The Final Piece. What is YOUR exit strategy? 2/5/2014

Transcription

1 The Final Piece Susan Albern and Sylvia Hill 2/21/2012 What is YOUR exit strategy? Transition to the next generation? Hire someone to run it? Sell to an employee? List it and sell it? Or 1

2 The ol Disclosure This is not legal advice, this is not tax advice. I am not a business broker, this is only ONE example of what a sale/purchase might look like. When is the best time to sell? When you have a buyer that meets your criteria for exiting. When your company is increasing its profitability. Building Value into the Business Create an asset not a job Make it run smoothly without you Document/improve systems Improve profitability; show growth Work on your company image Get company designations 2

3 Calculating Value ANY SALE PRICE MUST: Pay a reasonable salary Provide income to service the debt Generate a return on the investment Calculating Value (check with attorney and accountant) Calculate Sellers Discretionary Earnings Salaries Travel/entertainment Contributions, dues/subscriptions, education, NARPM SEP/IRA, 401K, health insurance, auto expense Taxes Depreciation Calculating Value (check with attorney and accountant) Market approach (comps) Income Approach (Present value of future value of cash flow) $100,000K/year projected cash flow 5 year note 15% return (discount rate/capitalization rate) $379,000 value REMEMBER ALL TERMS ARE VARIABLE 3

4 Types of Sales Stock Purchase Asset Purchase All of company assets (name, advertising, web domain, phone numbers, vehicles, buildings, furniture, fixtures, and equipment) Account Purchase The Process Letter of Intent Proposed price Terms Non-disclosure Due diligence Timelines The Process Due Diligence be ready to open the books and share intimate details Financial review Schedules of assets (vehicles, furniture, fixtures, and equipment) Policies and procedures Corporate minutes Employee contracts/files List of accounts File audit (leases/management agreements) 4

5 The Process Purchase Agreement Summary of terms Included/excluded assets Contingencies Default provisions Supporting Forms Bill of Sale Promissory Note Non-Compete UCC Security Agreement Guaranty/Stock Purchase Price Allocation Common Stock Purchase Agreement Financing Earnest Money/Cash at Closing Small Business Administration Loans Conventional Bank Business Loan Seller Financing 5

6 Research the Buyer Does who you sell to matter? Due Diligence Full financial statement Credit report References Managing the Transition Investor and Staff Confidence Communication!!!!! Meet with key investors before the transition If staff s are going to merge, include both staff s in the transition planning and implementation Managing the Transition Let the baby go! It WILL be different You WILL disagree with decisions You may NOT be retained to assist 6

7 Managing the Transition Start untangling things now! Personal vs. business Business vs. personal credit cards Set up business banking Store those items that you may still need after selling (retention for taxes/audits) What Would I Do Differently? What Would I Do The Same? 7

8 Questions? 8