Exit Planning Institute North Texas Chapter Social

Date:  June 8, 2017  4:30- 6:30
Place: Nick and Sam's, 8111 Preston Rd, Dallas 75225  (Preston Center SW corner)
Members: $15; Non-Members $20
Register: Here


"Working Capital - What You Don't Know Can Sabotage the Transaction"

Date: July 14, 2017  7:30-9:00
Place: Salmon Sims Thomas CPAs, 12720 Hillcrest Rd, Suite 900 Dallas, TX 75230
Members: $15; Non-Members $20
Speakers:  Monty Walker and Robert Rough

Register: Here


" Could Exit Planning Have Saved This Family and its Business"

Date: August 11, 2017  7:30- 9:00
Place: Salmon Sims Thomas CPAs, 12720 Hillcrest Rd, Suite 900, Dallas, TX 75230
Members: $15; Non-Members $20
Speakers: Doug Box, Interviewed by Mariann Montgomery
Register: Here


"Business Value for Exit Planning-Triggers Drivers Approaches"

Date: September 8, 2017  7:30-9:00
Place: Salmon Sims Thomas CPAs , Suite 900, Dallas 75230
Members: $15  Non-Members- $20
Speakers: Chris Mercer
Register: Here

 


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The baby boomer generation has been one of the most entrepreneurial generations in the history of our country. During the last 30 years, over 5 million businesses with annual revenues ranging from $1 million to $75 million were founded. The owners of most of these businesses are now 50 and are beginning to think about what comes next. Recent studies sponsored by, or conducted by, PriceWaterhouseCoopers, MassMutual, Rutgers, and Marquette University showed that between 34% and 55%, (depending upon the study), of privately held companies will change hands between 2006 and 2016. This group is largely baby boomers, but also includes their parents and even some grandparents. The result will be a glut of available businesses and downward price pressure for most privately owned companies. And, although there are plenty of buyers laden with cash, they are now more discriminating than ever.

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OK, so maybe we have yet to identify 50 ways to leave your business, but would you believe we have identified 34 ways? Paul Simon came up with 50 ways to leave your lover a few decades ago and his concept certainly applies here. His point is this, the possibilities are far more than most of us realize, and so are the exit strategies for most business owners. The good news is, you have options. The bad news is, determining the right one for you can be nearly overwhelming with all the variables to consider. We can simplify the decision making process by organizing your options into seven few basic categories and by listing examples of the options for each category:

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It might surprise you to learn that 70% of former business owners regret selling their companies less than a year after the sale. The main reason is lack of planning on the part of the business owner, and not having a clear vision for what comes next. Like a Captain Without a Chart Your Boat is Adrift A recent survey showed that the number one reason business exits fail is due to lack of planning on the part of the owner1. A separate survey showed that most business owners devote more time planning family vacations than they do planning how and when to exit their business. Rather than being proactive, most are reactive and “forced” to sell because of burn-out, health issues, marital problems, or poor market conditions where there is no time to prepare correctly. As a result, most business owners exit their companies under the worst of circumstances.

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Ready, Fire, Aim That seems to be the business owner’s mantra. Maybe that’s one reason 70% of all business transitions fail. Lack of planning, poor market conditions, and not understanding how buyers and their lenders assign value are three of the most common reasons that businesses fail to attract top dollar, or, that transactions do not close.

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If you tried to sell your business between 2000 and 2005, you probably had a difficult time finding a qualified buyer who was willing to pay a fair price. Part of the problem was that no one wanted to buy, cash was not readily available, and interest rates were unattractive. Another reason you might have had a difficult time attracting qualified buyers is that your sales or net income might not have been as impressive as they had been s few years earlier. In short, it was not the best time to sell. But that’s all changed. If you want to exit in the next 3 to 5 years, consider accelerating your plans. This might be as good as it gets. The mergers and acquisitions industry has had its ups and downs, but we are currently in one of the strongest sellers’ markets that we have ever witnessed. If you are thinking that you want to hold on a little longer to enjoy another year of strong positive cash flow - because you just can’t let go, because you think this upward trend will continue indefinitely, or maybe you don’t know what you want to do next, keep in mind that bad timing could wipe out your anticipated gains.

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Category: Estate Planning

Sometimes key employees do demand to have a piece of the action, but are they really asking for a share of ownership, or do they just want a significant share of the profits and some recognition. Looking at the situation from our business-owner clients’ viewpoint, they often want to “reward” key employees. To a business owner, “ownership” is the ultimate reward, so he (or she) often concludes that transferring stock is an appropriate solution. But for a key employee, sharing in company growth is usually reward enough. Before you start giving or selling away part of your company, take a look at exactly what that means and then explore other strategies that are available to you. More importantly, find out what both you and your key people are trying to accomplish before offering to give or sell stock to them.

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Sometimes key employees do demand to have a piece of the action, but are they really asking for a share of ownership, or do they just want a significant share of the profits and some recognition. Looking at the situation from our business-owner clients’ viewpoint, they often want to “reward” key employees. To a business owner, “ownership” is the ultimate reward, so he (or she) often concludes that transferring stock is an appropriate solution. But for a key employee, sharing in company growth is usually reward enough. Before you start giving or selling away part of your company, take a look at exactly what that means and then explore other strategies that are available to you. More importantly, find out what both you and your key people are trying to accomplish before offering to give or sell stock to them.

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Of course you aren’t. Business is great. Cash flow is excellent. Prospective acquirers with lots of money are everywhere and you believe they’re willing to pay top dollar. Why even consider exiting now if you can exit for top dollar any time you wish? Perhaps you don’t even know what you would do if you left your business. In fact, maybe even the word “exit” makes you feel uncomfortable.

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Baron Rothschild, when asked how he became rich, replied, "I always sell too soon." By that he meant he never waited to get out of a business at the very top price. He sold while the price was still rising and by doing so minimized the chances of losing money on any of his investments and businesses. A good friend of mine used to say that “timing is everything”. Ask any business owner who tried to sell his business between 2000 and 2003. Even deals that were in the works were placed on hold. Many businesses are cash flowing very well now and have been for the last few years. It is tempting for many owners to wait one more year to sell just to enjoy the up-cycle we are currently experiencing. But, why chance staying too long at the dance, especially if your business is in a cyclical industry. You could find yourself trying to sell after the market has turned. Seek guidance from a Certified Exit Planning Advisor (CEPA®) to guide and assist you. By delaying your exit you could be gambling several millions of dollars for another year’s net earnings. Ask yourself if this makes sense.

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Top 10 Deal Killers

Feb 11, 2013

As we meet with business owners we are constantly reminded that most are unaware of what potential acquirers are looking for when they are in anacquisition mode. To some extent, the type of business or industry will define the deal breakers. Some can be determined by a quick glance at the basic information produced by the mergers and acquisitions group representing the seller. This means that the acquiring entity knows what it is looking for and can quickly root through numerous summaries. Such a search becomes a process of elimination. Quality mergers and acquisitions firms will look at several businesses before accepting an assignment to find an acquirer because they work chiefly for a success fee. If your business does not go to closing, they don’t make money. If you are thinking that you will get in front of a buyer and “explain”, chances are you will never have that opportunity. You have to first sell yourself to the mergers and acquisitions firm before they will take you on. The following is a list of the most common deal killers if you are seeking top dollar for your business, and, how to address them.

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