7-Step Process

Step 1 – Identify Exit Objectives

Date you plan to leave your business (or cut back significantly)?

After-tax annual income needed when you leave?

Who will own the business – family, key people or 3rd party?

Step 2 – Identify Business & Personal Financial Resources

Does Business Value and other Personal Income-Producing Assets allow you to meet the income need established in Step 1?

If not, how much does the business need to grow?

Step 3 – Maximize & Protect Business Value

Focus on Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)

What value drivers do you need to implement to make the business saleable?

Retain your key employees – Incentive and Retention plan?

Step 4 – Ownership Transfer to Third Parties

Pre-sale planning and pricing (EBITDA – most 3rd-party sales are 4–8 times)

What is the quality of your management team and will they remain?

A controlled auctioning process will generally give you maximum value.

Step 5 – Ownership Transfer to Insiders

Two Issues: Tax treatment of the sale and insiders generally have no money.

Strategy needed to ensure seller gets fair value in the most tax-efficient manner.

For tax reasons, does an ESOP make sense?

You may have to be the bank, finance the deal and remain longer to get paid.

Step 6 – Business Continuity

A Buy-Sell Agreement = the most important business document you will sign!

If you died or became incapacitated, would the business survive?

If no other retention plan is in place, create a “Stay Bonus” for key people.

Step 7 – Personal Wealth & Estate Planning

Family security for spouse & heirs

How have estate taxes been addressed? Your wealth can only go to 3 places: your heirs, favorite charities or the IRS.

Complete/revise estate plan