A&D Family-Owned Businesses: Surviving the Test of Time Randal - PowerPoint PPT Presentation

A&D Family-Owned Businesses: Surviving the Test of Time Randal Breaux

“Family Business” Mom & Pop?

“Family Business” Over 80% of private businesses in AZ over $5 million revenue

“Family Business” • Big Deal • Lots of Companies • Lots of People • Special Issues • Often Ignored

Your Results May Vary

Small Business Bureaucracy: The Transition Challenge Randal Breaux

Leadership Transition Fortune 500 CEO • Operational Transferability • Leadership Succession • Ownership Transfer • Personal Financial Issues • Life After Issues Randal Breaux

Leadership Transition Family Business • Operational Transferability • Leadership Succession • Ownership Transfer • Personal Financial Issues • Life After Issues Randal Breaux

Private Businesses - 2025 60% of US private Leaving businesses are (Baby Boomers) owned by “Baby Boomers”

Transition Options: Choices & Consequences Randal Breaux

The Most Popular Option Four out of five dentists recommend sugarless gum for 80% their patients who chew gum. Randal Breaux

The Most Popular Option Four out of five dentists recommend sugarless gum for their patients who chew gum. Randal Breaux

Transition The Most Popular Option ^ • Cheap • Easy • No Planning 80% • No Prep Randal Breaux

Transition The Most Popular Option ^ • Cheap • Easy • No Planning 80% • No Prep Liquidation Randal Breaux

Liquidation? Value of Apple Computer 800 700 600 Intangible 500 70% 400 300 200 Tangible 100 30% 0 Randal Breaux

Liquidation? Value of Apple Computer 800 700 600 Intangible 500 70% 400 300 200 Tangible 100 30% 0 Randal Breaux

Liquidation? Value of Apple Computer 800 700 600 Intangible 500 70% 400 300 200 Discount Tangible 100 30% 0 Randal Breaux

Liquidation? Value of Apple Computer 800 700 600 Intangible 500 70% 400 300 200 Discount Tangible 100 30% 0 Randal Breaux

Liquidation Sucks • Destroys Value • Emotionally Devastating • The Ultimate Loss Interception Inside the Five... Returned for a Touchdown Randal Breaux

Why Most Lose • Odds Against You • Procrastination • Mis-allocation • Self-Delusion Randal Breaux

Why Most Lose Maybe I should talk • Odds Against You to a lawyer. • Procrastination • Mis-allocation • Self-Delusion Randal Breaux

Why Most Lose Over 80% of a • Odds Against You business owner’s • Procrastination wealth is tied to the • Mis-allocation • Self-Delusion value of the business. Randal Breaux

Why Most Lose Yet they invest more • Odds Against You time, money & effort • Procrastination in managing their • Mis-allocation portfolios than their • Self-Delusion business value. Randal Breaux

Why Most Lose • Odds Against You • Procrastination • Mis-allocation • Self-Delusion Randal Breaux

“You do the math.”

Why Most Lose • Odds Against You 60% of businesses are rejected • Procrastination 80% up for sale don’t sell • Mis-allocation 70% of sellers are unhappy • Self-Delusion 70% next-gen transfers fail “You do the math.”

Why Most Lose • Odds Against You • Procrastination • Mis-allocation • Self-Delusion “You do the math.”

The Most Popular Option • Cheap • Easy • No Planning 80% • No Prep Liquidation Randal Breaux

Don’t Follow the Herd • Not Cheap 20% • Not Easy • Planning • Prep Liquidation Randal Breaux

Don’t Follow the Herd • Not Cheap 20% • Not Easy • Planning Plan & prepare in advance • Prep to avoid liquidation Liquidation Randal Breaux

Transition Options: ^ Choices & Consequences Randal Breaux

Smart Options Go Public? 20% • Form of Selling • $20 Million+ EBITDA • $200 Revenue • Other Issues • Not Realistic / Ideal Liquidation Randal Breaux

Smart Options • Sell  3 rd Party 20%  Partner(s)  Management  ESOP  Family • Give Away  Inter-generational Transfer  Charity Liquidation Randal Breaux

If you want peace, prepare for war. - Ancient Roman Adage

An Enduring To Sell Company It If you want peace, prepare for war. - Ancient Roman Adage

An Enduring To Sell Company It If you want peace, prepare for war. - Ancient Roman Adage Building an enduring company is about maximizing business value.

Smart Options • Sell  3 rd Party 20%  Partner(s)  Management  ESOP  Family • Give Away  Inter-generational Transfer  Charity Liquidation Randal Breaux

Smart Options • Sell * • Opens up all other options  3 rd Party  Partner(s) • Takes liquidation off table  Management  ESOP • Makes time irrelevant  Family • Realizes the highest value • Give Away *  Inter-generational Transfer  Charity Randal Breaux

How Value Works… Value = Profit x Multiple Performance Desirability (Usually EBITDA) Randal Breaux

How Value Works… Value = Profit x Multiple Performance Desirability (Easy Way) (Hard Way) Randal Breaux

Desirability: Working the Multiple Randal Breaux

Desirability: Working the Multiple Premium Discount No Transaction Randal Breaux

Desirability: Working the Multiple Premium • Reliability • Scalability • Transferability Discount No Transaction Randal Breaux

Desirability: Working the Multiple Premium • Reliability • Scalability • Transferability Discount No Transaction Randal Breaux

Case Study: Transferability • Oil Refinery Service Firm • Hazardous Waste Processing • $12 Million Revenue • EBITDA% = 10% Randal Breaux

Case Study: Transferability • CEO Doing Invoices • Time Drain • Delays of 2 Weeks • Lost Revenue 1% Randal Breaux

Case Study: Transferability • CEO Doing Invoices Solution… • Field Reporting Procedures • Time Drain • Admin Computers & • Delays of 2 Weeks Networking • Lost Revenue 1% • Results Logging System • Staff Training Randal Breaux

Case Study: Transferability • CEO Doing Invoices Results (90 Days)… • CEO Cut Loose • Time Drain • Invoices in an Hour • Delays of 2 Weeks • Lost Revenue 1% • Lost Revenue Eliminated Randal Breaux

Case Study: Transferability Working Capital BEFORE AFTER DELTA Revenue 12,000,000 12,000,000 Per Day 32,877 32,877 Days to Bill 14 1 $A/R 460,274 32,877 427,397 Randal Breaux

Case Study: Transferability Company Value BEFORE AFTER DELTA Revenue 12,000,000 12,000,000 EBITDA% 10% 11% EBITDA 1,200,000 1,320,000 120,000 Multiple 3.5 3.5 Value 4,200,000 4,620,000 420,000 Randal Breaux

Case Study: Transferability Company Value BEFORE AFTER DELTA Revenue 12,000,000 12,000,000 EBITDA% 10% 11% EBITDA 1,200,000 1,320,000 120,000 Multiple 3.5 4.0 Value 4,200,000 5,280,000 1,080,000 Randal Breaux

Case Study: Transferability • CEO Doing Invoices Results (90 Days)… • CEO Cut Loose • Time Drain • Invoices in an Hour • Delays of 2 Weeks • Lost Revenue 1% • Lost Revenue Eliminated Randal Breaux

Case Study: Transferability • CEO Doing Invoices Results (90 Days)… • CEO Cut Loose • Time Drain • Invoices in an Hour • Delays of 2 Weeks • Lost Revenue 1% • Lost Revenue Eliminated Randal Breaux

How Value Works… Value = Profit x Multiple Performance Desirability (Easy Way) (Hard Way) Randal Breaux

Keys to Success • Focus on the Multiple • Be Very Specific • Short Time Cycle • Relentless Execution Randal Breaux

Summary • Family business is a big deal with distinct issues that deserve attention. • Most family businesses face liquidation at owner transition. • Beat the odds; build an enduring company by working on your business value multiple. (Case Study) Randal Breaux

Don’t Follow the Herd • Odds Against You • Procrastination • Mis-allocation • Self-Delusion Randal Breaux