Dictionary of Exit Planning Terms

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Assessment and Analysis

As the first part of our exit planning process, we conduct a thorough assessment of your goals, needs and expectations. It is important that we understand all of the factors and issues that may impact how we structure a plan for moving forward.

We use a combination of interviews, questionnaires, research, and dialog to determine the best course of action.

During this phase we also estimate the value of your business now and potentially in the future.  We help you clarify how proceeds from the sale of your business will help fund your retirement needs. We help you examine ways to maximize the value of your business and minimize taxes.

Once this phase is completed, we can help you move toward creating your exit preparation and implementation plan.

Execution Support

Now the business has created a framework for preparing for the exit event.  However, it is critical that two processes occur which assure that:

The business executes the plan properly and in a timely fashion

This may be the most difficult task of all, because the "tyranny of the urgent" constantly gets in the way of implement the exit plan.  When in the midst of fighting fires of unhappy customers, suppliers, or employees or trying to grow the business to meet this year's revenue goal, often the task from the exit plan get lower priority.

It is important to have a single individual be the project manager of this process other than the owner.  This may be a trusted employee or an outside resource.

The business reach out to experts who can help them find transactions companies, buyers, and/or financing sources that will be instrumental in the final stages

Once the business is prepared for the exit event, then the owner needs to decide who will represent the company, who will be tasked to find and screen buyers, and who will find financing to support a leverage buyout or to implement a recapitalization.

These tasks will likely be implemented by either a business broker or an investment banker.

Exit Preparation and Implementation Plan

Now that we understand your goals, needs and expectations, it is now possible for us to help you begin to plan for and prepare for your exit or transition event.  Included in this phase are the following activities:

  1. Development of a list of changes that should be implemented in order to increase your value
  2. Evaluation of all of your exit and/or transition options
  3. Tax planning to minimize or defer income, gift and estate taxes
  4. Review and updating of your estate plan
  5. Preparation of an updated wealth management plan that incorporates the planned deal structure.
  6. Pre-transaction due diligence
  7. Coordination of exit planning efforts with owner's attorneys and accountant
  8. Creation of a detailed value enhancement and exit planning action plan

Issues Faced by Owners

In first considering to change your role as the owner of a business, there are many issues that you need to face, including:

  1. How to retire
  2. How to create financial security from the asset you have built in your business
  3. How to maximize the sales value of your business
  4. How to deal with potential health issues that are occurring now or that may occur in the future
  5. How to best deal with any family members that may work in the business
  6. How to deal with retirement or transitioning of a business with multiple owners
  7. How to preserve the value of the business that you have created
  8. How to best protect your current employees

Picus Enterprises, LLC

Picus Enterprises, LLC is a performance-oriented consulting company for small and medium sized businesses, serving Manhattan and Long Island Communities.  Founded in August, 1996, we have provided management consulting services to hundreds of companies around the United States.

We work with businesses of all sizes to transform their Business Vision into Business Reality.  Using a combination of analysis, strategy, planning and implementation consulting techniques, we work with companies and organizations to help them achieve their business growth objectives.

As part of our focus on growth, we provide a variety of consulting services, including:

  • Implementation of Marketing Programs
  • Telemarketing Services
  • Design and Development of Websites and BLOGs
  • Implementation of CRM software, including ACT, Salesforce, and Infusionsoft
  • Creation of Prospect Databases and Lead Management Solutions

Picus Enterprises has significant experience in Mergers and Acquisitions and in working with business owners to architect their exit planning process to maximizes the value they can receive when they sell their business. 

 

Consequences of Not Planning Your Exit

The failure to create a well-defined exit or transition plan virtually guarantees that business owners will:

  1. Exit their companies as a result of pressure from outside circumstances, not as a result of their own desires.
  2. Exit their companies on a timetable that's forced on them instead of one that meets their needs.
  3. Undervalue their companies and leave hard-earned wealth on the table
  4. Pay too much in taxes
  5. Lose control over the process by being reactive and limiting their exit options
  6. Fail to realize all their business and personal goals
  7. Suffer unnecessary psychological stress
  8. Watch a lifetime of work disintegrate as a result of poor business continuity planning
  9. Lose confidentiality during the sale or exit process

Exit Planning Benefits

There are many benefits to exit or transitional planning for the business owner.  These benefits include:

  1. Helping to achieve your business and personal goals.
  2. Controlling how and when to exit.
  3. Maximizing company value.
  4. Minimize, defer, or eliminate capital gains, estate, and income taxes
  5. Facilitating your retirement
  6. Ensuring the survival and growth of the business
  7. Preserving family harmony, where multiple family members are involved in the business
  8. Defining strategic options from which to choose.
  9. Creating a well understood process to be followed.

Exit Strategy

SO WHAT CHOICES DO I HAVE IN EXITING MY BUSINESS?

For most businesses there are several choices to exit or transition out of your business.  These strategies include:

  1. Selling the business to a third party.
  2. Selling the business to a partner, the management team, or the employees.
  3. Re-engineering the business so that the management team runs the business and the owner stays on only in a limited fashion.
  4. Recapitalizing the business by bringing in outside investors in order to take some cash out of the business, but continuing to run the business.
  5. Liquidating the business assets.
  6. Closing down the business

SO HOW CAN I CREATE AN EXIT STRATEGY THAT WILL ALLOW ME TO EXIT MY BUSINESS WHEN AND HOW I WANT TO AND GENERATE WHAT I NEED TO SUPPORT MY RETIREMENT?

The first step in creating an exit strategy is to commit to develop a good exit strategy document or plan.  Having documented your exit strategy is to create a comprehensive exit strategy plan that outline the tasks that will need to be completed in order to accomplish the objectives that you have identified in your exit strategy.

We strongly urge business owners to create and work with a team of exit planning advisors, who can answer issues raised while considering their exit strategy.  We also suggest that for most business owners implementing an exit strategy, they consider hiring an architect/advisor who will help them construct and manage the implementation of their exit strategy plan.

Managing Stakeholders

There may be many stakeholders involved a business sale or transition, including the following:

  1. Multiple Shareholders
    With multiple shareholders it is important to secure consensus on the deal structure.  If this cannot be developed, then any dissenting shareholder needs to be bought out or at least dealt with.
  2. Key Management Team
    Often it is the key management team that will be responsible for delivering various assigned actions in the exit plan. It may be critical that they remain onboard until the sale.  In some cases, the buyer may want them to be committed after the sale.
  3. Other Critical Employees
    The may be other critical employees, such as top sales personnel, engineers, or technicians that need to be motivated to stay with the company.  Funding through an ESOP may require broad spread participation by employees.
  4. Customers
    It is important to communicate with key customers, once the exit event is near implementation, in order to assure them that the flow of products and services will not be interrupted.
  5. Suppliers
    Likewise key suppliers will need to be kept in the loop, as required.
  6. Family Members
    Any family members who work in the business or who may become recipients of the sales proceeds may need to be involved in the process.
  7. Financing Institutions
    Any current banks or financing sources having debts of the business will need to be involved and most likely their consent provided.

It may be useful to create Advisory Boards, Family Councils, or Committees which contain some or all of the stakeholders.  The value of creating these will vary from business to business, but should be considered.

If you have an exit planning consultant involved with your implementation process, they may be a valuable resource to help coordinate efforts and provide communications between the owner and the various stakeholders.

Richard Strautman Bio

 OVERVIEW OF BUSINESS EXPERIENCE AND EXPERTISE

EXECUTIVE POSITIONS FOR SMALL AND MEDIUM SIZED BUSINESSES

  • Divisional General Manager
  • Marketing Vice-President, Sales Vice-President, Sales Director
  • Manufacturing Vice-President, Materials Vice-President
  • Chief Financial Officer, Director Financial Planning, Manager Financial Reporting, Manager Financial Analysis
  • Sr. Programmer, IT Management, Computer System Selections

CONSULTING EXPERIENCE

  • Currently owner of Picus Enterprises, LLC specializing in helping small and medium sized businesses turn their business vision into reality. Have worked with over 100 Manhattan and Long Island companies.
  • Since 2004, a Certified Facilitator for The Alternative Board (TAB), the leading company that creates and supports peer to peer advisory boards for the owners of small privately held businesses.
  • Managing Director / Partner / Senior Manager with KPMG Consulting (Bearing Point) for five years, focusing on enterprise-wide computer system based solutions for medium to large businesses.
  • Owner of Picus Consulting for 2 years, specializing in providing turn-key solutions for start up businesses which provided an Integrated Business and Marketing Plan and a Private Placement Memorandum allowing them to approach potential investors for seed capital.

BUSINESS TRANSACTIONS EXPERIENCE

  • Currently an Agent Partner for the BizGro Partners company, specializing in growing businesses and business transactions.
  • Created and was President of a Joint Venture between Datapoint Corporation and the Tandy Corporation.
  • Was member of acquisition team that reviewed multiple acquisitions for DH Technologies, a technology manufacturer.
  • Was General Manager for two different acquisitions by a printer company.
  • Created and was President of a Joint Venture between Datapoint Corporation and EDS to provide hospital management systems to hospitals of the Army, Navy, and Air Force.
  • Have created multiple business plans for start-up companies looking for equity capital and /or business loans.
  • Advised financial investment company regarding the transfer of the business from the founder to his son.
  • Engaged by Human Resources company to advise owner regarding the potential sale of the company to a competitor.
  • Engaged by software company to create a strategy that would derail a potential take-over by a larger competitor.
  • Worked with co-owners of a distribution to develop a value enhancement plan to grow the business within 5 years and also advised them regarding several potential acquisitions.

SELECTED FUNCTIONAL EXPERIENCE

  • Management consulting
  • General management
  • Business and marketing planning
  • Business exit and transition planning
  • Mergers and acquisitions
  • Creating and implementing marketing programs
  • Project management
  • Computer based solutions for business

COMMUNITY AND NON-PROFIT INVOLVEMENT

  • Headed budget and admission process for United Way in San Diego, CA
  • Fund raiser for Habitat for Humanity
  • Past President of the Community Chest of Port Washington, NY
  • Past Co-President of the Chamber of Commerce, Port Washington, NY
  • Served on Advisory Committee of the Business and Tourism Development Corporation of the Town of North Hempstead, NY
  • Organizer, moderator and presenter at multiple Long Island business information and networking events

EDUCATION and CREDENTIALS

  • Past Certified Exit Planning Advisor (CEPA)
  • APICS certified
  • Certified Purchasing Manager
  • MBA from Memphis State University
  • BA in Business and Economics from Rhodes College