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business exit planning – Partners31: Specializing in Health and Human Services http://partners31.com We're Really Good At What We Do! Wed, 13 Apr 2016 23:07:11 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.3 http://partners31.com/wp-content/uploads/2011/09/cropped-Janet-FINAL-LOGO-no-bar-32x32.jpg business exit planning – Partners31: Specializing in Health and Human Services http://partners31.com 32 32 Growing the Value of Your Business- Getting Ready to Sell? http://partners31.com/business-planning/growing-the-value-of-your-business/ http://partners31.com/business-planning/growing-the-value-of-your-business/#respond Mon, 04 Mar 2013 19:27:46 +0000 http://partners31.com/?p=1480 In our experience most owners do not know how to grow value in their businesses: “…71% of small and mid-sized enterprise owners plan to exit their businesses within the next ten years, strongly highlighting the growing importance of enhancing business value. However, the challenge is that few organizations genuinely understand what actions they must take […]

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identifying business goalsIn our experience most owners do not know how to grow value in their businesses:

“…71% of small and mid-sized enterprise owners plan to exit their businesses within the next ten years, strongly highlighting the growing importance of enhancing business value. However, the challenge is that few organizations genuinely understand what actions they must take to achieve this goal…” – Deloitte

In our practice, we work with owners to methodically and successfully close the gap between what you have and what you will need. We begin with Step One: creating a written value building plan.

To create a written value building plan we ask several questions contained in our Value Driver Analysis. These questions are designed to:

  1. Identify your long-term business and personal goals (strategic objectives).
  2. Assess your current personal and business financial landscapes (quantify resources).
  3. Target specific areas in your business that you feel can drive up value and close the gap between where you are today and where you want to be after you leave your business.
  4. Your responses to our questions result in a graphic Assessment that gives you (and your advisors) a bird’s eye view of your company’s potential value building areas.

Based on our preliminary Assessment, we then ask a series of additional questions to pinpoint areas within your company that can best yield significant increases in value. In general, the areas that offer the best opportunity for value growth (and the areas we’ll examine in future issues of this newsletter) are:

Minimizing risks from inside and outside of the company.

Motivating the management team to perform without the owner’s involvement.

Pre-emptive tax planning.

Deployment of various operating systems.

Using timely and accurate financial reports to improve cash flow.

The Value Driver Report that we create includes specific recommendations about how to increase business value using these tools (and others). This written Report is not only a road map that reminds you (your advisors and if appropriate, key managers or co-owners) where you are going, but it:

  • outlines what must be done to reach your goals;
  • makes specific recommendations about how to achieve each task;
  • designates the person(s) responsible for accomplishing each task; and
  • holds everyone accountable to a timetable for achieving each task.

This process of creating a written Value Driver Report is the first vital step toward growing the value of your business.

When the task of creating more value appears overly-involved, burdensome, and time consuming, owners procrastinate or avoid the project altogether.  After all, you have businesses to run. We help owners to overcome this hurdle by prioritizing what needs to be done and creating a series of tasks with short time lines, measurable results, and concrete deadlines. Think of each task as a “low cost probe.” No one task will take a lot of your time, energy, or money. Yet each moves you closer to creating greater value, more sustainable cash flow, or less business risk.

We are excited to offer the Value Driver Report to business owners who are serious about exiting their companies in style. If you are one of those owners, give us a call and we will help you to create your successful financial future.

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Exiting Your Home Care Business Without Leaving It http://partners31.com/business-valuation/exiting-your-home-care-business/ http://partners31.com/business-valuation/exiting-your-home-care-business/#respond Tue, 22 Jan 2013 16:17:40 +0000 http://partners31.com/?p=1460 Business owners may be telling their advisors things like, “I’d like to back away from my business”, “I’d like the freedom to do whatever I want, whenever I want”, “I don’t want to worry about money. But if I sell, I’m unlikely to get enough cash in today’s merger and acquisition marketplace.”, “If I could […]

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Choices of a businessmanBusiness owners may be telling their advisors things like, “I’d like to back away from my business”, “I’d like the freedom to do whatever I want, whenever I want”, “I don’t want to worry about money. But if I sell, I’m unlikely to get enough cash in today’s merger and acquisition marketplace.”, “If I could cash out, where could I invest and generate a reasonable rate of return?”, “Don’t even think about suggesting that I put my money in the stock market!!”, “Even if I were foolish enough to let you do so, I doubt you could match the return I get on investments in my own business.”

Faced with limited prospects, owners often wonder if, rather than exiting, they can “back away” from their companies. They may contemplate treating their companies as more of an investment while continuing to own it.

Many owners realize that today’s merger and acquisition market contains fewer cash buyers. Consequently, owners may be reluctant to offer their companies for sale. They may be convinced that there could be less risk in keeping their businesses — at least in the short term.

In addition to a scarcity of cash buyers, the merger and acquisition market is no longer supporting the valuation multiples of six or seven times Earnings Before Interest, Taxes, Deprecation and Amortization widely achievable just a few years ago. Instead, most industry sectors have seen a decrease in valuation multiples of 20 to 50 percent.

It may be difficult to dispute that the lack of cash buyers willing to pay fair value for successful companies, and poor investment opportunities may certainly be sound reasons for owners to choose to stay in their companies. The issue for many owners then is: how do I back away and let others run the business without transferring ownership and control?

One answer is to engage in Exit Planning as if you were going to exit your business. After all, someday you will exit — even if you are carried out on a shield. Traditional Exit Planning can help to enable you to orchestrate a successful, permanent exit. Intermediate Exit Planning, however, can help to enable you to forge a path toward an exit without giving up ownership.

In order create an intermediate Exit Plan, you should:

1. Establish your (owner-based) on-going business objectives;
2. Determine future cash flow needs for yourself and for your business; and
3. Build a stronger business defined as one capable of running without you.

Let’s look briefly at each component.

First, working with your Exit Planning Advisors, establish your timetable for backing away from your business. Communicate your wishes clearly: What does backing away mean to you in terms of time commitment, emotional involvement, financial guarantees, etc.?

Second, you must determine the amount of income that you need the business to provide you. Ask members of your Advisory Team to help you make this determination.

Third, the characteristics of a “stand alone” business (one that can run without you) may be the same characteristics third party cash buyers look for. A company that can be managed from a distance and that is able to pay adequate cash flow with little risk of nose-diving without its owner at the helm, may be a highly-attractive business. It can be valuable both to third parties and to the owner who wants to step away. To create that type of business, you should have in place critical Value Drivers. They are:

  • Increased cash flow
  • Operating systems that improve sustainability of cash flows
  • Improved facility appearance
  • Debt reduction
  • Documented sustainable earnings
  • Growth strategy; and
  • Strong management team

When you work with your advisors to fashion your “stand alone” business, pay particular attention to creating repeatable, sustainable internal systems and developing and properly motivating your management team. In order to run successfully without you, your company needs systems and management in place capable of replicating your leadership.

The most valuable businesses are those in which the owners are no longer valuable. Planning to step away using intermediate exit planning can create a more vibrant business. When your day of departure does eventually arrive, both you and your business will be prepared.

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The Gap Between You and a Successful Exit: Do You Know Yours? http://partners31.com/business-planning/a-successful-exit/ http://partners31.com/business-planning/a-successful-exit/#respond Sun, 30 Dec 2012 16:42:22 +0000 http://partners31.com/?p=1402 Have you taken time to identify and quantify your value gap?   A value gap is created when the amount of money you will need to leave your company is less than the current value of your company.  The size of your gap determines what needs to be done how it is to be done when […]

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Tactical Planning Leads to Successful Outcomes

Have you taken time to identify and quantify your value gap?   A value gap is created when the amount of money you will need to leave your company is less than the current value of your company. 

The size of your gap determines

  1. what needs to be done
  2. how it is to be done
  3. when each value building action needs to begin and
  4. who is to undertake each such activity.
  5. Your next question should be, “How can I take concrete and immediate steps to close it?”

Most owners know they have to increase business value and want to grow their companies. But most don’t know how to do so. That knowledge begins with first determining the scope of the value-building project

If you are to reach your goal within your timeframe, you must start work today. You will have to re-orient yourself from working in the business to working on the business. This means that as tempting as it is to put out every fire, you must set aside time each day to take action to increase value.

Second, you will need to lay the groundwork for increasing value by determining how much the company needs to grow each year. This begins with creating monthly, quarterly and annual cash flow projections, and then directing your company’s energy toward achieving these immediate goals. An annual business plan based on these goals will become your roadmap to driving value upward.

Your gap analysis is the foundation for all of your value building choices:

  • the tools and processes you will use
  • the support you will need
  • the intensity of your efforts
  • Creating a value building plan based on what you want is a first step in taking charge of your and your company’s financial future.

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Annual Planning Meeting for Home Health Care Business Owners http://partners31.com/business-planning/annual-planning-meeting-for-home-health-care-business-owners/ http://partners31.com/business-planning/annual-planning-meeting-for-home-health-care-business-owners/#respond Tue, 25 Sep 2012 21:41:59 +0000 http://partners31.com/?p=1251 The annual planning meeting…Followers of our blog understand that Exit Planning is an ongoing process that begins with establishing your exit objectives and home care business valuation and ends with your successful exit. Along the way, you and your team of advisors focus on increasing and preserving business value and protecting business value from creditors. […]

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Make Time for Annual Planning Meeting

Annual meetings address your ultimate goal: leaving your business in style

The annual planning meeting…Followers of our blog understand that Exit Planning is an ongoing process that begins with establishing your exit objectives and home care business valuation and ends with your successful exit. Along the way, you and your team of advisors focus on increasing and preserving business value and protecting business value from creditors. You will also be making contingency plans in case something happens to you before your planned exit. And finally, you will be coordinating your business plan with your estate plan to protect your family.

This is a lot to consider–and to do! Some business owners keep putting it off until “later” or simply allow it to fall through the cracks. How do you avoid that trap?

The Annual Planning Meeting is an elegant solution that gives structure to your entire Exit Planning process. You may decide to meet with you advisors more often, depending on your needs, but all owners actively pursuing a successful exit should meet at least annually. So how can this meeting (or meetings) keep you and your advisors focused on your exit objectives?

Each year, you and your advisors–usually an attorney, insurance/financial professional, and CPA–will meet and go over your agenda (see below for a typical Annual Planning Agenda). Some owners hesitate to bring their advisors together because of cost-prohibitive hourly fees. Many advisors are sensitive to this and may reduce their rates for the meeting. They understand that the Annual Meeting is their chance to solidify their relationship with you and your other advisors. Ultimately, your success is their success.

The Agenda

Each attendee should receive the Agenda several weeks in advance in order to prepare. Typically, the Agenda includes

Your Objectives–Have yours changed since the last meeting? Are there new objectives for your team to focus upon?

Business Value–Is there an accurate valuation in place, and does it need to be reviewed?

Preserving Value–Is the company doing everything possible to minimize tax liability?

Promoting Value–Which areas need improvement to maximize your home care valuation? This topic often includes a discussion of how to motivate key employees.

Lifetime Transfer Objectives–Are you on track for your company transfer (to an insider or outside third party)?

Business Continuity Planning–If you die or become disabled, what must be done for your business to continue despite the loss of the following: ownership, financial resources, key talent, and very possibly employees and customers?

Wealth Preservation Planning--What can you do to minimize estate taxes, treat each child fairly, provide long-term financial security for your family, and–if applicable–transfer ownership to one or more child?

As you can see, this meeting is highly owner-driven. Each Agenda item is designed to address your ultimate goal: leaving your business in style. To make this possible, each advisor will leave the meeting with clear marching orders for the rest of the year. And because each is present, all benefit from the cumulative expertise.

If you need help planning and executing your Annual Meetings, contact us and we can help create a detailed and customized agenda for your meeting as well as answer any further questions you might have.

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8 Ways to Exit Your Home Health Care Business http://partners31.com/home-care/8-ways-to-exit-your-home-health-care-business/ http://partners31.com/home-care/8-ways-to-exit-your-home-health-care-business/#comments Tue, 04 Sep 2012 20:04:53 +0000 http://partners31.com/?p=1242 According to Paul Simon, there are fifty ways to leave a lover. We may not be as resourceful as Mr. Simon when it comes to saying goodbye, but we were able to come up with eight ways for owners to leave their home health care business. 1. Transfer to a family member 2. Sale to […]

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8 Ways to Exit Your Business

8 Ways to Exit Your Business

According to Paul Simon, there are fifty ways to leave a lover. We may not be as resourceful as Mr. Simon when it comes to saying goodbye, but we were able to come up with eight ways for owners to leave their home health care business.

1. Transfer to a family member
2. Sale to key employee(s)
3. Sale to key employee(s) using Employee Stock Ownership Plan (ESOP)
4. Sale to co-owner(s)
5. Sale to outside third party (including home care business brokers)
6. Initial Public Offering (IPO)
7. Retain ownership but become passive
8. Liquidation

Depending on your unique circumstances, any one of these paths may be appropriate. During the three-step process outlined below, you will harmonize your exit objectives with the unique strengths of your company and the evolving realities of the marketplace. Establishing thoughtful objectives is the first step of you Exit Plan, and doing so well in advance of your departure gives you and your advisors the time necessary to make your goals a reality. Many owners choose to avoid this sometimes difficult process. But if you wish to “leave your business in style”, choosing the correct path is key.

Step One–

First, you and your advisors must identify your most important objectives–see Issue 2 for more about identifying and prioritizing objectives. These objectives are both financial–“how much money will I need to meet my and my family’s needs?”–and non-financial–“I want my company to stay in my family” or “I want to remain involved in the business.”

Internal and external considerations will impact your choice of exit path. For example, you may wish to transfer the business for cash but are unwilling to put your company and valued employees’ fates to an unknown third party. In that case, you may decide that an ESOP or carefully-designed sale to key employees is the best exit path. Exterior considerations may include business, market, or financial conditions.

Step Two–

You must accurately value your company and determine its marketability. This analysis will provide you with further direction and help eliminate unnecessary exit paths. For example, if your company’s value is high but its marketability low–perhaps due to an anemic home health care market–you may decide that an outside party sale is impractical and instead choose to sell to an insider (co-owner, family member, or key employee).

Step Three–

The final step involves evaluating the various tax consequences of your exit options. This evaluation will include factors such as business entity and any changes that must be made. To use a third party sale example, if it would involve a sale of assets and your company is a “C” corporation, the adverse tax consequences might indicate an ESOP sale as a more appropriate choice.

Using this three-step process will help you narrow your list of exit options. And if more than one route remains, you and your advisors must conduct open and frank discussions about the pros and cons of each path.

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Time: Too Much or Too Little? Exit Planning for Home Care Agency Owners http://partners31.com/business-ownership/time-too-much-or-too-little-exit-planning-for-home-care-agency-owners/ http://partners31.com/business-ownership/time-too-much-or-too-little-exit-planning-for-home-care-agency-owners/#respond Tue, 07 Aug 2012 17:35:07 +0000 http://partners31.com/?p=965 Exit Planning?  Oh, I’ll have plenty of time for that later! Exit Planning?  I’m too busy to think about that now! Sound familiar?  The problem is that active, successful business owners like you seldom slow down, and despite your best intentions, you often bite off more than you can chew.  We can’t cram any more […]

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Exit planning image

Finding Time for Exit Planning

Exit Planning?  Oh, I’ll have plenty of time for that later!

Exit Planning?  I’m too busy to think about that now!

Sound familiar?  The problem is that active, successful business owners like you seldom slow down, and despite your best intentions, you often bite off more than you can chew.  We can’t cram any more hours into your day, but we can help you use your time more wisely.

Rudolfo LeMond owned a growing hospitality services company.  As his business grew, he learned to delegate, but no matter how much Rudolfo delegated, he never had enough time for planning.  And even if he could find time, he didn’t know how to create a plan founded on a clear vision, with clearly-defined and accountable steps along the way.

This was Rudolfo’s situation when he was approached by a buyer.  Though he had not actively pursued a sale, at 49 he was beginning to consider life after work.  So he found an hour to meet with the buyer.  In those 60 minutes, Rudolfo’s blinders were removed and his priorities turned upside down.

A large national company looking to establish a community presence, the buyer was interested in Rudolfo’s company because of its reputation and broad, diversified customer base. The buyer was looking to acquire a business that could grow with little other than financial support.

Naturally it sought a business with a good management structure because, like most buyers, it did not have its own management team to place in the business. Rudolfo, however, had not attracted or retained solid management (nor had he created a plan to do so). His business lacked this most basic Value Driver.  Like many buyers and mergers and acquisitions brokers, they were also looking for two additional Value Drivers: increasing cash flow and sustainable systems throughout the organization (from Human Resources to marketing and sales to work flow). Rudolfo quickly realized that his business was a hodgepodge of separate systems each created to patch a particular problem. Finally, they asked Rudolfo to describe his plans for growing the business. Rudolfo had none. What this buyer and Rudolfo now understood was that this business revolved around Rudolfo. As Rudolfo left the meeting, he expected that, given his company’s deficiencies, he would receive a low offer from the buyer. He waited weeks but no low offer was forthcoming. In fact, the buyer simply disappeared. The message to all of us is clear: Unless a business is ready to be sold, many buyers, especially financial buyers, are not interested. They have neither the time nor the in-house talent to correct deficiencies. The look for (and pay top dollar for) businesses that are poised for ownership transition. It is a fact of life for owners that unless you work on your business, rather than in your business, you will never find time to plan for the future of your business.

Is there a way to find the time for exit planning before your 60 minutes with a prospective buyer?  Of course.  But exit planning requires time– time not only to create the plan but also time to implement it and to achieve measurable results. That timeline may be considerably longer than you anticipate because, in creating an Exit Plan, you need to rely on others who are also busy (minimally an attorney, CPA, and financial planning professional). Additionally, you can not anticipate all of the issues that might arise, and it is unlikely that everyone you work with is as motivated or experienced as you are. Finally, and inevitably, not everything will go as planned.

Exit Planning encompasses all sorts of planning: growth, strategic, succession planning, as well as your personal financial, and estate planning. By wrapping business, estate, and personal planning into one process, Exit Planning is all-encompassing rather than a subset of the planning. In short, there is much to do, and the time to start doing it is now.

It’s important to recognize that planning, properly undertaken, can help enrich your business as well as your personal life. According to Brian Tracy (http://www.briantracy.com/), “A clear vision, backed by definite plans, gives you a tremendous feeling of confidence and personal power.” And, in the case of Exit Planning, it works, too.

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