{"id":16169,"date":"2015-01-15T11:33:14","date_gmt":"2015-01-15T16:33:14","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2015\/01\/plan-a-business-exit-now.html"},"modified":"2015-01-15T11:33:14","modified_gmt":"2015-01-15T16:33:14","slug":"plan-a-business-exit-now","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2015\/01\/plan-a-business-exit-now\/","title":{"rendered":"Business Report: Plan A Business Exit Now"},"content":{"rendered":"
\n
\n\"steve\n<\/div>\n
Stephan L. Ferraro is a CPA and partner with SaxBST LLP.\n<\/div>\n<\/div>\n

BY STEPHEN L. FERRARO<\/p>\n

With 2015 in full swing, some businesses
\nmay need to begin to think about planning a
\nbusiness exit.
\nListed are 10 reasons why one should
\nthink about planning it now, whether the
\nactual event will happen this year or in the
\nnext 10 years.<\/p>\n

1. The timing is right to begin planning
\ntoday.
\nIn real estate, the saying is “location,
\nlocation, location.” With business exits, it is
\n“timing, timing, timing.” Just as timing was
\nimportant as you built your business, it is
\ncritically important during your exit. If we
\nlook at the following transfer timing chart, it
\nindicates that we are likely in the ‘prime selling
\ntime’ and should be for a few more years.<\/p>\n

Since it takes time to properly plan and execute
\nan exit, the advice is to act now, rather
\nthan head into the next recession with a
\nmajority of your wealth tied to your business.
\n2. Avoid owning your business during the
\nnext recession.
\nThe leading baby boomer owners are turning
\n69 years old in 2015. Since many privately
\nheld businesses are owned by boomers, a
\nquestion that needs to be asked is how many
\nmore recessions do you want to go through?<\/p>\n

Most owners agree that the last recession
\nwas a painful reminder of the risk that exists
\nin a privately-held business. They also do not
\nwant to go through another one, particularly
\nif they are in their 70s. Unfortunately, we do
\nnot know the timing of the next recession
\nbut you can control your own actions and
\nyour ability to take action with your planning
\ntoday.<\/p>\n

3. A new congress brings uncertainty and
\npossibly new changes.
\nOn Nov. 2, 2014, the Republican Party took
\nover as the majority in the U.S. Senate (and
\nreinforced their majority in the U.S. House
\nof Representatives). While the assumptions
\ngenerally are that Republicans will promote
\npro-growth initiatives for small businesses,
\nwe really don’t know what form of compromised
\nchanges will come about.<\/p>\n

For example, the tax code is re-written
\napproximately every 25 years or so and it
\nseems over-due for a re-write. A new Congress
\ncould bring new changes and those changes may or may not benefit your future plans for
\na business transition.<\/p>\n

4. Your business likely showed improved
\nperformance in 2014, a trend toward a higher
\nvalue.
\nThe future owner of your business will ultimately
\ncare about two financial components
\nrelated to your company’s performance: the
\nfuture cash flows and the [perceived] risk
\nof receiving those cash flows into the future.<\/p>\n

Therefore, each additional year that you
\ncan show a trend towards improved performance
\nis one more arrow in your quiver to
\nargue for, and defend, a higher value for your
\nbusiness. This is particularly important if you
\nneed that additional value to meet your personal,
\nfinancial goals. You may be like many
\nowners who have seen profitability restored
\nfor many years now and it may just be time
\nto cash in while the value is high.<\/p>\n

5. Interest rates are still very low.
\nIn today’s financial environment, interest
\nrates remain low, making money cheap to
\nborrow. Therefore, buyers can still borrow
\nat a historically low rate, which makes it
\nmore attractive to execute transactions. And,
\nsimilar to home prices, when money is cheap,
\nvalues tend to rise. You may find that your
\nexit value in a low interest rate environment
\nis higher than in an environment where interest
\nrates are rising.<\/p>\n

6. Capital is available for acquisitions.
\nAccording to online data-base PEI Services,
\nthere are currently over 2,400 private equity
\ngroups that own nearly 57,000 privately-held
\ncompanies. The basic formula for many of these
\nprivate equity groups is to buy a ‘platform’ business
\nand buy additional companies as a growth
\nplan. With hundreds of billions of dollars in
\navailable capital for acquisitions and a business
\nmodel of growth through acquisition, there is
\na high demand for privately-held businesses.<\/p>\n

7. A relatively low supply of companies to
\npurchase.
\nThere is an imbalance between the high
\ndemand from buyers for companies and the
\nlow supply of quality businesses available for
\nacquisition. When an imbalance in the marketplace
\nexists, you can take advantage of it if
\nyou understand the dynamics.<\/p>\n

If you have the right type of business, revenues,
\nmanagement team and growth trend;
\nthen it is possible that there will be a line of
\nbuyers bidding up the price of your business.
\nIf you desire to cash in your business, you owe
\nit to yourself to learn more about this marketplace
\ndynamic.<\/p>\n

8. The supply -demand imbalance is not
\nlikely to last.
\nWith so many baby boomer owners marching
\ntowards retirement, it is likely that more
\nand more companies will come on the market
\nfor sale over the next few years. Therefore, to
\ntake advantage of this current imbalance, you
\nmay need to stay ahead of this pending wave
\nof sellers and offer your business to the market
\nbefore others.<\/p>\n

9. Tools and resources have never been
\ngreater.
\nExiting a business is a complex process. To
\nfill the needs of exiting owners, the ‘exit planning’
\nindustry is growing at a dynamic rate.<\/p>\n

An exit planner is a new breed of consultant
\nwho is adapting and building their business
\nmodel around servicing this particular need to coordinate various planning issues, including:
\ntaxes that you may owe for different transfers;
\nlegal agreements that you may need to sign;
\ncapital that you may need to attract; cash flow
\nprojections that you may need to provide to
\nsuccessor owners; insurances that you may
\nneed to purchase to protect your wealth; estate
\ntax planning protections; reinvestment of the
\nexit proceeds.<\/p>\n

More and more owners are seeing that their
\nadvisors now have access to tools and support
\nto assist them with this critical planning area.
\nAsk your advisors about how they are aligned
\nto assist you in this area. You are likely to see
\nthat these valuable consultants now have the
\nvision, creativity and tools to help you arrive at
\nyour desired destination.<\/p>\n

10. You may simply be tired.
\nThis is a fine time for reflection. Go back to
\nthe beginning of your business. Ask the important
\nquestion, “why did I get into business to
\nbegin with?” The answer, if you are like most
\nowners, is something like “to control my own
\ndestiny.” The question today is, “do you really
\nfeel in control of your destiny?'”<\/p>\n

The answer is likely “no,” as you have
\ncommitted most of your financial and time
\nresources to your business, feeling anything but
\nempowered and free. Although the business
\nhas provided for you for many years, it may be
\ntime to plan for the ultimate transaction, the
\nliberation of your time and resources from the
\nbusiness and a personal transition into activities
\nthat are stimulating and satisfying outside
\nof your privately-held company.<\/p>\n

There are an infinite amount of reasons to
\nbe proactive in protecting your most valuable
\nasset, your privately-held business. The ones
\nlisted in this article hopefully have moved you
\ntowards further seeing that you need to take
\nthe first steps in planning your exit. Why not
\nresolve to do it this year?<\/p>\n

Ferraro is a CPA and partner with SaxBST
\nLLP.<\/em><\/p>\n

Photo Courtesy SaxBST LLP<\/p>\n","protected":false},"excerpt":{"rendered":"

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