
21
Risk Aversion
BE
FO
RE
Maximum position on % terms after re-cap 30%
Net Worth $5,000,000
Business Value $3,500,000
Current Position 70%
-30% $1,500,000
-$1,500,000 ÷ $3,500,000 42%
Therefore sell 58% @ a valuation of $3,500,000: $2,030,000A
FT
ER Net Worth $5,000,000
Business Value $1,500,000
Assets Outside $3,500,000
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Figure Out Your Number
22
Bored or Something Else
Number of years running company 7
Market rate compensation $200,000
Your annual benefits – Salary and Perks $120,000
Your Investment of Time $80,000
x 7
Total Value of Time Invested $560,000
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Calculate New Process of Sales
23
Sales Price $3,500,000
Intermediary Fee (10% of 1st Million 8% on 2nd Million 6% on 3rd Million) $260,000
Legal Fees (2-4%) $80,000
Employee “Thank Yous” $350,000
Net Proceeds Before Tax $2,810,000
Tax @ 30% $843,000
Net Proceeds After Tax $1,967,000
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Consider Currency
24
VS.
Cash 90% Stock 65%
Stock10%
Cash35%
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Six Things Every Employee (You) Should Negotiate
25
Job Description
Salary and Short Term
Bonus
Long Term Incentive –
Options?
SeverenceTerms
Holiday Acquirer Get Acquired
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Step 4Decide the Life You Want Post Exit
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Your Role Post Sale
27
Lender
Cash Vendor Take Back
$5,000,000 VS. Down stroke: $4,000,000
8% Interest on $1,000,000 x 5 Years: $1,216,560
Total Proceeds: $5,216,560
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Your Role Post Sale
28
Earn Out
Cash Earn Out
$5,000,000 VS. Down stroke: $3,000,000
Earn Out: $6,000,000
Total Proceeds: $9,000,000
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Your Role Post Sale
29
Consultant
Cash Consulting Agreement
$5,000,000 VS. Down stroke: $4,800,000
Consulting Fee: $500,000
$5,300,000
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Your Role Post Sale
30
Shareholder
Cash Re-Capitalization
$5,000,000 VS. Down stroke: $3,000,000
Second Bite: $7,000,000
$10,000,000
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Step 5Pinpoint Your Spot on the Exit Matrix
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The Exit Matrix
32
Ma
xim
ize
cash
pro
ceed
s o
f sa
le
Willingness to stay on during transition
Liquidate Assets(Fire Sale)
Sell to Strategic Buyer
Re-capitalization
Management Buy-Out
Transfer to Kids
Chairman CEO/COO
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Poll Question #3
What Exit strategy are you leaning toward?
A) Sale to 3rd party
B) Transfer to insiders
C) Transfer to family
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5 Steps to Get Ready to Exit
34
1. Get clear on why you are exiting
2. Align your exit type with your why
3. Figure out your number
4. Decide the life you want post exit
5. Pin-point your spot on the exit matrix
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Questions
4550 Montgomery Avenue, Suite 650N
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Pat Ennis, CExP®, CAP®, CFP®
Founder & President
Walter H. Deyhle, CPA/ABV/CFF, MAFF, CExP™, CEPA
Senior Tax Partner and Director of Valuation and Exit Planning Division
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DisclaimerThis webinar is not intended as, and should not be taken as, financial, tax, accounting, legal, consulting or any other type of advice.
While we use reasonable efforts to furnish accurate and up-to-date information, we do not warrant that any information contained
in or made available in this webinar is accurate, complete, reliable, current or error-free. We assume no liability or responsibility
for any errors or omissions in the content of this webinar.
The use of the information provided in this webinar does not establish any contractual or other form of client engagement between
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webinar information are advised not to act upon this information without seeking the service of a professional accountant.