Category: Exit Planning

Posted on

Still No Plan to Sell Your Company? Do you Even Know What It’s Worth?

 

David Shavzin

When do I start my exit planning and how much is my company worth? We have gotten these questions for decades, especially from Baby Boomers. Sometimes it comes across casually: “So what do you think, should I start my exit plan 2 years ahead, maybe 3 years ahead?”

 

 

They often ask knowing the answer. They are trying to make themselves feel better because they haven’t created an exit plan and they know they should have started it long ago. They don’t know what their company is worth, but often get some outsized value stuck in their mind. If I respond that waiting until 24 months ahead of the sale is ok, they can let themselves off the hook for not having an exit plan or succession plan in place.

We talk to hundreds of business owners.

    • Some say they are tired and would like to get out. They do not want to put in much more time or invest in building the value of the company. Yet, they are not satisfied with what it is worth today.
    • Some family businesses have put off building a succession plan for a generation-to-generation transfer. They may feel they have time, or they may feel that their children (children often in their 30’s and 40’s) are “not ready yet”. They may fear losing an income stream as they transition out of the business.
    • Some are simply working the business, taking no time to develop an exit plan that could dramatically increase the value of the business when it comes time to sell.

 If any of these ring true for you, there are many potential solutions to address your concerns and situation. Take the first step and have a conversation with all involved. A good advisory team can help guide those exit plan discussions and provide an objective, experienced perspective. There are so many business exit options.

If you do have just a few years, there are a number of things you can do to optimize your exit and get everyone on the same page. But “2 – 3 years” is NOW, especially if you are a business owner in your 50s, 60s, 70s, or older. You have heard when talking about stocks that you can’t time the market. It’s the same thing for your business. And remember, the sale process itself can take 6 or 9 months to a year or more from start to finish.

With all of what’s going on out there in the world, a plan is critical to monetizing your life’s work! A sudden downturn could keep you captive in your business for another few years as you try to rebuild.

 Questions to ask yourself:

    • Do you know the value of your business? Don’t rely on a value that is some industry multiple or that sounds reasonable or what you’d like. Get professional assistance. This is your life, livelihood, and retirement.
    • When do you want to be completely or mostly out of the business?
    • Can you wait out the next downturn? If you are thinking of a 2- to 3-year timeframe, what if the economy slows down? Can you wait another few years to rebuild the value of your business? What do you really need out of the sale?
    • Do you have a solid plan for what you will do after your exit?

 By the Way, It’s NOT all about YOU!

Without an exit plan, you are not just risking your own retirement or next phase of life. You are putting in jeopardy your spouse, children, their families, your employees, their families, and more. Share on X

The message is simple: work with your advisors now to get a good understanding of your situation. The more informed you are, the better positioned you will be to create an exit plan that works for you, maximize value and minimize risk. You will leave the legacy that you want, not what others want. You will create your future!

Need to Get an Idea of Where You Stand on Business Value and Your Options?

David Shavzin, CMC
Founder, The Value Track
M&A Advisory, Exit Planning, Building Value
770-329-5224
david@GetOnTheValueTrack.com
Atlanta, Georgia
Our BLOG  // LinkedIn // www.GetOnTheValueTrack.com

Thank you for visiting our blog.

 

Jim Weber – President
New Century Dynamics Executive Search

Jim Weber – Managing Partner,  ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

 

 

Posted on

You Are Destroying Business Value, Just Pay the %^$*^R and Move On!

Business owners working on exit planning and maximizing the value of their company for sale often take a wrong turn. Litigation is a nightmare. When we work with owners to sell their companies and advise on the value-building process, we find they are sometimes destroying business value without realizing the extent of it.

We are human beings – we get into disputes. This is America – people sue people. If you have been through business litigation of any sort, you know it is not pretty. In the end, it’s rarely worth it. You may be in the right, there may be real damages or loss of money, and darn it, they should pay!

Certainly, there are situations in which you cannot avoid the dispute dragging on. It may be a substantial amount of damages or it may be a more complex situation tied to other potential liability. Often, however, the relentless, unending fighting – especially going all the way to court – can reduce the value of your company. If each year over a few years you are paying $100,000 in legal fees and your net income takes a hit of $100,000, the reduction in business value can be in the hundreds of thousands of dollars.

    • Revenue Decline: There is no question that you will be distracted by the process. Even with your attorneys handling much of the work, it will always be on your mind. Stress grows and you will have a less-than-100% focus on growing your business, exit planning, and building value for a sale. Revenue will suffer.
    • Bad Decisions: You will – consciously or subconsciously – adjust the decisions you make away from your best course of action because of the ongoing dispute and its implications.
    • Attorney Fees: They add up very quickly – quite possibly ending in more money than it would have taken to just pay the *$*&* and get it behind you to focus on value growth.
    • Brand Damage: The longer the fight continues, the more likely this will get out to hurt your brand and image, even if you are right!

 

36 to 53 percent of small businesses are sued in a given year.

~4 Small Business Statistics About Lawsuits – SmallBizDaily

So just forget it?? Well, sometimes, yes, as much as it pains you. Work with your attorney to make a fair offer, even go a little higher to get it settled! The investment can be worth it!

There are great attorneys who know that doing right by their client is to quickly come to an agreement. Make sure your attorney is not encouraging you to fight without considering all options, the financial implications, and the effect on business value. Consider the options, despite your frustration. You may be on the right side of the dispute but don’t reduce the value of your business any further.

Don’t let one of these issues delay or derail your exit planning, value-building, and the sale of your company. Resolving these issues quickly will help you maximize value and move through the business transaction process more smoothly and quickly.

Call if we can help you think through your specific situation. Always happy to have a conversation to provide some guidance on the business sale process, business value, exit planning or building value for sale.  

 

David Shavzin, CMC, Exit Strategist

David Shavzin

Transactions, Value Growth, Exit Planning, Succession Planning

Founder and President, The Value Track, Atlanta, Georgia
Co-Founder and President, Exit Planning Exchange Atlanta

 

 

 

 

770-329-5224

david@GetOnTheValueTrack.com

Our BLOG // LinkedIn // www.GetOnTheValueTrack.com

 

Posted on

When You Hear: “Hey, I Want to Buy Your Business”

Have you gotten this phone call, regardless of where you are in your exit planning? During challenging, tumultuous times, this call comes from many corners. Some are legitimately interested, some are fishing, some are trying to take advantage. It may or may not be the right timing for your exit planning.

Over the last few months, we have heard from several business owners asking for help because they received “the call“.

When this question comes at you, it can be interesting, even exciting. How do you respond?

The best response is to ask for some basic information and let them know you will get back to them. Whether they say they are the potential buyer or representing the potential buyer, ask for their name, phone number, email address, and website. If you can’t get that, politely end the conversation. If they say they are representing another party, ask for the name of that person or company. They may not share this initially but ask. Getting some basic information will help you do some digging.  It may be something like “I have buyers that are interested in your business.” If you hear that, consider ending the conversation!  In any case, do NOT share any information, financial or otherwise, on this first call. Step back and consider your exit plan.

Even if they are legitimate, remember that they are representing the seller. This is a complex transaction, probably the most complicated one you will ever consider. It will impact your life, retirement, family, and employees for the long-term. Succession planning takes some time.

As I discussed in my last blog (Sell My Business Now? Wait for the Economy?), you need to consider so many factors when deciding if this is the right time for you to sell. It may very well be. Even then, you need experienced professionals who provide transaction services to help guide you through this most important decision and avoid the expensive pitfalls of trying to go it alone.

If you are ready to sell, get professional representation to help manage the process. A business sale is always complicated, even more so under current conditions. If you are not ready yet, start with an estimate of value and some advice on preparing your exit plan – whether your target is one year or 10 years. If you do have time, focus on getting through COVID-19 and building business value: Rebuilding Post-Crisis.

Call if we can help you think through your specific situation. Always happy to have a conversation to provide some guidance!

Stay Healthy & Safe!

David Shavzin

David Shavzin, CMC
Exit Strategist – Value Growth, Exit Planning, Succession Planning, Transactions

Founder and President,
 The Value Track, Atlanta, Georgia
Co-Founder and President, 
Recent Blogs:

During & Post-Crisis: Preserving, Rebuilding & Growing Business Value

Posted on

Sell My Business Now? Wait for the Economy?

Get on the Value Track

Yes, for most businesses, this is probably the toughest year over the last few decades. The recession 12 years ago was devastating but 2020 has been a catastrophe in many more ways.

 Coming up with an exit plan is more important than ever.

“Should I sell my business now?” We have been fielding this question almost daily since COVID-19 started. In good times it seems that we field that question a bit less. Generally, that should be the reverse. Like with the stock market, business owners too often ride the wave up and assume it will keep rising until they reach the exact moment – and value – that they want. That isn’t going to happen for the vast majority.

Of course, the answer at any given moment depends on so many factors:

    • YOUR personal situation
    • Family considerations (See: Family Business Succession)
    • The overall economy
    • The health of your industry
    • Perhaps most importantly the state – and transferrable VALUE – of your Business

 Should I sell? Should I wait? When? Price? The answers are different for every one of you reading this article. Our current clients (mid-COVID) range from $0 in revenue to having their best year ever. What is the same for every business, however, is the series of questions and considerations for designing an exit plan.

If the value of your business is down during COVID-19, but still reasonable for your needs, consider selling. Get over the emotion of it being worth more at the beginning of 2020 and don’t gamble on the future. If you cannot jump out at the current value, get hyper-focused now on comprehensive, realistic exit planning. Call if we can help you think through your specific situation.

 Whatever your situation, these 5 Action Items Apply:

  1.  Get absolute clarity from your CPA or tax advisor and HR consultant on your obligations regarding employment laws under COVID-19 and loan uses / forgiveness. Do what you need to do to have your 2020 financial statements in order shortly after December 31st.
  2. Request an estimate of value based on your best forecast for 2020. This is not an exact science (it never is) but a mid-COVID estimate will give you a baseline for decision-making. Get this done now, you can quickly update it when your numbers are final.
  3. Set out a preliminary goal (target date and value) for the sale of your business.
  4. Design a plan to get from today’s value to your target value by your exit date. Your exit planning should consider: What is working, what needs work, how to get creative…in these 8 areas:

 

    • Brand / Marketing / Business Development
    • Your Customers’ Experience
    • Operations & Key Business Processes
    • Human Capital and Human Resources
    • Profit Improvement, Accounting/Reporting, Cash Flow
    • Risk Management to include Disaster Recovery & Business Continuity
    • Technology
    • Your Personal Finances and long-term plan

 

  1. Make sure that all your advisors are communicating and coordinating as a team on your behalf! If anyone is not doing so, kick them to the curb!

Always happy to have a conversation to provide some guidance!

Stay Healthy & Safe!

 

David Shavzin

David Shavzin, CMC
Exit Strategist – Value Growth, Exit Planning, Succession Planning, Transactions

******************************************

Founder and President, The Value Track, Atlanta, Georgia
Co-Founder and President, Exit Planning Exchange Atlanta

 

770-329-5224 david@GetOnTheValueTrack.com
Our BLOG // LinkedIn // www.GetOnTheValueTrack.com

 

Posted on

Plant a Pine Tree!

Do you know the best time to plant a pine tree?

TWENTY YEARS AGO!!

Do you know the best time to plan your exit strategy??

The first day you stick the key into the front door of your new office!

Franklin Covey said, “Start with the end in view!”

I know in the excitement of launching a new venture and all the chaos that ultimately ensues, an exit strategy is the LAST thing on an aspiring business tycoon wants to consider.  The problem is that once it is pushed to the back burner, it tends to stay there for the next 30-40 years!

So let’s compromise!  If you are 55 years old and own a business, it is time to start giving serious consideration regarding what your ultimate destination will be.  An “Exit Strategy” is about selling the business off and a “Succession Plan” is about passing it down to the next generation, but both demand serious consideration well before you are ready to step away.

Two realities must align at the same time to maximize the value of a business: The owner must be mentally and emotionally prepared to walk away from a business they birthed and nurtured for the last 30-40 years AND the business must be structured to operate without the daily oversight of the owner and generating the highest level of profitability possible. Invariably, the business owners get to the finish line before the business is ready to command its highest multiple!

Now a good M&A guy can recast your financials to take out the country club membership and the spouse’s Cadillac, but if profits have been leaking out of the business, there just isn’t enough lipstick to make that pig win the blue ribbon!

The reason a 10-year runway is advised is to be able to make any necessary corrections in the business and run at that higher level for at least 3 to 5 years prior to going to market to demonstrate sustainable profitability.

As Dr. Ortego used to say, “The VALUE of a thing is the PRICE it will bring!”

Plan NOW to MAXimize Your Exit!!

 

Ralph Watson

Ralph Watson has a varied and extensive career spanning 45 years of increasingly responsible positions in both sales and operations in a very diverse mix of industry specialties, including food processing, textile and apparel, financial services, and professional management consulting.

Ralph served as a Senior Executive Analyst with a number of international consulting companies focused on the family-owned, privately held market where he distinguished himself as one of the top analysts in a highly competitive field.  In early 2014, he personally coached 10 businesses in Europe.

Ralph C. Watson, Jr.   404-520-1030

Thank you for visiting our blog.

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

Jim Weber – Managing Partner, ITB Partners

 

 

Posted on

Family Business Transfer Conversations – Talking with Your Adult Children About Succession Planning

Family Business Succession 

 

David Shavzin

Are your children ready to take over your business? The answer I usually get is something like “No, she has only been in the business for 10 years, she’s not ready to run a business.” Or, “He will get it eventually, but there is no rush.” Exit planning and succession planning are critical to a smooth sale and transition, but they are too often ignored until it’s too late, especially when it comes to family business situations. Are you burying your head in the sand because you are uncomfortable planning to leave the business?


You don’t have to leave tomorrow. At the same time, starting early will help you think through a variety of options to find a structure that best fits your needs. An early start will also provide enough time to talk through key issues with family, inside and outside of the business. The issues can be thorny ones when dealing with the family business, but time can bring everyone together.


Don’t leave a mess for your spouse, children, and employees. We will ALL exit our business at some point, one way or another. The process of selling is very complicated, and it will take much longer than most owners expect. Family business transfers are especially complex.


Again, you don’t have to rush out the door just because succession planning begins. But your family and employees will be more engaged knowing that you are laying out a game plan. If they are not yet ready, start now and include a plan for them to get ready. You may still think of them like this, but they really may be more ready than you think.

 

It takes a huge toll on morale when your children lack specifics and any semblance of a timeline. We routinely hear from adult children of business owners who are beyond frustrated at the lack of a real plan as to how they will eventually start taking steps to succeed Mom and Dad. They don’t need it to happen next week, but they need to know how and when. And, yes, what they need to do to show you that they are ready.


They may never be ready. However, getting an early start on talking about these issues will help you determine whether that is the case or not. You may find that they don’t want the family business, even if they would be capable. Either way, you need to know that as early as possible.


Get your family engaged in these complex issues. The right conversations will lead to the engagement that carries on your business legacy for years to come. Another significant benefit to family business succession conversations is that with a plan in mind, business value growth becomes a lot easier.


Let us know if a conversation about your specific succession planning situation would help you move forward.

______________________________________________________________________________________________

David Shavzin, CMC
Exit Strategist – Value Growth, Exit Planning, Succession Planning
Founder and President, The Value Track, Atlanta, Georgia

Building Transferable Value for Sale

770-329-5224 david@GetOnTheValueTrack.com
Our BLOG // LinkedIn // www.GetOnTheValueTrack.com

 

Posted on

David Shavzin, CMC, Exit Strategist, interviewed on RadioX North Fulton.

David Shavzin Interviewed by N. Fulton RadioX

David Shavzin created The Value Track to help business owners build value and create a path toward a successful exit. Too often, they have not built the value they need and are unprepared when the time comes to put their transition into action. In this RadioX interview, “Maximizing Exit Strategy, Understanding Value”, interviewed by John Ray on Business RadioX®:  Listen to the Interview

David discusses critical issues that business owners need to understand in order to maximize the sale of their business. Exit planning is a process – not something to decide one day, and try to implement the next.

David helps business owners think through their long-term goals and plans, educates them on business value and brings the right – collaborative – advisory team around the table. He then assists in the implementation of value-growth initiatives, guiding them to a successful transition (sale, family transfer, etc.). His 7-step process improves their quality of life and allows them to exit on their own terms.

A frequent speaker on these topics, David is a CMC, former IMC Georgia chapter president and President and Co-Founder of Exit Planning Exchange Atlanta, formed to bring advisors together in a collaborative effort to serve their clients.

His early career was in banking and finance, then 12 years with life sciences company Sanofi/Aventis. He spent 4 years in corporate finance and Mergers & Acquisitions. Then, 8 years of leading teams responsible for Quality, Finance, Supply Chain, Customer Service and IT functions within a $175M subsidiary.

For More Information, Contact David Shavzin at:

(770) 329-224

david@getonthevaluetrack.com   

 

Posted on

My Business is Worth HOW MUCH?!?!

The Problem

We recently spent 2 hours explaining to two business partners what their business was worth and why. They were disappointed but excited to understand the value and how they would manage the business going forward.

 

Buying or selling a business is not easy, even for professionals who spend all their time evaluating deals. Granted, professionals have a far better understanding of the market, the supply and demand for businesses.  If they specialize in a specific industry, as many do, they have an even better perspective on the market and the competitive dynamics for that sector. They understand the challenges of that line of business, including the anticipated cost of innovation required to remain competitive.

 

Even so, the professional must deal with challenges unique to each individual deal. Depending on the strategies employed by competing buyers, whether they’re strategic or financial buyers, the professional may be at a competitive disadvantage for the same acquisition target.  In other words, buyers seldom have the same cost of capital.  For any given transaction this dynamic will work in the favor of one or the other buyer.  There are no guarantees as to an outcome.

 

For someone looking to sell their business, the challenge becomes monumentally greater.  It is likely that these owners have been completely focused on their day-to-day operations, probably paying little attention to the details of merger and acquisition activity in their industry.  As a result, they are not savvy sellers. They must learn as much as they can as quickly as possible to realize the most value from the sale of their company.

 

When we present a valuation to our clients, they are usually horrified. The value is most often nowhere near their expectations or needs. The disbelief and devastation are apparent. Why is this?  Business owners do not have a full understanding of what drives business value.

 

Ultimately, the value of a company depends on internal and external factors to the enterprise. Clearly, internal factors are more straightforward. Most people understand that sustained revenue generation is a key driving force, along with the margins generated on that revenue, and non-cash expenses, i.e. depreciation and amortization.

 

External factors in play include the overall state of the economy and the attractiveness of other businesses for sale in the same industry segment.  This will provide an indication as to the interest level for the business and other potential sellers.  Whereas buyers may be active in a depressed economy when prices may be lower, sellers are less motivated.  On the other hand, the least competitive companies may be forced to sell during a recession.

Research says that 4 million businesses will be sold over the next 5 – 10 years. If that’s even close, you know that most will be selling for well under what their value could have been…IF THEY SELL AT ALL.

 

When is the Best Time to Get on The Value Track?

The ideal time to begin building value is the moment you start your business. But most of us are scrambling to get going – and then get so busy with growth – that we delay focusing on building value and exit planning. We are caught up in putting out fires, it remains a lifestyle business, value suffers.

 

The Value Track – 7 Steps in the Process

The Value Track is a proven, 7-step process of improving profitability and building the transferable value – the real value – of your business. Embracing the Value Track approach will help you exit ownership on your own terms, create your best possible future and improve your quality of life.

Whatever stage you are at in your business’ lifecycle, this process gets you beyond all of that and onto a serious Value-Building track for your company. Click here for 3 client stories at three stages.

 

  1. Get Everyone on the Same Page
  2. Understand Current Business Value
  3. Build Your Advisory Team
  4. Exit-Readiness Assessment
  5. Build Value
  6. Determine Exit Structure
  7. Execute the Transaction

 

Are You on The Value Track? Learn More About the 7 Steps here: The Value Track

 

David Shavzin

David Shavzin, CMC
Founder & President, The Value Track

770-329-5224
david@GetOnTheValueTrack.com

Succession Planning / Exit Planning, Building Transferable Value for Sale
Our BLOG  // LinkedIn // www.GetOnTheValueTrack.com

Tags: exit plan, Exit Planning, exit strategy, transferable value, value, Value track

Thank you for visiting our blog.

Jim Weber – Managing Partner, ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

Jim Weber, Managing Partner

ITB PARTNERS

Jim.Weber@itbpartners.com

Author of: Fighting Alligators, Job Search Strategy For The New Normal

 

 

Posted on

Exit and Succession Planning is a Team Sport

We have advisors and coaches in all facets of life. But in this most important area for our future, for our family and for our retirement, most business owners are pretty much just “winging it”. Oh, they may have an accountant but not much more of a team to focus on exit planning in all its complexities. An advisory team is critical for successful succession planning.

Business owners start their companies to create their future. But they often lose sight of the key to making that future happen – building value. They get caught up in the day-to-day and don’t get to implementing the sustainable, positive change that allows them to transition on their own terms.

Consider: “…78 percent of small-business-owner clients plan to sell their businesses to fund their retirement. The proceeds are needed to fund 60 percent to 100 percent of their retirement needs. Yet, less than 30 percent of clients actually have a written succession plan…”
http://www.cnbc.com/2015/04/13/ew-small-biz-have-an-exit-plan.html   [I would suggest that 30% is generous, and even if accurate, that those plans are not very effective, for growth or for exit planning.]

When I speak on exit planning/succession planning/transition planning, I outline a proven 7-step process. Forming your advisory team is one of those steps.

Build a Team of Advisors.

Nobody knows everything. Many of my clients are in creative industries, designing, creating, building. You don’t want me in that role. But I have worked with many organizations and have a different experience and skill set than my clients. I bring ideas and experience from many industries and many client engagements. The other critical exit planning team members bring their own expertise to the table. These should include:

  • Exit Planning Consultant / Coach
  • CPA
  • Financial Advisor
  • Business value expert
  • Business Attorney
  • Insurance Expert
  • Estate Planning Attorney
  • Banker
  • Business Transaction Expert

When I work with a client, we build this team. The players may already be in place. Or, we may bring in advisors where there is a gap. Either way, we need this core team working with the owner. A business is complex.   A marketing action impacts finance, HR, and more. Big decisions need to take into account the effect on the whole organization and should support clear goals focused on building value.

The client receives much better advice and guidance with this approach.

This does not mean that you are going to start hiring all of these people and employing them full-time as you work toward your transition…especially if you have a few years to go. But, you should use them strategically as you build your business/succession plan. For major decisions on growth, expenditures, hiring, exit-readiness, business value, deal structure…engage their expertise!

The Bottom Line

 Find advisors who understand what you are all about, your growth and exit planning objectives. More importantly, find advisors with whom you feel comfortable. Make sure that they can work together and collaborate on your behalf.

 

********************************************************************

David Shavzin, CMC
770-329-5224
david@GetOnTheValueTrack.com

The Value Track
Succession Planning / Exit Planning, Building Transferable Value for Sale

Thank you for visiting our blog.

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

Jim Weber, Managing Partner

ITB PARTNERS

Jim.Weber@itbpartners.com

Author of: Fighting Alligators, Job Search Strategy For The New Normal

 

 

Posted on

Jim Weber Completes 1st Phase of Turnaround Engagement

Jim Weber has completed the first phase of a Turnaround Management Engagement for a client in Chapter 11 Reorganization.

His work revealed a clear path for a successful exit from Chapter 11 and a strategy to generate sustainable growth for the client.  The next phase will include a detailed plan and the introduction of performance metrics.

For more information about ITB Partners and what we can do for you, contact Jim Weber at;  Jim.Weber@itbpartners.com