BE INFORMED AND PREPARED!
BUSINESSES SUCCESS AND EXIT STRATEGY GO HAND IN HAND.

PART I

Janet Ackerson, EA, CBI
Doug Robbins, FCBI, M&AMI, MCBC, CM&A

A 62 year old business owner contacted us regarding his interest in a small insurance business. 

 During the current year, he had vacationed for eleven weeks and was planning to take fifteen weeks of vacation the following year.  Hence his conscience was bothering him because he was not sure he was being fair to his partners. 

In the course of conversation, he said he really enjoyed the business and did not want to totally retire.  We then discussed what he liked and disliked about the business that he was in, and discussed his relationship with his partners.  He then asked what we thought he should do, based on our experiences as a Business Intermediaries.

The discussion then turned to the issues surrounding his partnership arrangement. We were surprised to learn that there was no written partnership agreement.  The partners each had their own book of business, as well a book of business that they all shared.  They each paid their proportionate share of partnership expenses.  Each partner made a different amount of money.  Each partner had a different sense of the value model that they would use in calculating their book of business; and that this lack of value consensus could, at some point in the future, prove explosive.

These partners had not made provisions for the untimely demise of any of the partners.  Remember, these partners sold life insurance and financial planning to their clients. This is a real example of the Shoemaker not making shoes for his own family!

There are 15 steps to successfully planning for life after business.  Most people do not realize that the average entrepreneur spends about 68 hours per week involved in business activities.  In this case the business owner had made for plenty of leisure time; before planning his exit strategy.  Which, lack of planning could result in the leaving of a lot of money on the table when the business owner, finally, was no longer able to participate in the business.

What are our recommendations?  What should be done in a situation like this?

Catch us in the next issue of Insight to find out.  In the meantime; do you have an Exit Strategy for your business?  Here are just a few questions to ask yourself:

1)      What is that status of your corporate/business paperwork and minutes?

2)      Do you have Buy/Sell agreements in place?

3)      Will the business go to family?  Are they capable? Do they want it?

4)      What is your plan as you approach your retirement years?

5)      Have considered retirement and investment accounts? 

6)      What is your business worth?  How is the value calculated?

7)      Is there something you can do now to increase the value prior to selling?

Who are the professionals you should be working with?

Make it your goal to develop an Exit Strategy. See you next time for some answers.

Copyright Robbinex, Salt Lake.  All rights reserved.

Janet Ackerson, The Dimensions Group

bruce :: Jun.29.2008 :: Business Owners - General :: No Comments »