“State of Owner Readiness”©
Survey Results 2013
© Copyright 2013 Exit Planning Institute
© Copyright 2013 Exit Planning Institute
“Are we meeting client objectives?”
- Peter Christman, 2000
� Founded EPI & wrote The $10 Trillion Opportunity in 2005
� Certified Exit Planning Advisor (CEPA) developed in 2007
� 5-day executive MBA style program; 22 subjects & 13 different speakers
� 350+ Advisors across seven countries � Most are CEPAs; some General &
Academic members � Financial Planners, Wealth Managers,
CPAs, attorneys, M&A, Insurance, Lenders, etc.
� 16 community-oriented chapters planned by the end of 2015.
EPI Founder & Board Member
Peter Christman, CEPA The Christman Group
Chicago, IL
EPI Founder & Board Member
Richard E. Jackim JD, CEPA, MBA
MidCap Advisors, LLC Chicago, IL
© Copyright 2013 Exit Planning Institute
Delivering innovative learning experiences, performance-enhancing
resources and strategic tools designed to enhance the exit planning profession
EPI is a platform for…
�Creating Awareness �Advisor Collaboration � Continuous Education �Defining Methodology �Research and Thought
Leadership � Practice Development
© Copyright 2013 Exit Planning Institute
A global community of advisors that help owners realize their dreams of not only succeeding in business but passing a legacy, protecting and maximizing
family values and wealth, and achieving a fulfilled life in their third act.
© Copyright 2013 Exit Planning Institute
Principles of The Three Legs of the Stool
� Maximize the value of the business
� Ensure the owner is personally and financially prepared
� Ensure the owner has planned for the third act of their life
Committed to changing owner outcomes!
© Copyright 2013 Exit Planning Institute
What’s Driving the Need?
� “Age Wave” � First boomers turned 65 in 2011; 10,000 turn 65
everyday; the youngest are now 51. � Own 63% of the private businesses in U.S. � 80-90% of their wealth is tied up in their businesses � EPI recent survey confirms: 75% plan to transition over
the next 10 years; 48% in the next 5 years � Represents a transfer of 4,500,000 businesses and over $10
trillion of wealth
© Copyright 2013 Exit Planning Institute
How successful are we at transitioning businesses?
• 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision. (Price Waterhouse)
• 70-80% of businesses put on the market don’t sell. (Business Reference Guide, T. West)
• 95% of M&A professionals believe a business owners unrealistic expectations of company value are the biggest obstacle to sale or transfer. (AM&AA)
• Only 30% of all family-owned businesses survive into the second generation; only 12% survive into the third generation; only 3% operate at the fourth generation and beyond. (Family Firm Institute)
• Private companies are not generating returns on investment greater than their costs of capital. (Private Capital Markets Study, Rob Slee)
© Copyright 2013 Exit Planning Institute
2.0%
19.7%
43.5%
29.3%
5.4%
What is your current age?
< 40
40 - 49
50 - 59
60 - 69
> 70
© Copyright 2013 Exit Planning Institute
38.3%
36.9%
8.7%
6.7% 9.4%
What is your company's annual revenue?
< $5M$5M to $25M$25M to $50M$50M to $100M> $100M
© Copyright 2013 Exit Planning Institute
15.7%
68.7%
15%
.6%
How is your business organized? LLC S-Corp C-Corp Other
© Copyright 2013 Exit Planning Institute
77.1%
13.2%
4.2% 5.6%
If your company is privately held, what is the ownership structure?
Family Owned (100%)
Family controlled (outsideownership)Family Owned (outsideownership controlled)Outside Ownership(100%)
© Copyright 2013 Exit Planning Institute
71.1%
20.6%
6.2% 2.1%
If family owned, how long has your company been owned by the family?
1 Generation2 Generations3 Generations4 + Generations
© Copyright 2013 Exit Planning Institute
Retail, Wholesale trade or distribution
Energy
Business/Professional Services
Technology/ Communications
Transportation
Manufacturing
Healthcare
Real Estate
Insurance/Financial Services
Other
What industry are you in?
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27.6%
72.4%
Do you have an engaged Board of Directors/Advisors?
Yes No
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34.6%
28.6%
36.8%
Are you familiar with all of your transition options?
Yes No Not sure
© Copyright 2013 Exit Planning Institute
When are you planning to transition the company?
0% 20% 40% 60% 80% 100%
40 to 49
50 to 59
60 to 69
> 70
1-2 years (20%)
3-5 years (28.2%)
6-10 years (27.4%)
No plans (24.4%)
Overall
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14%
78%
8%
Have you established a formal transition advisory team?
Yes No My Board
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34.1%
65.9%
Have you completed any formal education related to transitioning your business?
Yes No
© Copyright 2013 Exit Planning Institute
15.8%
1%
32.9%
12.3% 4%
2%
32.2%
Who do you see as your most trusted Advisor?
SpouseBankerAccountantLawyerFinancial AdvisorInsurance AgentOther
Who do you see as your most trusted advisor
Most trusted advisor by revenue size
32%
12%
8% 14%
15%
5% 14%
< $50M
Accountant Lawyer PartnerPeers Spouse Fin AdvOther
38%
19% 14%
0%
11%
5% 14%
> $50M
Accountant Lawyer PartnerPeers Spouse Fin AdvOther
© Copyright 2013 Exit Planning Institute
© Copyright 2013 Exit Planning Institute
What best describes your companies transition plan?
0.0% 50.0% 100.0%
40 to 49
50 to 59
60 to 69
70+
No plan (48.6%)
Plan, No doc or Comm(34.3%)Plan, Doc No Comm (5%)
Plan, Doc & Comm(12.1%)
Overall
© Copyright 2013 Exit Planning Institute
Estate Plan (52%)
Financial plan (61%)
Contingency Plan (39%)
Business Valuation (52%)
Value Enhancement
(13%)
Advisory Team (26%)
Tax Plan (35%)
What do your plans encompass?
© Copyright 2013 Exit Planning Institute
21.3%
2%
10.3%
2% 29.4% 1% 1%
30.9%
2%
What best describes how you are planning on transitioning?
Internally (familysuccession)Internally (ESOP)
Internally (Management)
Internally (Partners)
Externally (3rdParty/Strat/PE)Externally (Recap)
Externally (Orderly Liqu)
Not sure
Other
© Copyright 2013 Exit Planning Institute
Transition Plans by Age
0 20 40 60 80 100
40 to 49
50 to 59
60 to 69
70 +
InternalExternalNot Sure
Transition plans by revenue size
35%
34%
31%
< $50M
External Internal Not Sure
19%
48%
33%
> $50M
External Internal Not Sure
© Copyright 2013 Exit Planning Institute
© Copyright 2013 Exit Planning Institute
60%
40%
Do you have provisions in place if key personnel or shareholders should get ill, die or otherwise exit the
company?
Yes No
© Copyright 2013 Exit Planning Institute
Family issues (25%)
Management (51.5%)
Cash Flow (26.5%)
Profitability (40.4%)
Tax Planning (20.6%)
Other (8.8%)
What are your biggest internal concerns?
© Copyright 2013 Exit Planning Institute
Market conditions
(65.4%)
Gov't legislation (54.4%)
Tax changes (40.4%)
Credit availability
(11.8%)
Currency risk (2.9%)
Other (11%)
What are your biggest external concerns?
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Which describes your post transition “life after the business” plan?
0.00% 20.00% 40.00% 60.00% 80.00%100.00%120.00%
Written Plan
Informal plan
Idea
No thoughts
InternalExternal
Describe potential changes to your lifestyle following transfer of ownership
No change (57.6%)
Earn-out
(20.3%)
Reduce (10.2%)
Not sure
(11.9%)
Internal Transition
No change (37.3%)
Earn-out
(19.4%)
Reduce (7.5%)
Not sure
(35.8%)
External Transition
© Copyright 2013 Exit Planning Institute
What do you plan to do post-transition?
Philanthropy
(47.5%)
Retire (35.6%) Buy
(8.5%)
Invest/ Board (22%)
Consult (32.2%)
Other (10.2%) No
Plans (15.3%)
Internal Transition Philanth
ropy (10.3%) Retire
(20.6%)
Buy (5.9%)
Invest/ Board
(14.7%)
Consult (17.7%)
Other (8.8%)
No Plans
(22.1%)
External Transition
© Copyright 2013 Exit Planning Institute
Have you incorporated into your personal financial and estate plans?
Both (62.7%)
Financial (15.3%)
Estate (0%)
Neither (22%)
Internal Both
(27.3%)
Financial (33.3%)
Estate (3%)
Neither (36.4%)
External
© Copyright 2013 Exit Planning Institute
Level of employee awareness of the managerial and ownership transition plans.
Internal
Aware -both
Aware -ManagerialAware -OwnerNot awareeither
External
Aware -bothAware -ManagerialAware -OwnerNot awareeither
© Copyright 2013 Exit Planning Institute
56.1% 18.2%
25.8%
External: Current understanding of value of
business
Good ideaFormally valued <1 yrNot sure
13.6%
86.4%
External: Pre-transition VE project last 2 yrs
Yes No
© Copyright 2013 Exit Planning Institute
Internal Transitions: comparing strategic plans versus strategic moves in next 5 years
25.4%
49.1%
25.5%
Strategic Plan
Yes -writtenNo -informalNo
57% 43%
Strategic Moves in next 5 years
YesNo
© Copyright 2013 Exit Planning Institute
External Transitions: comparing strategic plans versus strategic moves in the next 5 years
12%
41%
47%
Strategic Plan
Yes - written No - informal No
75%
25%
Strategic Moves in next 5 years
YesNo
© Copyright 2013 Exit Planning Institute
© Copyright 2013 Exit Planning Institute
Why is this important?
• Further proof that the opportunity is real – $10+ trillion of US wealth transitioning next 10 years – Significant exit strategy related advisory work
• Use as an educational tool with owner and other advisors – Share with your clients
• Great Business Development Opportunity – Open the door to conversations
Christopher M. Snider, CEPA CERTIFIED EXIT PLANNING ADVISOR
President and CEO [email protected]
14701 Detroit Avenue, Suite 430
Cleveland, Ohio 44107 Main Office: (216) 712-4244
Delivering innovative learning experiences, performance-enhancing
resources and strategic tools designed to enhance the exit planning profession
© Copyright 2013 Exit Planning Institute
Delivering innovative learning experiences, performance-enhancing resources and strategic tools
designed to enhance the exit planning profession
© Copyright 2013 Exit Planning Institute