© 2008 Business Enterprise Institute, Inc. Business Section of the Utah Bar Association The Exit...

© 2008 Business Enterprise Institute, Inc.

Business Section of the Utah Bar AssociationThe Exit Planning Executive Briefing

February 9, 2011

Presented by

Gregory W. Williams

Exit Strategies Specialist, LLC6340 South 3000 East, Suite 500

Salt Lake City, UT 84121(801) 453-2271


Ingredients of a Successful Exit

• An Exit Plan based on the owner’s objectives.• An experienced team of advisors to design and

implement the plan.• Cash flow and a quantified business value.• A strong management team in place.• Time.


The Seven Step Exit Planning Process™

Step 1 – Identify Exit Objectives

Step 2 – Quantify Business and Personal Financial ResourcesStep 3 – Maximize and Protect Business Value

Step 4 – Ownership Transfer to Third PartiesStep 5 – Ownership Transfer to Insiders

Step 6 – Business ContinuityStep 7 – Personal Wealth and Estate Planning


Step One: Identify Exit Objectives

Universal Objectives• How much longer does the owner want to work in the

business before retiring or moving on? _________ years• What annual after-tax income does the owner want

during retirement (in today’s dollars)? $_________• To whom does the owner want to transfer the business?

– Family?– Co-Owner?– Key Employee(s)?– Outside party?– ESOP?



Working with a Team of Advisors• No one professional has all the answers.• Diverse skills and talents are necessary.• Team approach minimizes time and cost.

– If properly facilitated and led.



Who is on the Advisor Team?• Exit Planner• Financial Planner• Insurance Advisor• Investment Advisor• Business Attorney• Estate Planning

Attorney• CPA

• Valuation Specialist• Business Broker • Investment Banker• Business or Management

Consultant• Banker


Business Value

Benefits to the Owner• Provides a baseline value by projecting cash flow.• Measures business and personal resources both today

and as a basis for future projections.• Allows you to monitor progress toward the stated

objectives.


Step Two: Quantify Business and Personal Financial ResourcesRole of the Attorney• Assist in determining appropriate type of valuation.• Help select valuation advisor depending on owner's

objective (sale to third party or transfer to insider).• Evaluate methods of reducing business value (e.g.

Unfunded Non-Qualified Deferred Compensation Plan).• Opportunity:

– Provide new services and value to existing clients.


Step Three: Maximize and Protect Business Value

Benefits to the Owner• Grow business value and intangible value of the

business.• Reduce income taxes upon sale of business.• Protect assets from potential business and personal

creditors.• Create ability to sell the business.• Motivate and keep Key Employees.



Promote Value Through Value Drivers• Focus on increasing cash flow.• Develop operating systems that improve sustainability of

cash flows.• Solidify and diversify customer base.• Implement strategies to grow the company.• Improve company performance as measured by industry

metrics.• Build a solid management team and groom a

successor.



Role of the Attorney• Conduct Annual Planning Meeting with all Advisory Team

members present.• Periodically review entity status (C vs S).• Identify tools to protect business value during periods of growing

or flat performance.• Analyze federal and state law implications of proposed

strategies.• Draft legal documents necessary to implement recommended

strategies.• Opportunity:

– Meet with client, typically 3-15 hours.– Draft summaries of recommended documents, as well as

final documents. Fees


Step Four: Ownership Transfer to Third Parties

Benefits to the Owner• Cash at closing.• Eliminate financial risk.• No family succession issues.• Speed of exit.



Third Party Sales – Not Just About the Business• Ability to sell and business value are determined by:

– Intrinsic Value: the value drivers.

– Extrinsic Value: the value the market places on the business.

– Effectiveness of the sale process.



Role of the Attorney• Tax analysis related to the proposed sale of company.• Legal due diligence.• Preparation and review of all transaction documents.• Negotiation of a definitive agreement.• Design and draft Sale Bonus plan for important employees.• Opportunity:

– Representation of owner/business in sale (generating fees).

– Respond to post-closing indemnification claims.


Step Five: Ownership Transfer to Insiders

Benefits to the Owner• Achieves Exit Objective of:

– Selling to Key Employee Group (KEG).

– Transferring to a Child.

• Motivates and retains key employees.• Planning reduces risk and increases amount of money

received.


Step Five: Ownership Transfer to Insiders

Role of the Attorney

• Analyze legal issues related to proposed transactions (state, federal and tax law compliance with documents).

• Draft summaries of proposed agreements.

• Draft and implement agreements and other documents implementing transfer/s.

• Draft documents providing incentives to key employees not receiving ownership.

• Opportunity:

– Generate revenue from creation of documents that implement one or more ownership transfers.

– Generate fees on a flat or hourly fee basis for document drafting, implementation and follow-up.


Step Six: Business Continuity Planning

Benefits to the Owner• Objectives can still be achieved if you don’t survive your

exit.• Retains ownership and control of company if co-owner

departs.• Can force non-contributing owners to leave the business.• Provides consistency between lifetime and death

objectives.• Ensures survival of the business for the benefit of others.• Results in family receiving value of owner’s interest, in

cash.


Step Six: Business Continuity Planning

Role of the Attorney• Prepare legal business and estate planning documents.• Prepare Stay Bonus Agreement.• Assist owner in positioning business to operate

independently if owners is unable to remain involved.• Opportunity:

– Prepare business continuity documents generating fees.

– Implementation of documents and agreements if a death or disability occurs.


Step Seven: Personal Wealth and Estate Planning

Benefits to the Owner• Preserve wealth, minimize taxes using both lifetime and

death planning tools. • Coordinates and integrates lifetime exit objectives

wishes with estate plan.• In effect, estate planning becomes part of business

planning.



Role of the Attorney• Perform overall estate planning.• Revise and update estate plan as circumstances change.• Coordinate planning for business and non-business assets

when a child is the proposed successor owner.• Educate owner on structure and function of estate planning

strategies.• Transfer business interests to children prior to a third party

sale.• Create related entities to be partly owned by children.• Perform charitable income/estate tax planning.



Role of the Attorney• Opportunity:

– Collect fees for creating and updating estate planning documents (Fees generally between $5K and $25K).

– Collect hourly fees for family meetings to explain planning to beneficiaries.

– Collect probate and estate administration fees.

– Manage personal asset protection and transfers.

© 2008 Business Enterprise Institute, Inc.Copyright 2008 ESS


The Exit Planning Executive Briefing

At some point, every owner leaves his or her business - voluntarily or otherwise. At that time, every owner wants to receive the maximum amount of money in order to accomplish personal, financial, income and estate planning goals


Thank You

Gregory W. Williams, MSFS, CFPCertified Family Business Specialist

Exit Strategy Specialists, LLC6340 S. 3000 E., Suite 500Salt Lake City, Utah 84121

(801) [email protected]

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