www.BOSSworkshops.com

1. B.O.S.S. Workshops (Business Owner Strategy Sessions) A Succession Plan is Critical You will Exit your business. Who will be in control? March 17, 2011 www.BOSSworkshops.com

2. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

3. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

4. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

5. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

6. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

7. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

8. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

9. B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners www.BOSSworkshops.com

10. B.O.S.S. Workshops (Business Owner Strategy Sessions) A Succession Plan is Critical You will Exit your business. Who will be in control? Speaker: Roy Messing, MBA, CEPA Program Coordinator www.BOSSworkshops.com

11. Program Overview • Brief Overview of Succession Planning • Background • Implications of not planning • Succession Planning Basics • Helpful Tools • Resources

12. Some Statistics... 4.6 million family-owned/closely-held businesses

13. Some Statistics... Employ 76% of U.S. workforce

14. Some Statistics... Small and medium-sized businesses create 65% of net jobs in U.S.

15. Some Statistics - (the wave) • During the next 20 years close to 80 million baby boomers will be retiring. • More than 70 percent of privately owned businesses will be changing hands within the next two decades.

16. Some Statistics –(the wave) • The largest intergenerational transfer of wealth in history … a staggering $10 trillion A "business transfer tsunami”

17. Some Statistics... 20 years ago 30% of small businesses made it to 2nd generation & 15% made it to the 3rd generation

18. Some Statistics... Now 15% of small businesses make it to 2nd generation & 5% Make it to the 3rd generation

19. Some Statistics... COSE study found that about 80% Do NOT have a succession plan COSE = Council for Smaller Enterprises in Cleveland, Ohio

20. Recipefor Disaster……. • Fewer companies transitioning to “next” generation • Aging Ownership Population • Few Owners have plans in place • What can go wrong………….

21. Worst Case Family loses business investment Business Ceases Operations Employees Lose Jobs Communities Lose Tax Base Quality of Life and Services Suffer Domino Effect

22. Elements of a Succession Plan Transactional Economic Personal/Emotional

23. Options Sale or Transfer to Insiders Sale or Transfer to Outsiders Or do nothing

24. Potential Inside Buyers • Family Members • Partners • Management • Employees • Combination of the Above

25. Potential Outside Buyers • Strategic Buyer Within Industry • Strategic Buyer in Aligned Industry • Financial Buyer

26. Do Nothing Transfer • Only two things are certain in life Death & Taxes

27. If the Owner does nothing • The Courts decide, • Uncle Sam gets his share, and • All others left to pick up the pieces

28. Given all that can go wrong and the impact of that inaction….. Why don’t owner’s start a succession plan?

29. Difficulties • Death • Taxes • Risk • Control • Life Changes • Relationships • Options • Value

30. Succession Planning Steps Start Identify Owner’s Needs and Goals Research/Identify Professionals Draft/Communicate Plan Revisit & Adjust Plan

31. The Best Time to Start a Plan Now!!!

32. Key Questionsfor the Business Owner Do I need the sale and/or transfer proceeds to finance my retirement? Can the business support that?

33. Key Questionsfor the Business Owner Do I have family members in the business? Do they rely on the business for their income?

34. Key Questionsfor the Business Owner Would I like to see the business continue as a viable entity after I leave?

35. Key Questionsfor the Business Owner Can I let go of the business?

36. Why Don’t They Do It? • What will motivate a typical small business owner to begin and actually execute a succession plan?

37. Family Issues Owner(s) Spouse(s) (or spice) Parents/siblings/in-laws Children & Grandchildren

38. Family Issues Communication Competency Fairness or Equality

39. Management Succession Often Overlooked Extremely Important Creates and Maintains Value Who’s Taking Over Seller’s Duties?

40. Selecting Advisors • Find experienced professionals • Interview several before selection • Get and check references • Have a “Team” of trusted advisors • Define roles amongst team

41. Team of Advisors • Estate and Trust Professionals • Financial Planner/Insurance Agent • Business Attorney • Business Valuation Expert/Accountant • Exit Planning Advisor

42. Drafting the Plan • Focuses on the goals and needs of the owner • Includes input from advisors, owner and other appropriate parties • Outlines the projected outcome and the path to reach that outcome • Specifics better than generalities

43. Time Frame 3 Months -20 Years 1-2 Years OK 5 + Years Ideal

44. Implement, Track and Adjust the “Plan” • Plans that “collect dust” are worthless • Routinely monitor implemented plan • Note uncontrollable changes that impact plan (good or bad) • Adjust plan to fit “new reality”

45. SPP Tools • Buy/Sell Agreements • Life Insurance • Trusts • Gifting of Shares

46. Valuation

47. Valuation Every ownership transaction should include a valuation Independent, third-party Think of it as an insurance policy against future litigation

48. Valuation Methods • Asset Approach • Market Approach • Income Approach

49. Business Valuation Different Levels of Value Strategic outside buyer Financial outside buyer Fair market value – ESOP Small group internal buyer (maybe) Family internal buyer

50. Project Exit Outcome • Financial outcome of exit per goals • Anticipated outcome per evaluation • Calculate the “Exit Gap”