Exit Planning
What is Exit Planning?
In the book titled “The Completely Revised How To Run Your Business So You Can Leave It In Style,” Joseph M. Durnford, along with co-author and attorney John H. Brown, describe this experience-based, proven step-by-step process that leads business owners to ultimate success—the profitable sale or transfer of their businesses. To request a copy, click here.
Thousands of business owners have tailored this process to meet their particular exit objectives and have left their businesses with more cash than they ever imagined and without any regrets.
To access an article describing the seven steps common to every exit plan, please click here
To access the Exit Planner Newsletters, please click here
The following is a brief summary of the Exit Planning strategy we use with middle market business owners.
A successful transition planning process involves many steps, including:
You've got to be very careful if you don't know where you're going, because you might not get there." Yogi Berra
We think Yogi Berra was describing the business owner's need to set Exit Objectives. Under our interpretation, Mr. Berra meant to warn owners that they couldn't expect to successfully sell their businesses if they didn't know their objectives before beginning the sale process.
As strategic advisors, JD Ford works with business owners to establish and refine exit objectives. Many owners come to us with objectives in mind. Others only know that they are emotionally ready--perhaps more than ready--to leave their businesses now. We believe that, at a minimum, there are three straightforward exit goals that every owner must establish. To determine their goals, we suggest that owners ask themselves three questions that, once answered, enable them to move forward decisively.
- When do I want to sell my business?
- What is the annual after-tax income I want after I sell my business?
- To whom do I want to transfer the business?
Selling, Recapitalizing or Financing business growth starts with a definition of what you want and need from the transaction or, in other words, what success means to you. We can help you formulate that definition because we've helped hundreds of owners through this process. At JD Ford, we offer our experience and insights to owners who are trying to clarify their goals. We have found that our early involvement leads to a smoother, faster and more financially successful outcome.
This emphasis on business Exit Planning sets JD Ford apart from other investment banking firms. At JD Ford, Exit Planning is not the marketing tool of the moment. We've been in the Exit Planning business over 25 years because we know that owners who formulate specific goals have a much greater chance of selling out successfully. Whether or not you plan to work with JD Ford, we encourage you to learn more about the Exit Planning process. (To do so, click here).
- Determining Market Value
When valuing companies in the middle market, many CPAs and Business Appraisers may not consider factors that influence a real world sales price. The reason for this is simple - most valuation approaches base the value of a business on the assumption that it is in the hands of the current owner (an "as is" valuation).
At JD Ford, we know all too well that in the fast paced, forward-looking global world of middle-market mergers and acquisitions, buyers look primarily to the future cash flow they expect to realize from the investment. Consequently our valuation methodology first projects future cash flow and then examines the market factors that will affect a prospective buyer's willingness to pay top dollar for a company's future cash flow.
Our emphasis on the future and our focus on value are pragmatic--not theoretical. We do not spend our time and our clients' money on establishing "in the best of all worlds" valuations. Instead, middle-market business owners look to us to establish a value that can be supported in today's market.
The question that every owner must answer before deciding to sell is, "How much can I sell my business for today?" Only by knowing the answer can he/she determine if the sale will yield financial independence. Our purpose for valuing a business then is the same as the business owner's; how much can the business be sold for in cash in today's M&A market?
For more information on the factors that JD Ford uses to establish a valuation for transaction purposes, please see our Exit Planner article, "Beauty Is In The Eye of the Beholder."
- Building Market Value
Value drivers are characteristics of a business that either reduce the risk associated with owning the business or enhance the prospects that the business will grow significantly in the future.
The value drivers critical to most businesses are:
- Management Team
- Effective Operating Systems
- Established and Diverse Customer Base
- Solid Brand and Reputation
- Realistic Growth Strategy
- Effective Financial Controls and Corporate Governance
- Stable and Increasing Cash Flow
- Transfer or Sale of Business
It is the blending of strategy with tactics - strategic services with transaction services - that provides clients of JD Ford with the unique and ideal combination of planning and execution; planning to position your company properly and execution to negotiate the best possible deal. JD Ford's strategic services help owners to design and implement an exit strategy that creates the greatest likelihood that owners will ultimately receive their purchase price. We also design exit plans to include an "out" - if the transfer to children or key employees doesn't work, an owner needs the ability to sell his business to an outside party in order to achieve his original exit objectives.
- Developing a Contingency Plan for the Business
When owners make the decision to begin exiting their businesses, the last thing they consider is a need for adequate planning to protect the business if they should suddenly die or become incapacitated. Yet, this is precisely the point when the business is most vulnerable; it has peaked in value, but the event creating liquidity (the sale of the business) is often a year or more away. JD Ford works with an owner's legal and financial advisors to make certain the business is protected in the event the owner departs from the business instead of the business departing from the owner. Providing business continuity planning is a necessary element of the overall strategic plan.
- Wealth Preservation Planning
When owners sell their businesses, they create cash, not only for themselves and their families, but also for the IRS. Professionals at JD Ford have helped hundreds of business owners preserve wealth for themselves and their families through the proactive design and implementation of wealth preservation strategies. Ideally, these strategies are designed and implemented before an actual transfer of the business.
We believe it is this type of service that sets JD Ford apart from other investment banking firms. While we are interested in selling your business for top dollar, we are also interested in your ability to retain as much money as possible for you and your loved ones.
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