Exit Planning--Structured Financial Partners: Building value for your company's tomorrow ℠

Sometimes the right action is a contrary action.

I was at a meeting this morning and was reminded of Warren Buffett's quote that he simply attempts to be fearful when others are greedy and to be greedy only when others are fearful. This is a great reminder that sometimes the right action is a contrary action.

As we talk with our business owner clients about their exit planning—they ask us how can they possibly think or extricating themselves from their businesses in times like these?

Our answer, of course, is you don't have to exit now, but you have to plan NOW and start implementing NOW, because times won't always be like this.

As baby boomers continue to age, there will be a glut of business owners in that demographic seeking to cash out of their businesses. There are not enough buyers in the younger generations to absorb the glut, so only the businesses that are best prepared and look best in the eyes of prospective buyers will get top dollar. Others will be a disappointment to their owners when they attempt to sell.

Our last few posts addressed some of the things a business owner can do now to take position him or herself for the upturn when it comes.

Other things a business owner should be considering are:

• Review estate planning objectives relative to the business transfer. With the picture becoming more clear on the estate tax there are opportunities here whether or not the business will remain in the family
• Consider gifting some closely-held stock using a "squeeze play" such as a GRAT. With low interest rates and depressed valuations of companies, when the upturn hits, a business owner can achieve different goals:
  • Transfer very inexpensively from an estate and gift tax perspective, stock to a family member of a business that is going to remain in the family.
  • Transfer to the trust for later distribution, shares of company stock for the benefit of adult children or grandchildren of a company that will eventually be sold, again on a highly tax leveraged basis.

I have never been in a conversation with another professional advisor about a client who planned too much, yet I've heard war stories about those, if they had only done this…

 

Savvy business owners are preparing for the upturn

Once again, guest blogger, Susan Laine, SC

Every day we read doom and gloom and then more gloom. Many of people we talk to are tempted to do nothing and hope for the best.

Savvy business owners know better. They are thinking strategically and preparing for the upturn, which, contrarian as it might sound will happen.

Instead of burying your heads in the sand, this may be the time to think about acquiring competitors who are unable or unwilling to hang on.

This is a buyer's market—you can expect lower purchase prices as well as more attractive terms—larger earn outs and more seller-based financing. And by being creative, businesses who you once thought were too large or expensive to consider, this may be the time to grow your business substantially through acquisitions.

Imagine how well prepared you will be for the upturn, if you acquired struggling competitors and only paid them for results i.e. a percentage of revenue from their clients for a finite period of time.

In Exit Planning, value drivers are the true measure of a business' worth. Preparing a business to grow and prosper is a key component of Exit Planning.