State of Owner Readiness Survey Results Copyright 2013 Exit Planning Institute

Transcription

1 State of Owner Readiness Survey Results 2013

2 Are we meeting client objectives? - Peter Christman, 2000 EPI Founder & Board Member Peter Christman, CEPA The Christman Group Chicago, IL EPI Founder & Board Member Richard E. Jackim JD, CEPA, MBA MidCap Advisors, LLC Chicago, IL Founded EPI & wrote The $10 Trillion Opportunity in 2005 Certified Exit Planning Advisor (CEPA) developed in day executive MBA style program; 22 subjects & 13 different speakers 350+ Advisors across seven countries Most are CEPAs; some General & Academic members Financial Planners, Wealth Managers, CPAs, attorneys, M&A, Insurance, Lenders, etc. 16 community-oriented chapters planned by the end of 2015.

3 EPI is a platform for Creating Awareness Advisor Collaboration Continuous Education Defining Methodology Research and Thought Leadership Practice Development Delivering innovative learning experiences, performance-enhancing resources and strategic tools designed to enhance the exit planning profession

4 A global community of advisors that help owners realize their dreams of not only succeeding in business but passing a legacy, protecting and maximizing family values and wealth, and achieving a fulfilled life in their third act.

5 Principles of The Three Legs of the Stool Maximize the value of the business Ensure the owner is personally and financially prepared Ensure the owner has planned for the third act of their life Committed to changing owner outcomes!

6 Age Wave What s Driving the Need? First boomers turned 65 in 2011; 10,000 turn 65 everyday; the youngest are now 51. Own 63% of the private businesses in U.S % of their wealth is tied up in their businesses EPI recent survey confirms: 75% plan to transition over the next 10 years; 48% in the next 5 years Represents a transfer of 4,500,000 businesses and over $10 trillion of wealth

7 How successful are we at transitioning businesses? 12 months after selling, 3 out of 4 business owners surveyed profoundly regretted the decision. (Price Waterhouse) 70-80% of businesses put on the market don t sell. (Business Reference Guide, T. West) 95% of M&A professionals believe a business owners unrealistic expectations of company value are the biggest obstacle to sale or transfer. (AM&AA) Only 30% of all family-owned businesses survive into the second generation; only 12% survive into the third generation; only 3% operate at the fourth generation and beyond. (Family Firm Institute) Private companies are not generating returns on investment greater than their costs of capital. (Private Capital Markets Study, Rob Slee)

8 What is your current age? 5.4% 2.0% 29.3% 19.7% < > %

9 What is your company's annual revenue? 8.7% 6.7% 9.4% 38.3% < $5M $5M to $25M $25M to $50M $50M to $100M > $100M 36.9%

10 How is your business organized? LLC S-Corp C-Corp Other.6% 15% 15.7% 68.7%

11 If your company is privately held, what is the ownership structure? 4.2% 5.6% 13.2% Family Owned (100%) 77.1% Family controlled (outside ownership) Family Owned (outside ownership controlled) Outside Ownership (100%)

12 If family owned, how long has your company been owned by the family? 6.2% 2.1% 20.6% 71.1% 1 Generation 2 Generations 3 Generations 4 + Generations

13 What industry are you in? Insurance/Financial Services Other Retail, Wholesale trade or distribution Energy Real Estate Healthcare Business/Professional Services Manufacturing Technology/ Communications Transportation

14 Do you have an engaged Board of Directors/Advisors? Yes No 27.6% 72.4%

15 Are you familiar with all of your transition options? Yes No Not sure 36.8% 34.6% 28.6%

16 When are you planning to transition the company? > 70 Overall 1-2 years (20%) 60 to to years (28.2%) 6-10 years (27.4%) No plans (24.4%) 40 to 49 0% 20% 40% 60% 80% 100%

17 Have you established a formal transition advisory team? Yes No My Board 8% 14% 78%

18 Have you completed any formal education related to transitioning your business? Yes No 34.1% 65.9%

19 Who do you see as your most trusted advisor Who do you see as your most trusted Advisor? 15.8% 1% 2% 32.2% 32.9% Spouse Banker Accountant Lawyer Financial Advisor Insurance Agent Other 4% 12.3%

20 Most trusted advisor by revenue size 5% 14% < $50M Accountant Lawyer Partner Peers Spouse Fin Adv Other 5% 14% > $50M Accountant Lawyer Partner Peers Spouse Fin Adv Other 32% 38% 15% 0% 11% 14% 8% 12% 14% 19%

21 What best describes your companies transition plan? 70+ Overall No plan (48.6%) 60 to to to 49 Plan, No doc or Comm (34.3%) Plan, Doc No Comm (5%) Plan, Doc & Comm (12.1%) 0.0% 50.0% 100.0%

22 What do your plans encompass? Tax Plan (35%) Estate Plan (52%) Advisory Team (26%) Value Enhancement (13%) Financial plan (61%) Business Valuation (52%) Contingency Plan (39%)

23 What best describes how you are planning on transitioning? 2% Internally (family succession) Internally (ESOP) 30.9% 21.3% 10.3% 2% Internally (Management) Internally (Partners) Externally (3rd Party/Strat/PE) Externally (Recap) 1% 1% 29.4% 2% Externally (Orderly Liqu) Not sure Other

24 Transition Plans by Age to to 59 Internal External Not Sure 40 to

25 Transition plans by revenue size < $50M External Internal Not Sure > $50M External Internal Not Sure 31% 35% 33% 19% 34% 48%

26 Do you have provisions in place if key personnel or shareholders should get ill, die or otherwise exit the company? Yes No 40% 60%

27 What are your biggest internal concerns? Tax Planning (20.6%) Other (8.8%) Family issues (25%) Profitability (40.4%) Management (51.5%) Cash Flow (26.5%)

28 What are your biggest external concerns? Tax changes (40.4%) Currency risk Credit (2.9%) availability (11.8%) Other (11%) Market conditions (65.4%) Gov't legislation (54.4%)

29 Which describes your post transition life after the business plan? No thoughts Idea Informal plan Internal External Written Plan 0.00% 20.00% 40.00% 60.00% 80.00% %120.00%

30 Describe potential changes to your lifestyle following transfer of ownership Internal Transition External Transition Reduce (10.2%) Not sure (11.9%) No change (57.6%) Not sure (35.8%) No change (37.3%) Earnout (20.3%) Reduce (7.5%) Earnout (19.4%)

31 What do you plan to do post-transition? Consult (32.2%) Internal Transition Other (10.2%) No Plans (15.3%) Philanth ropy (47.5%) No Plans (22.1%) External Transition Philanth ropy (10.3%) Retire (20.6%) Invest/ Board (22%) Buy (8.5%) Retire (35.6%) Other (8.8%) Consult (17.7%) Invest/ Board (14.7%) Buy (5.9%)

32 Have you incorporated into your personal financial and estate plans? Internal External Estate (0%) Neither (22%) Neither (36.4%) Both (27.3%) Financial (15.3%) Both (62.7%) Estate (3%) Financial (33.3%)

33 Level of employee awareness of the managerial and ownership transition plans. Internal External Aware -both Aware - Managerial Aware - Owner Not aware either Aware - both Aware - Managerial Aware - Owner Not aware either

34 External: Current understanding of value of business Good idea Formally valued <1 yr Not sure External: Pre-transition VE project last 2 yrs Yes No 13.6% 25.8% 18.2% 56.1% 86.4%

35 Internal Transitions: comparing strategic plans versus strategic moves in next 5 years Strategic Plan Strategic Moves in next 5 years 25.5% 25.4% Yes - written No - informal No 43% 57% Yes No 49.1%

36 External Transitions: comparing strategic plans versus strategic moves in the next 5 years Strategic Plan Yes - written No - informal No Strategic Moves in next 5 years 12% 25% 47% Yes No 41% 75%

37 Why is this important? Further proof that the opportunity is real $10+ trillion of US wealth transitioning next 10 years Significant exit strategy related advisory work Use as an educational tool with owner and other advisors Share with your clients Great Business Development Opportunity Open the door to conversations

38 Christopher M. Snider, CEPA CERTIFIED EXIT PLANNING ADVISOR President and CEO Delivering innovative learning experiences, performance-enhancing resources and strategic tools designed to enhance the exit planning profession Detroit Avenue, Suite 430 Cleveland, Ohio Main Office: (216)

39 Delivering innovative learning experiences, performance-enhancing resources and strategic tools designed to enhance the exit planning profession