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

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

Oct 31, 2022 225 likes •600 views

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

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Valuation Acceleration and Exit Planning

January 23, 2020

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The Value of Your Business

Increases today!

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What is an Exit Plan?

Exit Planning is business

  • strategy. Exit Planning

builds, harvests and preserves wealth while aligning business, personal and financial goals.

Personal Goals

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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

  • wned business.
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Georgia Readiness Survey

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Georgia Readiness Survey

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Georgia Readiness Survey

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Georgia Readiness Survey

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Value Maturity Index

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Stage 1: Identify

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Stage 2: Protect

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Stage 3: Build

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Stage 4: Harvest

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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

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Stage 5: Manage

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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

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What is Value Acceleration?

Revenue Cash Flow Multiple

Value

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Value Factor Analysis

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How is Value Determined?

100% of the information comes from the past.

100% of the value comes from future performance. Cash flows generated

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What is the Multiple?

Multiple of Revenue? Multiple of EBITDA? Multiple of Book Value?

0.1x 0.3x 0.5x 3.0x 5.0x 7.0x 1.0x 5.0x 10.0x

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What is the Multiple?

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Value Acceleration and Exit Planning Process

DISCOVER PREPARE DECIDE

Business Valuation Assess Personal Financial Business Prioritized Action Plan Personal & Financial Planning Business Improvements Grow

  • r

Exit?

Key Milestone

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What is the VAEP Process?

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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
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Value Acceleration and Exit Planning Process

DISCOVER PREPARE DECIDE

Business Valuation Assess Personal Financial Business Prioritized Action Plan Personal & Financial Planning Business Improvements Grow

  • r

Exit?

Key Milestone

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Value Acceleration and Exit Planning Process

DISCOVER PREPARE DECIDE

Business Valuation Assess Personal Financial Business Prioritized Action Plan Personal & Financial Planning Business Improvements Grow

  • r

Exit?

Key Milestone

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Case Study

Stan owned a very successful financial services consulting company

  • He was 62 years old
  • Owned business for 18 years
  • No strategic business plan
  • No exit plan
  • No tax plan
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Company Value

Before:

  • Revenue $5.5MM
  • EBITDA $.9MM
  • Baseline value estimated at $5.4MM
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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

Maximizing Value

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After 24 months:

 Revenue increased to

$11MM (from $5.5MM)

 Cash flow increased to

$2.4MM (from $0.9MM)

 Company sold to a foreign

strategic buyer for $15MM

A Case Study

2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000

2001 2003 Earnings Revenues

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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!

A Case Study

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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

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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

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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!!!

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Success

Imagine what success could look like for you!

T h i s P h

  • t
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Questions?