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transcript
Adding Business Owner Exit Planning to Your Practice
CPA Academy
July 2017Pinnacle Equity Solutions, Inc.
www.PinnacleEquitySolutions.comwww.PinnacleExitPlanners.com
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
We are pleased to provide these PowerPoint slides for your note-taking purposes for the CPA Academy Webinar. However, this proprietary content is the property of Pinnacle Equity Solutions, Inc. and is not to be reproduced, transmitted or otherwise used in any manner beyond your own use in viewing our webinar.
Pinnacle’s content is licensed for our Member’s use. If you would like information on how you can obtain a license to use and present this and other exit planning material you can contact our office at 781-821-2608 or e-mail Jessica at jessica@pinnacleequitysolutions.com
Please note that these are not all of the slides that will be presented in today’s webinar, but rather a summary of the content that will be covered for your note taking purposes.
Thank you.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Copyright & Privacy Notice
AgendaAgenda
1. Introduction
2. The Exit Planning Opportunity
3. Pinnacle’s Six Step Process
4. Pinnacle’s Training, Certification, & Membership Program
5. Closing Thoughts – Q&A
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
About Pinnacle Equity Solutions
John M. Leonetti, Esq., M.S. Finance, CM&AA, Certified Business Exit Consultant™
Managing Director, Pinnacle Equity Solutions
Pinnacle Equity Solutions was founded by John M. Leonetti who, for fifteen years, has served as a principal, a manager, a transactional advisor, a legal advisor and a financial advisor to privately held businesses, their owners, and their advisors.
John brings to the Exit Strategies practice an extensive education to go with his hands-on work experience. He earned his Law Degree from Suffolk University and is a non-practicing attorney in the State of Massachusetts. Along with the Law Degree, John also completed a Masters Degree in Finance at Suffolk's Sawyer School of Management. John's undergraduate work in Finance was completed at Providence College.
Academic achievements include teaching Retirement and Estate Planning courses at Suffolk University for those studying to earn the CFP® certification and a 'first of its kind' Private Capital Markets course being offered in the Spring of 2007. In the Fall of 2008 John released his book, Exiting Your Business, Protecting Your Wealth: A Strategic Guide for Owners and Their Advisors.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
About Pinnacle Equity Solutions
www.CertifiedBusinessExitConsultant.com
Agenda
1. Introduction
2. The Exit Planning Opportunity
3. Pinnacle’s Six Step Process
4. Pinnacle’s Training, Certification, & Membership Program
5. Closing Thoughts – Q&A
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
How many businesses exist in the United States today?
500-999
Employees
100-499
Employees
20-99 Employees
1-19 Employees
Non-Employees
Source: United States Census Bureau https://www.census.gov/ces/dataproducts/bds/data_firm.html
22,491,080
4,458,108
497,144
84,541
20,533
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
27,551,406 !
The Owner Marketplace
How many are planning prospects ?
500-999
Employees
100-499
Employees
20-99 Employees
1-19 Employees
Non-Employees
Source: United States Census Bureau http://censtats.census.gov/cgi-bin/cbpnaic/cbpsect.pl
22,491,080
4,458,108
497,144
84,541
20,533
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
581,6852.1 % of total
Publicly Traded
Lack of Mgmt Team
The Owner Marketplace
Are the Owner, Company and MarketAll Ready for a Successful Exit?
Are the Owner, Company and MarketAll Ready for a Successful Exit?
Personal Readiness Company Readiness Market Readiness
Is your owner personally, mentally, and financially ready to exit the business?
Do they know what else they will do after the exit?
Is your owner’s company ready for a new owner?
Does the business run without the owner?
Are systems, procedures, agreements, and financial statements in order for a new owner?
Are the market conditions favorable to transact?
Are lenders lending money to finance acquisitions?
Are buyers in a ‘buying season’?
© 2017, Pinnacle Equity Solutions
What is an Exit Strategy Plan ?
An Exit Strategy is:
The written goals for the succession of a business’ ownership and control, derived from a well thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and a time period that is accommodative to the business, its shareholders, and potential buyers.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
The Exit Planning Marketplace
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Provided by: Rob Slee
Agenda
1. Introduction
2. The Exit Planning Opportunity
3. Pinnacle’s Six Step Process
4. Pinnacle’s Training, Certification, & Membership Program
5. Closing Thoughts – Q&A
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Exiting Your Business, Protecting Your Wealth:A Strategic Guide for Owners and Their Advisors
Part IPlanning Your Exit
Part IIExit Options
Part IIIExecute Your Exit
Strategy Plan
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Financial Readiness
• Exit Strategy Planning Question to ask the exiting owner: What amount of investable assets in your account will be sufficient to satisfy your post-exit lifestyle ?
• The exiting owner’s Financial readiness for an exit will be a strong determinant of what options are realistically available for her exit.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Asset Base Required
$3,000,000
Savings: $ 1,000,000
Value Gap
$ 2,000,000
Financial Readiness
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
•
• Higher Financial Readiness =
More exit options available.
Financial Readiness
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
• Because how the owner views their exit is critical to the advice that you give.
• Too many business owners are emotionally attached to their businesses.
• When truly seen for what a business is (which is an investment) the business owner can make better financial decisions.
Mental Readiness
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
The Exit Quadrant Chart
••
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
The Exit Quadrant Chart
Four Types of Exiting Owners
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
The Business Exit Readiness Index™ (BERI) Survey
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Survey MethodologyThe BERI® survey asks twenty (20) questions related to an
owner’s financial and mental readiness
Survey Results
84% of owners who took the BERI® survey scored themselves as having a LOW mental readiness for an exit
www.pinnacleequitysolutions.com
BERI™ Report Survey
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
1. Sale of the Business
2. Private Equity Group Recapitalizations
3. Employee Stock Ownership Plans (ESOPs)
4. Management Buyouts
5. Gifting Programs
Five Primary Exit Options
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Exit Options
The primary exit options fit into our Exit Quadrant Chart
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Exit via Sale to a Competitor
Sale to an Outside Buyer
• Owners may choose to exit their business via a sale to an industry buyer.
• This type of exiting owner is generally aware that this is the way to get the highest price.
Sale to an Outside Buyer Synergy Value
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Recapitalization
• Owners will not receive the highest value.
• Investment value includes a multiple of earnings, no synergies.
Recapitalization Investment Value
Exit via Recapitalization
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
How the ESOP transaction works
Bank
Business
ESOP
1. Bank lends $$ to Business
3. Business lends $$ to ESOP
4. Note from ESOP to Business
7. Business makes annual deductibleem’ee contributions to ESOP
8. ESOP repays ‘inside loan’
5. ESOP buys $$ shares from owner
2. Note from Business to Bank
6. Shares transfer to ESOP trust
9. Employees get annual allocations
of shares to a retirement account
10. C corporation sellers (with 30% sold to the ESOP) elect for tax deferral under IRC
sec. 1042.
11. Diversify assets through QRP investment
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
ESOP
• Owner receives lower value.
• They do not sell control or bring in new partners.
• Owner keeps their job, salary, perks.
• Owner participates in future value of business.
• A properly installed ESOP can boost moral of employees.
ESOP Fair Market Value
Exit via ESOP
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Management Buyout
• Owner may choose to exit by selling the company to the management team.
• A High Level of financial readiness is recommended due to the inherent uncertainties involved with converting employees into owners.
Management Buyout
Investment Value
Exit via Mgmt. Buyout
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Gifting Program
• You may choose to make gifts of stock to family members or others.
• A High Level of financial readiness is recommended due to the fact that the owner is gifting away assets.
• Larger estate planning techniques are likely required.
• Intra-family transfers can have lots of drama.
Gifting Program Fair Market Value
Exit via Gifting Program
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Gifting Program
• Estate Tax Issues include getting assets out of your estate.
• Two discounts apply to the value to help move more assets out of an estate in a tax-efficient manner.
Gifting ProgramFair Market Value
Less: Discount for Lack of Marketability
Less: Discount for Lack of Control
Exit via Gifting Program
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A simpler way to view these transfer options is to see them as:
Internal vs. External Transfers
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Internal Transfer External Transfer
Employee Stock Ownership Plan (ESOP)
Recapitalization
Management Buyout Sale to an Outside Buyer
Gifting
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Affordability is determined by Value
Range of Values Intro.
Internal Transfer External Transfers
Gift,
ESOP
Fair Market Value
Private Equity Group ‘Recap’
Sale to Competitor
“Market Value”
Exit Options Exit Options
Discounts may applyInvestment
ValueSynergy
Value
Management Buyout
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
A Six Step Process
Financial Readiness
Identify Type of Exiting Owner You Most Resemble
Learn & Choose Your Exit Option
Execute Your Exit Strategy Plan to Reach Your Goals and Protect Your Wealth
Understand the Value of the Option You Choose
Set Exit Goals
Mental Readiness
1.
2.
3.
4.
5.
6.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Exiting Your Business, Protecting Your Wealth
A Strategic Guide for Owners and Their AdvisorsPart III: Planning Your Exit, Protecting Your Wealth
Ch. 11: Deal Structuring and Taxes
Ch. 12: Exit Strategies and Estate Tax Planning
Ch. 13: Legal Agreements
Ch. 14: Forming an Exit Strategy Advisory Team
Ch. 15: Pulling it All Together
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Business Owner
Exit Strategies Advisor: CPA
Legal Advisor
Financial Planner
M&A Advisor
Insurance Advisor
Deal Structuring / M&A ProcessLegal Agreements, Estate
Planning
Financial PlanningEstate Planning, Wealth Protection
The Advisory Team
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Agenda
1. Introduction
2. The Exit Planning Opportunity
3. Pinnacle’s Six Step Process
4. Pinnacle’s Training, Certification, & Membership Program
5. Closing Thoughts – Q&A
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Pinnacle’s Mission & Vision
The vision of Pinnacle is that all Lower-Middle Market Business Owners have an exit plan.
Our mission is to empower advisors to deliver these services to the marketplace.
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
About Pinnacle Equity Solutions
Pinnacle’s Core Values
Education
Excellence
Integrity
Creativity
Helping Others
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
About Pinnacle Equity Solutions
Exit Planning Online Workshop
Certified Business Exit Consultant™
Course
Pinnacle’s Membership
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Application Required
Optional, Discounted Rate
Step 1:
Step 2:
Step 3 (optional):
Core Training
Pinnacle’s Training
Pinnacle’s Training
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Content
• Twelve (12) online modules that take you through Pinnacle’s 6-step process including a case study that represents the typical exit planning engagement
• New this year: we are including four (4) facilitated review calls designed to provide additional insights into the material, and to further prepare those wishing to continue into the advanced course.
Learn More at www.ExitPlanningCourse.com
Exit Planning Online Workshop
Pinnacle’s Training
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
8 Remote Training Modules Where We Will Discuss:
Pinnacle’s 6 Step ProcessAdvanced Technical TrainingEngaging the OwnerDelivering the Exit PlanFee SharingQuarterbacking the Exit Planning Engagement
We also have presentations made by experts in tax, estate planning, ESOPs, life planning, valuation, growth consulting, & more.
Certified Business Exit Consultant™ Course
Curriculum
Thirty (30) hours of prerequisite work (includes the Exit Planning Online Workshop)
Eight (8) Remote Training Modules Held Weekly Oct. 10th through Dec. 5th, 2017
On-site Boston Live Review and Final Exam – Dec. 7th and 8th.
Pinnacle’s Training
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Certified Business Exit Consultant™ Course
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Pinnacle’s Membership – Tools & Support
How to Get Started Today
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
www.ExitPlanningCourse.com
Option 1:
Core Training: $650
Option 2: (Includes Core Training)
CBEC® Training: $2500
CertifiedBusinessExitConsultant.com
How to Get Started Today
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
If you are interested in attending our Certified Business Exit Consultant ™course, you may apply for our next class that runs from October through December 2017
•The dates for our upcoming online Courses are:
• October 10th – December 5th – Weekly Remote Course Training Modules
• December 7th & 8th – Boston Live Review Membership Discussion, Final Exam
• Certification Cost: $2,500
Contact Pinnacle today to sign up – 781-821-2608
Jessica LeClair jessica@pinnacleequitysolutions.com
Agenda
1. Introduction
2. The Exit Planning Opportunity
3. Pinnacle’s Six Step Process
4. Pinnacle’s Training, Certification, & Membership Program
5. Closing Thoughts – Q&A
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Concluding Thoughts
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
• You can add value to your conversations with owners by understanding their exit needs, options, and special planning issues.
• Education is the key to having this conversation.
• Differentiation is the key to you working with owner’s on this specialized need.
Thank You for Attending
Questions?
© 2017, Pinnacle Equity Solutions www.pinnacleequitysolutions.com
Pinnacle Equity Solutionswww.PinnacleEquitySolutions.com345 Neponset Street, Second FloorCanton, MA 02021(781) 821-2608
john@pinnacleequitysolutions.comjessica@pinnacleequitysolutions.com