Exit Planning Services for Business Owners

1. The Exit Planning Executive Briefing Presented by Tom Doncaster, CLU, CWM Member of Business Enterprise Institute’s Network Of Exit Planning Professionals™

2. 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.

3. The Seven Step Exit Planning Process™ Step 1 –Identify Exit Objectives Step 2 –Quantify Business and Personal Financial Resources Step 3 – Maximize and Protect Business Value Step 4 – Ownership Transfer to Third Parties Step 5 – Ownership Transfer to Insiders Step 6 – Business Continuity Step 7 – Personal Wealth and Estate Planning

4. “When a man does not know which harbor he is heading for, no wind is the right wind.” - Seneca Step One: Identify Exit Objectives

5. 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?

6. Step One: Identify Exit Objectives 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.

8. Insurance Advisor

9. Investment Advisor

10. Business Attorney

11. Estate Planning Attorney

12. CPA

13. Valuation Specialist

14. Business Broker

15. Investment Banker

16. Business or Management Consultant

18. 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.

19. “Making a silk purse from a sow’s ear.” Step Three: Maximize and Protect Business Value

20. 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.

21. Step Three: Maximize and Protect Business Value 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.

22. “Making a mountain out of a molehill.” Step Four: Ownership Transfer to Third Parties

23. Step Four: Ownership Transfer to Third Parties Benefits to the Owner Cash at closing. Eliminate financial risk. No family succession issues. Speed of exit.

24. Step Four: Ownership Transfer to Third Parties 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.

25. Step Four: Ownership Transfer to Third Parties Current M & A Marketplace 20 percent of businesses are for sale, but only one out of four actually sells. Businesses with sales of $10 million per year aren’t much better – only one-third sell. Above $10 million per year, the odds improve to 50-50. - 2005 Business Reference Guide by Tom West

26. “Making a molehill out of a mountain.” Step Five: Ownership Transfer to Insiders

27. 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.

28. “Making sure the business continues when the owner doesn’t.” Step Six: Business Continuity Planning

29. 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.

30. “When the ‘slings and arrows’ of outrageous fortune befall you, fight back.” - William Shakespeare (Hamlet) Step Seven: Personal Wealth and Estate Planning

31. 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.

32. 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