Valuation Acceleration and Exit Planning January 23, 2020 The - PowerPoint PPT Presentation

Valuation Acceleration and Exit Planning January 23, 2020

The Value of Your Business Increases today!

What is an Exit Plan? Exit Planning is business strategy. Exit Planning builds, harvests and Personal Goals preserves wealth while aligning business, personal and financial goals.

What is an Exit Plan? An exit plan asks and answers all the business, personal, financial, legal and tax questions involved in transitioning a privately owned business.

Georgia Readiness Survey

Georgia Readiness Survey

Georgia Readiness Survey

Georgia Readiness Survey

Value Maturity Index

Stage 1: Identify

Stage 2: Protect

Stage 3: Build

Stage 4: Harvest

Exit Options Inside Outside Intergenerational Transfer Sale to Third Party Management Buyout Recapitalization Sale to Existing Partners IPO Employee Stock Ownership Plan (ESOP) Orderly Liquidation

Stage 5: Manage

Which business would you rather buy? Company A Company B $20m revenue $10m revenue $2.0m earnings $0.9m earnings 5% growth 2% growth Owner hrs 50/wk Owner hrs 50/mo Quickbooks financials Audited financials 20% cust=80% rev No cust >5% revenue Doesn’t own brand Trademarks/patents No succession plan Deep management bench No documentation Documented procedures Loyal employees Phantom stock/non‐comp

What is Value Acceleration? Revenue Value Multiple Cash Flow

Value Factor Analysis

How is Value Determined? Cash flows generated 100% of the information 100% of the value comes from future comes from the past. performance.

What is the Multiple? Multiple of Revenue? 0.1x 0.3x 0.5x Multiple of EBITDA? 3.0x 5.0x 7.0x Multiple of Book Value? 1.0x 5.0x 10.0x

What is the Multiple?

Value Acceleration and Exit Planning Process DECIDE DISCOVER PREPARE Personal & Business Financial Valuation Planning Grow Prioritized or Action Exit? Plan Assess Business Personal Improvements Financial Business Key Milestone

What is the VAEP Process?

The Exit Planning Report 1. Executive Summary 2. Your Goals and Objectives 3. Personal Contingency Plan 4. Your Business: A Baseline Valuation 5. Value Factor Analysis 6. Value Enhancement Opportunities 7. Exit Options and Considerations 8. Tax Analysis 9. Recommendations 10. Action Plans 11. Professional Advisors 12. Glossary 13. Exhibit A: Presale Due Diligence Check List 14. Exhibit B: Limited Scope Business Valuation Report

Value Acceleration and Exit Planning Process DECIDE DISCOVER PREPARE Personal & Business Financial Valuation Planning Grow Prioritized or Action Exit? Plan Assess Business Personal Improvements Financial Business Key Milestone

Value Acceleration and Exit Planning Process DECIDE DISCOVER PREPARE Personal & Business Financial Valuation Planning Grow Prioritized or Action Exit? Plan Assess Business Personal Improvements Financial Business Key Milestone

Case Study Stan owned a very successful financial services consulting company o He was 62 years old o Owned business for 18 years o No strategic business plan o No exit plan o No tax plan

Company Value Before:  Revenue $5.5MM  EBITDA $.9MM  Baseline value estimated at $5.4MM

Maximizing Value Strategic analysis showed that Stan needed to:  Developed a stronger mid‐level management team  Increased formal sales training  Change reporting and accountability  “Productize” their services to capture market share

A Case Study After 24 months: 12,000,000  Revenue increased to Earnings 10,000,000 Revenues $11MM (from $5.5MM) 8,000,000 6,000,000  Cash flow increased to 4,000,000 2,000,000 $2.4MM (from $0.9MM) 0 2001 2003  Company sold to a foreign strategic buyer for $15MM

A Case Study The Results: Before: $5.4MM After: $15MM Value‐added: $9.6MM Professional planning and implementation almost tripled the value of this client’s company in 24 months!

During the Exit Planning Process Stan . . . • Saved $900,000 in capital gains taxes • Developed an estate plan that saved over $1 million in estate taxes • Dramatically increased the value of his company

The ROI of Exit Planning Costs Exit Plan $15,000 Estate Plan $15,000 Financial Plan $4,000 Valuation $12,000 Tax Plan $30,000 Total Costs $76,000

The ROI of Exit Planning Returns Capital Gains Tax Saving $900,000 Value Enhancement $9,600,000 Estate Tax Savings $1,000,000 Peace of Mind priceless Total Return $11,500,000 That’s a 151 to 1 return on his investment!!!

Success Imagine what success could look like for you! T h i s P h o t

Questions?