ILMA Compoundings May 2018 - 40

BUSINESS HUB

A Business Owner's
Guide to Exit Planning
By Mandy Patterson and
Robert Davis

W

e often say to our clients that there are three parts
to every transaction: a beginning, a middle and an
end. The "easy" part is getting in, or the beginning.
More difficult is the middle, or actually developing profitability. Most important, though, and often ignored until too late,
is the end. Not to say that other aspects, such as managing
costs, strategic marketing or critical hires, are not important,
it's just that the exit is final - no "do-overs" allowed.

Regardless of your approach,
you should choose a partner
who listens to what you want your
world to look like after the sale and
will help you achieve your goals."

For this reason, planning the exit or sale of a business needs
careful scenario analysis and planning to effect the right
transaction. In some cases, preparing a business for sale ought
to begin years in advance. Ramping revenues, improving margins and managing expenses are critical to achieving optimal
valuations from a serious buyer. Just as important is having
thoughtful conversations with yourself and loved ones to
ensure that the path you are taking is the one you desire most.

40

MAY 2018

| COMPOUNDINGS | ILMA.ORG

This is because there are multiple options for a transition of
ownership, including selling or giving the business to one or
more family members; selling to a private equity firm; selling
to a strategic buyer (often a competitor); creating an employee
stock ownership plan (ESOP); or allowing a management
buyout (MBO), which often requires a funding source for
management, such as seller financing or a private equity
backer. The most flexible option is usually partnering with a
private equity firm, as long as its goals are aligned with yours.
Many firms will allow you to determine your day-to-day role
in the business moving forward - whether that's continuing
to manage the business, transitioning to retirement or exiting
completely and immediately. A good partner, whether a private equity firm or any other buyer, will enable you to remain
invested in the business to benefit from the future growth of
your company, while also taking some chips off the table.
MBOs appeal to business owners who want to retire and
wish to reward their management teams with the opportunity
to become owners of the company. MBOs allow the management team to continue running the business and to reap
the financial rewards from the future success of the business.
Regardless of your approach, you should choose a partner
who listens to what you want your world to look like after the
sale and will help you achieve your goals.
Of course, selling a business incorporates not only deal terms
and the extent of the business owner's ongoing involvement,
but also draws in personal tax implications, family health
insurance needs, estate planning considerations and, of course,
portfolio management of sale proceeds for ongoing income.
Each of these aspects requires outside professional, objective
advice and a sufficient time horizon for optimal impact.
Generally speaking, owners should revisit their wealth
plan (or begin one) in the context of a potential business
sale at least nine months before entering a transaction. How
an owner views his or her wealth and in what amounts that
wealth transfers to future generations are complex issues.
Wealth-planning strategies such as gifting, establishing trusts
or transferring shares of a business may be subject to less
scrutiny by tax authorities if they occur separate from a sale
transaction. Pursuit of philanthropic goals and creating
their respective entities may also be established prior to a


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Table of Contents for the Digital Edition of ILMA Compoundings May 2018

LETTER FROM THE CEO
INSIDE ILMA
Company Callout
WHAT’S COMING UP
NEW MEMBERS
INDUSTRY RUNDOWN
In the Know
International Insight
Market Report
SMOOTH TRANSITION
PERILOUSLY OBSOLETE
HARASSMENT IN THE WORKPLACE
BUSINESS HUB
COUNSEL COMPOUND
WASHINGTON LANDSCAPE
IN NETWORK
Member Connections
Cross Connections
PORTRAIT
ILMA Compoundings May 2018 - Cover1
ILMA Compoundings May 2018 - Cover2
ILMA Compoundings May 2018 - 1
ILMA Compoundings May 2018 - 2
ILMA Compoundings May 2018 - LETTER FROM THE CEO
ILMA Compoundings May 2018 - INSIDE ILMA
ILMA Compoundings May 2018 - 5
ILMA Compoundings May 2018 - 6
ILMA Compoundings May 2018 - 7
ILMA Compoundings May 2018 - Company Callout
ILMA Compoundings May 2018 - 9
ILMA Compoundings May 2018 - WHAT’S COMING UP
ILMA Compoundings May 2018 - 11
ILMA Compoundings May 2018 - NEW MEMBERS
ILMA Compoundings May 2018 - 13
ILMA Compoundings May 2018 - INDUSTRY RUNDOWN
ILMA Compoundings May 2018 - 15
ILMA Compoundings May 2018 - 16
ILMA Compoundings May 2018 - In the Know
ILMA Compoundings May 2018 - International Insight
ILMA Compoundings May 2018 - 19
ILMA Compoundings May 2018 - Market Report
ILMA Compoundings May 2018 - 21
ILMA Compoundings May 2018 - SMOOTH TRANSITION
ILMA Compoundings May 2018 - 23
ILMA Compoundings May 2018 - 24
ILMA Compoundings May 2018 - 25
ILMA Compoundings May 2018 - 26
ILMA Compoundings May 2018 - 27
ILMA Compoundings May 2018 - 28
ILMA Compoundings May 2018 - 29
ILMA Compoundings May 2018 - PERILOUSLY OBSOLETE
ILMA Compoundings May 2018 - 31
ILMA Compoundings May 2018 - 32
ILMA Compoundings May 2018 - 33
ILMA Compoundings May 2018 - HARASSMENT IN THE WORKPLACE
ILMA Compoundings May 2018 - 35
ILMA Compoundings May 2018 - 36
ILMA Compoundings May 2018 - 37
ILMA Compoundings May 2018 - 38
ILMA Compoundings May 2018 - 39
ILMA Compoundings May 2018 - BUSINESS HUB
ILMA Compoundings May 2018 - 41
ILMA Compoundings May 2018 - COUNSEL COMPOUND
ILMA Compoundings May 2018 - 43
ILMA Compoundings May 2018 - 44
ILMA Compoundings May 2018 - 45
ILMA Compoundings May 2018 - 46
ILMA Compoundings May 2018 - WASHINGTON LANDSCAPE
ILMA Compoundings May 2018 - Member Connections
ILMA Compoundings May 2018 - 49
ILMA Compoundings May 2018 - Cross Connections
ILMA Compoundings May 2018 - 51
ILMA Compoundings May 2018 - PORTRAIT
ILMA Compoundings May 2018 - Cover3
ILMA Compoundings May 2018 - Cover4
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