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business 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 planning – Partners31: Specializing in Health and Human Services http://partners31.com 32 32 Business Senses, USE Them for Systemizing http://partners31.com/consultant-intellectual-disabilities/business-senses-use-systemizing/ http://partners31.com/consultant-intellectual-disabilities/business-senses-use-systemizing/#respond Tue, 22 Apr 2014 01:58:13 +0000 http://partners31.com/?p=1753   As a business owner, would you like to eliminate some stress from your life?  Consider having systems in place.  Documenting what really works can make you, your employees, and your processes more efficient and effective.   People want to work with companies that treat them well and they want to know what their job responsibilities […]

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little executiveAs a business owner, would you like to eliminate some stress from your life?  Consider having systems in place.  Documenting what really works can make you, your employees, and your processes more efficient and effective.   People want to work with companies that treat them well and they want to know what their job responsibilities are.  Having systems in place will help satisfy these needs.

So how do you go about getting these systems identified and defined?  One way to start is to use your senses.  You may think I am talking about “common” sense.  But I’m not.  I mean use your senses, literally—sight, smell, sound, taste, and touch. Get in the practice of exercising one of your senses each day when you are in your office.

Today let’s focus on sound.  Take 3-4 minutes somewhere inconspicuous in your office and close your eyes and listen.  What do you hear?  How do you feel about the environment, the voices, the phones ringing, the conversations, the words, the tones?  Do you hear any annoying sounds, distractions, alarms, music?

Now open your eyes and jot down your thoughts on what you heard.

How do you feel about what you heard?  Did you hear an office purring like a cat or screeching like fingernails across a chalkboard?

Listening to what you hear can be a big clue as to what environment you have in your office.  If what you heard made you feel awesome, let your team know.  If there is room for improvement, be clear, identify the problems and create a solution.  Communicate with your team and make changes when needed.

Please try this with some of your other senses.  It’s a great exercise to Get Your Business FIT, and ready to go when you are!

 

 

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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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Using Multiple Entities To Save Tax Dollars http://partners31.com/business-planning/using-multiple-entities-to-save-tax-dollars/ http://partners31.com/business-planning/using-multiple-entities-to-save-tax-dollars/#respond Thu, 07 Feb 2013 18:37:04 +0000 http://partners31.com/?p=1472 Have you considered using multiple entities to save tax dollars for you home health business? We’ve met few business owners who believe they should pay more income taxes every year. Instead, most are frustrated with the inability to engage in meaningful income tax planning that reduces the annual tax bite. Take Thomas Lamplighter for example. […]

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Have you considered using multiple entities to save tax dollars for you home health business?

Income tax planning for family businessWe’ve met few business owners who believe they should pay more income taxes every year. Instead, most are frustrated with the inability to engage in meaningful income tax planning that reduces the annual tax bite. Take Thomas Lamplighter for example.

Thomas was a second-generation owner of a brickyard. His eventual Exit Planning objective was to pass the company to his children in a way that would avoid the gift and estate taxes he had to pay when his father had passed the business to him. But his children were still young and he first wished to provide them with the best possible education. Preferably, he wanted to find a way to have the business pay for his children’s education, on a tax-deductible basis no less.

Thomas’s fourteen year-old son, Thomas III, attended an expensive private school while his seventeen year-old daughter, Patricia, was not only in private high school but was looking forward to many years of higher education. Lamplighter’s advisors suggested he create multiple business entities in order to distribute taxable income to the right owners (the kids) in the right amount and at the right time. How was Thomas able to accomplish income tax planning as well as estate tax planning through the use of multiple entities?

The answer is fairly simple. Thomas and his wife owned the land used in Thomas’s business. His attorneys suggested that the Lamplighters transfer that real estate into a family LLC (Limited Liability Company), and gift a minority interest in that LLC to trusts created for the benefit of Thomas III, and Patricia. The LLC would then lease the land to the business, thereby insulating the land from the operational risks of the business. The LLC and the business would enter into a long-term lease thus providing income to the LLC.

To the extent the children owned interests in the LLC, they would receive, and be taxed on, income to extent of that year’s earnings. The ownership interest would be gifted to the children, applying standard minority and lack of marketability discounts. This technique removes that share of the property from the Lamplighters’ estates and more importantly, removes the future appreciation in the value of that real estate from their estates.

Just as importantly, the income attributable to the LLC interests owned by the children (through their trusts) would be taxed to the children in their own tax brackets, since each child is at least 14 years old. Each child’s ownership interest was calculated to produce approximately $30,000 of taxable income each year. After paying taxes of approximately $4,000 (an effective rate of less than 15 percent), each child has about $25,000 to pay his or her education expenses or other expenses (such as vacation expenses) that would not be deemed “support obligations” of their parents. The tax savings to the senior Lamplighters are not inconsequential. An extra $60,000 of income is removed from their marginal tax bracket. This removal results in tax savings of roughly 45 percent of $60,000 or $27,000.

If we subtract the taxes paid by the children ($8,000) from the parents’ tax savings, the entire Lamplighter family saves about $20,000 per year in taxes. Expecting that the Lamplighter children will be in school for at least ten more years, Thomas concluded that the cumulative tax savings are not inconsequential — about $200,000. At the same time, the Lamplighters have removed from their estate an asset that can be expected to grow in value. Finally, they have removed from their taxable income an income that they do not need personally.

 The final result?

Tax savings to the family of approximately $20,000 per year;

Estate tax savings of an undetermined amount; and

The creation of a creditor-protection vehicle (an LLC) to protect the real estate from attack by business creditors.

The total cost in terms of on-going accounting and legal fees is less than $1,000 per year in most circumstances. Not a bad return on investment! It is clearly necessary to consult with your Advisory Team, to see if this type of planning is appropriate for you, your family and your business.

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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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Building Home Care Value with Tactical Planning http://partners31.com/business-planning/building-home-care-value-with-tactical-planning/ http://partners31.com/business-planning/building-home-care-value-with-tactical-planning/#respond Thu, 13 Dec 2012 15:10:15 +0000 http://partners31.com/?p=915 Building value in your home care business and setting goals for exit planning does not happen by accident.  Partners 31 helps you develop your overall strategy as well as the specific tactics, the means by which you execute that strategy, necessary to achieve your goals. Let’s take the example of “Stuart,” a typical home care […]

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Tactical PlanningBuilding value in your home care business and setting goals for exit planning does not happen by accident.  Partners 31 helps you develop your overall strategy as well as the specific tactics, the means by which you execute that strategy, necessary to achieve your goals.

Let’s take the example of “Stuart,” a typical home care business owner who needed help building business value but wasn’t sure where to begin.  We started by asking a deceptively simple question:  what specific business activities do you LEAST enjoy?  Stuart’s list included placing collection calls, balancing the books, paying bills, and hiring and firing employees.  Obviously, these tasks are business critical, and your own list may include other activities no less crucial.

It might seem counterintuitive, but we suggested that Stuart STOP doing these tasks.  Instead, we asked whether he could identify employees who could handle the activities at least as well as Stuart or develop systems and procedures to ensure the tasks received the proper focus.  His alternative was to do everything himself, working longer and harder on the tasks he least enjoyed.

All home health care owners have specific strengths, aptitudes, and interests they bring to their home health business.  Naturally, they also have areas where they are weaker, have less aptitude, and interests on which they’d rather focus.  Stuart found that he could become MORE efficient by doing LESS.

Now let’s examine several areas we must consider and questions we must answer when developing your strategy and tactics:

*Diversifying your Customer Base

*Expanding Sales

*Defining and Measuring Success

*Developing Consistent Sales and Marketing Messages

*Planning your Taxes

Diversifying your Customer Base–What percentage of you sales or income are attributable to each customer?  Does one client account for a disproportionate amount of sales over the past year?  If you lack diversity in your customer base, it will be difficult to convince potential home care mergers and acquisitions brokers and buyers of your proper business value and future prospects.

Expanding Sales — Are you doing everything possible to build home care valuations through existing customers?  Have you recently explored different options to increase market penetration?

Defining and Measuring Success– How do you measure home health company success?

How do you achieve accountability?  Is it through the consistent achievement of annual sales targets or by successfully penetrating especially difficult markets? To build home care business valuations and meet your exit planning goals, to set appropriate base incentives for compensation, to establish growth targets you must first be able to define and measure success.  This is particularly important when working with home care business brokers and mergers and acquisitions home care entities.

Developing Consistent Sales and Marketing Messages–Have you effectively communicated your home care company’s purpose and goals to your employees?  Can all, or even most, employees accurately describe your competitive advantage?  Many home health owners mistakenly believe they have!  Crafting a consistent sales and marketing message ensures all employees are focused on company goals.

Planning your Taxes–No tactical planning discussion would be complete without mentioning taxes.  Wise home care business owners do everything possible to legally build value by avoiding unnecessary taxation and minimizing existing tax obligations.  Your tax advisors can recommend appropriate entity structures, how to use multiple structures to minimize taxes, or how to choose the proper location to take advantage of state and local tax codes.

These five examples are by no means comprehensive; they are just a few examples of the many ways Partners 31 can help you plan your business strategy and execute effective tactics.  Our advisors can assist you in organizing and focusing your efforts to achieve all your exit planning goals

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Cash is King http://partners31.com/business-planning/cash-flow-is-king/ http://partners31.com/business-planning/cash-flow-is-king/#respond Thu, 08 Nov 2012 17:56:28 +0000 http://partners31.com/?p=1278 Cash is King, but  for the cash buyer, a slight modification to our saying is required: “Cash Flow is King.” Our advisors often hear from business owners who say, “My friend sold her business for a six times multiple. Can I get the same type of multiple for MY business?” To understand why the answer […]

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cash flow is king when selling your businessCash is King, but  for the cash buyer, a slight modification to our saying is required: “Cash Flow is King.”

Our advisors often hear from business owners who say, “My friend sold her business for a six times multiple. Can I get the same type of multiple for MY business?” To understand why the answer is not a simple “yes” or “no,” we need to know what exactly is being multiplied.

Cash of course is our favorite thing to multiply. Investment bankers, sellers, and mergers and acquisition advisors of all kinds have a favorite phrase: “Cash is King.” Cash greatly reduces a seller’s risk in the transaction.

But for the cash buyer, a slight modification to our saying is required: “Cash Flow is King.” The buyer wants to know exactly how much cash the business is producing. In fact, few cash buyers are willing to part with their money unless they see a proven, and increasing, stream of cash flowing from the business.

The balance of our discussion is devoted to defining cash flow and examining its importance for third-party cash buyers who are interested in your business.

The Importance of Cash Flow

During the heyday of consolidation, companies used their own publicly-traded stock to aggressively pursue and acquire similar companies. This led to payments of multiples of earnings–sometimes of future earnings–that in our more sober climate seem stratospheric. Mergers and acquisitions activity is down as much as 80% from 1999. That frenetic period of consolidation is over.

Today’s buyers may still be anxious to acquire companies, but they are looking for “good” companies–those with increasing cash flow, solid growth potential, and strong fundamentals (including the management team and operating systems). These characteristics have always been important, but given the high rate of failure of recent mergers and acquisitions, cash flow has never been so important. Strong cash flow reduces a buyer’s risk, so for many sellers getting “six times multiple” of cash flow depends greatly on what exactly is meant by “cash flow.”

The Definition of Cash Flow

Another favorite, albeit less succinct, phrase of investment bankers is, “We can get you five or six times multiple of your cash flow as a purchase price for your business.” All you have to do is let THEM define “cash flow.” The devil in this case is in the definition. There are several definitions or measures of cash flow, each with significant differences. Typical measures of cash flow include:

EBIT: Earnings Before Interest and Taxes

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization

True Cash Flow: The amount of pre-tax money distributed to owners via salary, bonus, company distributions such as S-distributions, and rental payments in excess of fair market rental value of equipment or buildings used in the business.

Each of these measures of cash flow can produce a different cash flow amount, and you can add to these measures the need to recast cash flow by using “add backs” such as excess rents, salary, or bonuses paid to the owners and their families.

This brings us back to our original questions. Can you get six times multiple when you sell your business? Sure. But, as we have explained, it depends greatly on how you define cash flow. To accurately determine which measurement is appropriate for your business, look first to the marketplace’s measurement for insider sellers. This “true cash flow” measurement reflects what your potential buyers must use to pay for your business.

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