Follow Dallas Linkedin
Email Dallas Email
Financial
Mar 1, 2017

Building Value: The Win-Win-Win Of Exit Planning

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

In all likelihood, you are absolutely critical to the success of your business. Without you, there is no business.

We want to fix that.

With a little luck and a lot of hard work, we can help you become an “inconsequential owner.”

At some level, all owners understand they will someday leave the businesses they have created. Let’s assume for a moment that you leave your business permanently tomorrow. If you are an inconsequential owner, your exit will have no impact on the business, and that’s good for business value. Buyers pay for business value, not for the departing owner.

If you constitute a significant part of your company’s value (i.e., you are a “consequential owner”) and you have left the scene, there likely will be few buyers interested in your company, and those who are interested likely will pay significantly less than they would had you been an inconsequential owner.

Exit planning is a process you can use to transform yourself into an inconsequential owner for your sake, your family’s sake and your company’s sake. While perhaps not the most flattering label, becoming an inconsequential owner not only increases your business’ value but also probably aligns with what your friends and children have been calling you for years!

All exit plans should answer this question: “What has to happen in my business by the time I leave it to (1) enable me (and my family) to achieve financial security; and (2) allow me to move forward with the rest of my life, confident that I have been a good steward of the business?”

The details that constitute “what has to happen” are discussed in myriad newsletters, books and white papers that we can share with you. For most owners, one of the first and most important things that “has to happen” after figuring out where they are (i.e., current business value) and where they want to go (i.e., exit objectives) is to create and sustain business value.

When we talk about value in the context of exit planning (Step Three of The Seven Step Exit Planning Process™), we divide the discussion into three areas: building value, protecting value and minimizing income taxes. The following is a summary of each area.

Building Value

When considering building value, we first will ask, “What do you, as the owner, need to do to create a successful company that can operate without you?” Topics include developing a market focus, creating a top management team, and adopting a proper financial focus and corresponding policies.
Second, we ask, “Which characteristics will buyers pay handsomely for?” We call these characteristics value drivers, and they include - but aren’t limited to - the following:
  • A stable and motivated management team.
  • Operating systems that improve cash flow sustainability.
  • Understanding and nurturing the company’s competitive advantage.
  • A solid and diversified customer base.
  • A realistic growth strategy.
  • Effective financial controls.
  • Good and improving cash flow.

Protecting Value

Protecting value relates to both internal and external threats. Instead of handling these threats as they occur, owners must identify threats and know how to avoid them before they happen.

Some examples include: protecting propriety information and trade secrets; preventing employees from doing harm to the business when they leave by taking customers, employees and business relationships; and anticipating and evaluating outside threats to owners’ companies.


Minimizing Income Taxes

The lifeblood of every business - and therefore the best indicator of value - is cash flow. Our discussion includes how to preserve cash flow and value from income taxation (legally, of course).

Income taxes collected on the sale of a business interest can range from zero to over 50 percent. Of course, each tax-efficient design and the tools used to implement those designs usually have disadvantages along with their advantages. However, to date, we have not identified any upside to paying more than necessary to your silent partner, Uncle Sam.

As you read articles about The Seven Step Exit Planning Process, we hope you begin to appreciate that while planning and preparing yourself and your business for your ultimate exit may seem to be a daunting task, it does not need to be. Indeed, if you approach the task systematically, you will use only small chunks of time and effort for a potentially enormous payoff.

If you would like more detailed information about value drivers, please contact us today, and we will provide you with guidance and literature on how to install and maximize the effects of value drivers in your business.

© Copyright 2017 Business Enterprise Institute, Inc. All Rights Reserved

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email [email protected].
 
 

Other Posts from Dallas Romanowski

Bizjournalblockad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Infinity 891835159

Get to Know Infinity Payment Systems

Kyle Thorpe - Infinity Payment Systems
Martyheadshot

Are You Ready for GDPR?

Marty Cayton - TeamLogic IT of Wilmington & Fayetteville
Susan 2 april242017

Divorced? You May Be Eligible for Boosted Retirement Benefits

Susan Willett - Old North State Trust, LLC

Trending News

Untappd Leads Pack Of Local Firms On Inc. 5000 List

Christina Haley O'Neal - Aug 15, 2018

NHRMC Launches Innovation Center At TekMountain

Christina Haley O'Neal - Aug 13, 2018

NHRMC Buys Wilmington Property From International Paper

Cece Nunn - Aug 15, 2018

RiverLights Submits Plans For Additional Homes

Christina Haley O'Neal - Aug 14, 2018

Black Sea Grill Restoration Underway

Jessica Maurer - Aug 15, 2018

In The Current Issue

Low Impact Building With High Rewards

Pam Fasse, president and licensed general contractor for Fasse bldgs., says that she always gravitated toward project management and design...


NHRMC Earns National Cancer Accreditation

The Commission on Cancer recently granted three-year accreditation to the cancer program at New Hanover Regional Medical Center....


Program Addresses Funding Gap

A program designed to help female entrepreneurs bridge the funding gap drew a number of local startups this year....

Book On Business

The 2018 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2018 Power Breakfast - Dishing on the Restaurant Biz
2018 WilmingtonBiz Expo - Keynote Lunch with Eric Dinenberg, Rouse Properties
2017 Health Care Heroes