Exit Planning: It can wait until tomorrow, right?
When asked about succession or exit planning, have you given one of these responses? “I think I will leave my business in three to five years.” “The operation still needs me.” “The business is not ready to be transitioned.” “We are too busy to worry about succession.” “I will easily sell it in a few years and walk away.” “I am just not ready yet.” Or perhaps you know someone who has given one of these answers when discussing their potential exit from the business and retirement? Like starting an exercise program, exit planning can easily wait until tomorrow. However, for the Baby Boomers, tomorrow is here. Business owners born between 1945 and 1964 make up 25% of the population but own over 60% of the small businesses. The high ownership levels result from their surge into the job market in the 1970s and the lack of room in corporate America to absorb a much larger and better-educated employee population. From 1975 until the mid-1980s, Baby Boomers opened new businesses at a rate never seen before and not duplicated since. Today, over 5,000,000 Baby Boomers are preparing for retirement. Just as when they all went to college, started new businesses, and became prolific consumers, they will create a flood of small business sales in the United States. So, what is exit planning, and why should you do it? Also, how do you do it, and when should you start? Exit Planning: What is it and Why do it? When a business broker creates an “exit plan,” it usually involves listing the business for sale to a third party. An attorney’s planning focuses on the legal documents that allow the transition of a company’s assets to new ownership. An accountant or financial planner will look closely at tax and inheritance issues, and an insurance broker offers products that reduce the risk of interruption or disaster. It is logical then that exit planning is quickly becoming a significant focus of the legal and financial communities. Although boomers are healthier than prior generations, they all have to retire eventually. Tens of thousands of professional advisors are positioning themselves to provide tax, risk management, wealth management, and contract preparation services to this flood of sellers. You may be in your 40s and 50s and maybe thinking that this doesn’t apply to you. After all, you have plenty of time. However, the answer to that question is another question: then why buy life insurance? Anything can happen to any of us at any time. Exit planning is another form of insurance— just as you are making sure your family is being cared for, don’t you want the same for your business and employees? There are many additional benefits to starting exit planning early— the process of getting your business transition ready means making it more attractive to investors. That includes, but is not limited to: maximizing revenue, lowering expenses, increasing efficiencies, eliminating owner-centric processes, getting the business modernized, up-to-speed, and more profitable. All of these will have tremendous benefits for you and your company regardless of your exit timing. Examining the strengths and weaknesses of the business, IT systems, management team, and customer base are good continual improvement practices that make the company more profitable in the short-term and make it much more attractive for a potential buyer. How to Plan Your Exit? A successful transition starts by determining the planned date of exit and the post-tax proceeds required from the business to satisfy the owner. The target proceeds should be achievable in the chosen time frame. If they are not, you can extend the time frame or reduce the financial goal. After determining schedules and financial information, there are essentially three options on whom will take over as an owner: a family member, an internal team sale, or a third-party sale. Discussions with accountants, attorneys, financial planners, and others likely feel similar to a complicated maze that makes you not even want to start the process. A trained advisor will help initiate the process and will engage in constant communication with all of the parties listed above, with your control of the process remaining intact. The most effective and efficient approach to exit planning is to select a single professional who can manage all the others involved. Creating new entities or sale agreements is pointless unless the tax implications are first understood. Planning to reduce the impact of income taxes may be rendered moot if a company is not in a position to sell. Putting the company up for sale may be a disaster if an owner doesn’t understand what buyers are looking for and how much they’re willing to pay. Not only will this process determine the best options for your eventual exit from your business, but it also provides a screenshot of the company. It helps to identify areas of the organization that can be improved and what we can outsource to others to achieve the highest sale value possible. Eventually, the planning also leads to a smooth transition, operationally, so that your business continues to be run in the best manner possible by new leadership. When to Start? Retiring Boomers will outnumber GenXers reaching ownership age by 4,000 a day! Studies show that the generation reaching retirement age is 2.5 times more likely to want to own a business than those in their 30’s and 40’s. Thus, this severely limits the small-business buyers in our economy today. It often takes a minimum of 5 years to develop most succession and exit plans—a more realistic number might be as much as ten years. Time and potential buyers will likely be the two most significant challenges for you in this process. Once you have a plan in place, you can implement it whenever you chose. Why wait until it is too late? Get the conversation started with the correct parties now. Are you ready? The single largest transaction and transition of your life deserves special attention. Are you planning to exit
The Graduate’s 5-Step Guide to Landing Your First Internship or Professional Job
As an intern at BEST Human Capital & Advisory Group, and as a student at Indiana University, I have experienced a wide range of career courses, internships, resume workshops, and interview processes. The following is a guide and helpful tips to use when navigating the post-graduation world with a focus on entering the professional sector. Colleges have many resources available to their students for career-specific use including workshops, cover letter help sessions, mock interviews and more. At Indiana University, students like myself are required to take career courses before they can graduate. As one goes through this process, which can be seen as a waste of time by many, one thing that becomes apparent is that you are in competition with thousands of your fellow classmates. However, this competition should not be seen as a barrier but added motivation to take your game to the next level. It is important for students and newly minted professionals to hit the ground running. The current economic market is in need of young professionals, especially with unemployment at historic lows. Although many companies send recruiters to universities, there are countless other options to pursue. Time should not be wasted contemplating. Rather, it should be spent with “boots on the ground” strategies to begin searching, applying, and interviewing for positions. Although intimidating, the professional world offers immediate feedback. It is ultimately up to you to use your knowledge and skills to find a position that fits your needs and the needs of the company. Step 1: Prepare for the Search As a new college graduate, it is important to make sure you are up to date. This entails having your resume ready to tailor to any position with your latest experience, skills, and related information presented appropriately (See our post on Resume Writing). Young graduates should also make sure to leave their sweatpants in the dorm and make sure they are fully stocked with professional clothing (a nice interview suit at the very least). These seemingly small preparations can make the job search process much less intimidating. LinkedIn also plays a key role in young professional lives. As graduates enter this new world, their names are a blank canvas. There is often little to no knowledge on a young professional, other than what is listed on their resume or social media (and it is important to keep your Facebook, Twitter, Instagram, Snapchat and other media clean). LinkedIn provides employers an excellent resource to find more background information on a potential job candidate. Thus, new graduates need to have their information current on LinkedIn, along with a relevant professional picture (head shot) to post on the profile. If you can afford it, look into LinkedIn Premium and start building connections. Being up-to-date on LinkedIn is important for employers since it is often the first place they look for more information and is also a critical first impression outside of your resume. Step 2: The Search Initial searches can be done on your school’s career center website, via Google, Indeed, and other search sources, or via your network that you have built through connections. A wonderful source of job postings is available on LinkedIn, where you can easily apply for jobs as your information is already up to date. Throughout my search I had specific roles and organizations in mind. I never ruled any position or organization out of the realm of possibilities, but this can be challenging and extremely time consuming. It is important to keep the competitive motivating factors fresh in your mind to keep you moving through the entire search and open your mind to opportunities you may not have previously considered. Do your due-diligence on researching a company, not only on the job post, but also the company’s website and its employees. As discussed in a previous post, websites such as, Glassdoor.com, Careerbliss.com and Vault.com are excellent resources to use when examining a company, its culture, its interview process, structure and background. By examining companies as a whole, I was able to sift through hundreds of postings to narrow my list of interesting internships to ten. After that, I had to delve deeper into the companies to find what was ultimately the right fit for me. Step 3: Communicate It is common for young professionals to hit a wall when trying to decide which of these positions to apply for. I could have applied to all ten positions. However, I would risk being overwhelmed by multiple hiring processes, which would lead to the creation of generic cover letters and other bad habits in the application and interview process. Instead, I focused and began reaching out to my shortlist of companies and organizations in search of who was hiring the specific position I was interested in. At the very minimum, I would get a name to address my cover letter to, and with further digging, I would be able to open a line of communication with the person who had the power to potentially hire me for the position. It is vital to open a line of communication and begin a relationship with the company of interest to get a better feel for how they operate. Doing this made it easy for me to construct a tailor-made cover letter, which is becoming a lost art, specific to the organization or individual I had been interacting with. I could also alter my resume specific to the position and the company after I had spoken with someone inside the organization. In my case, the communications and personalization of my documents were convincing enough to get my foot in the door and obtain an interview, which is really the purpose of a resume and cover letter. Step 4: The Interview After steps one through three, you are either one of two things: exhausted or excited. If exhausted, now is the time where it becomes important to draw on those past college experiences to gain motivation and recall those ho-hum mock interviews, which was rare practical knowledge