Exit Planning
Exit planning is the process of developing a business owner’s strategy for what may be the biggest financial transaction of his or her life… the transfer of the business. That strategy may be a succession to the next generation of family. It could be a sale to employees. It may be a sale to another entrepreneur, or acquisition by a larger company. In some cases, it could require an orderly dissolution. In every case, it involves tax, legal, financial, operational and risk management expertise. Exit planning, in the true sense of the word, is coordinating all those skills to work together for a single objective.
- Cash Flow Normalization
 Cash flow normalization is done with the intention of identifying Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) or Seller’s Discretionary Earnings (SDE). These differing measures are not interchangeable, but are used by different classes of buyers for different categories of acquisition.
Free cash flow is an important measure when calculating ... - Private Equity Reputation
 We began this series by saying that Private Equity reputation is as the Great Satan to some, and a savior to others, depending on the personal experience of the speakers. In fact, both reputations are well deserved, but neither can be universally applied.
The “Great Satan” Private Equity Reputation
PEGs buy companies ... - Private Equity Leverage
 Private equity leverage can dramatically increase ROI, but it can also be a trap. In our previous article, we discussed the general structure of Private Equity, how it works, and the types of Private Equity Groups (PEGs). They have grown rapidly as an alternative investment that produces far better returns ... - Private Equity and Privately Held Businesses
 Depending on who you are talking to, Private Equity is either the Great Satan or the savior of small and mid-market companies in the United States. The stories depend a lot on the personal experience of the speakers.
Once a vehicle for high-risk investment plays in corporate takeovers (see Bryan Burrough’s ... - Addressing the Value Gap – Truth in Pricing
 Truth in pricing is a common issue when discussing the sale of a business.
The selling price of their company is a point of pride for any owner. When they are willing to share the price they were paid, they usually include everything that was listed in the purchase agreement. While ... - Addressing the Value Gap – Living Expenses
 The Value Gap is one of the most used phrases in exit planning. Simply stated, it’s the difference between what a business owner would realize if he or she sold the company today, and what they need to embark on a financially secure “next act” after business ownership.
Both amounts can ... - Owners are a Minority
 When it comes to careers, business owners are a minority of the population. In conversations this week, I mentioned the statistics several times, and each owner I was discussing it with was surprised that they had so few peers.
According to the Small Business Administration (SBA), there are over 33,000,000 businesses ... - Purpose After the Sale
 Purpose after the sale is one of the biggest challenges for an exiting owner.
Purpose – “Having as one’s intention or objective.”
Many exit planning advisors discuss the three legs of the exit planning stool – business readiness, financial readiness and personal readiness. In our previous two articles, we focused on two ... - Personal Vision – Life After the Sale Part 2
 In our last article about life after the sale we discussed identity. Even when business owners are comfortable with who they are, however, there is still the nuts and bolts issue of activity.
A business owner spends 20, 30, or (not uncommonly with Boomers,) 40 years focused on running a business. ... - Personal Vision – Life After the Sale Part I
 Life after the sale is often both the most important and most neglected factor in exit planning. Although (according to two different surveys in 2013 and 2022,) 75% of owners report regrets or unhappiness a year after the transition, exit plans continue to be constructed primarily around financial targets. In ...
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