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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That all depends on who the buyer is. Your buyer could be a family member, employee, management, a private equity group, another shareholder, or a strategic buyer. Which type of buyer you attract has everything to do with: What kind of shape your business is in Your personal desires and motivations Your personal financial needs and goals Your time horizon to leave the business Unique, special aspects of your business How well prepared you are mentally to leave The quality of your advisors Protections you have in place Market conditions Your business entity The industry you are in This is the short list. It is far from exhaustive.

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Selling a business can be very stressful. Chances are you have a large share of your personal identity, and perhaps your family’s identity, wrapped up in it, not to mention the family wealth. Unlocking that wealth through a transfer of a part or all of the business begins when you select a firm to represent you. Gather important information before entrusting anyone with your precious asset. Where to Meet Your professional advisor, such as your CPA, attorney, or financial planner, might prefer that the intermediary meet you at the advisor’s office. Instead, consider meeting with your trusted advisor at the intermediary’s office. While there, observe the support staff. Is there full time staff to facilitate information flow about potential or pending transactions? Is the staff polite to callers? Do they appear to be well organized? Read the office shelves. The reading material and shelves will reveal something about the professional’s coursework, area of interest and expertise, and sources of information.

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Business owners are often surprised and unprepared when an unsolicited suitor approaches with the intent of making an offer. A typical reaction is flattery, and then defensiveness and fear, not to mention greed. A well-prepared seller is in a position to recognize a serious offer that merits further consideration. Here are a few steps you can take to prepare for the inevitable unexpected offer.

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Independence, desire for control, image, and prestige – all these describe most business owners. Whether your business is a family affair or not, as a business owner you want to be in control. But when it comes to taking charge of the future of the company in the event of the your retirement, incapacitation, or death, like most business owners, you probably ignore or put off facing the realities for another day. According to the American Family Business Survey, 85% of owners of family owned businesses plan to pass the business on to other family members, but of those CEOs age 61 or older who expect to retire in five years, 55 % have not chosen a successor. Sadly, 47.7% of family owned businesses will fail to pass to the next generation due to inadequate estate planning, failure to properly prepare for transition to the next generation, and lack of liquidity to pay estate tax at the founder’s death (Univ. of Conn. Family Business Program). That means that the business will need to be sold to pay estate tax and estate administration costs, or to invest the proceeds to support dependents, such as a spouse. This is especially troubling if your children work in the business since they could find themselves out of a job if the business needs to be sold.

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Suppose you were thinking about transitioning out of your business in the next few months, or even three years from now. Would you know where or how to start the process? Most business owners do not know the answer to that question. As a result, between 50% to 70% of all privately held businesses that are in play, fail to sell. With a sound plan, your chances of a successful transition are greatly increased, regardless of whether you wish to transfer the business to family, employees, management, or to a third party.Most business transitions fail due to any number of reasons including: Unrealistic price and terms, business-owner’s lack of preparation, inappropriate exit strategy, due diligence surprises, the business’s lack of preparation, inappropriate transition team, inadequate post-transition planning, and poor timing. With proper planning, these issues can be addressed and the chances of a successful transition greatly increased.

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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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