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% of owners have no WRITTEN transition plan. 79 % have done no planning at all. 48 % have no written personal THIRD ACT plan. 94 % of owners plan to transition over the next 10 years (representing million businesses and over $ trillion in wealth). 76%, 4.5 million, $10 trillion of business owners have no transition plan. 49% More than % of businesses that are put on the market do not sell. 70
Only % of family-owned businesses transition to the second generation, and only % survive to the third. 30%, 12% A Successful Exit Strategy Has Three Legs: Maximizes Transferrable Business Value, Ensures Owner is Financially Prepared, and Ensures there is a plan for "What Next?" 5 Stages of the Value Maturity Index Identify, Protect, Build, Harvest, and Manage Value The 4 C's Human, Structural, Customer, Social Strategic Value factors you control Predictable Cash Flow, Clean Balance Sheet, Size Matters! Strategic Value factors you control some of Private capital market conditions, Terms/Exit Option, Tangibles (value factors) Traditional accounting systems are setup to provided regular feedback on , yet your are the direct drivers of business attractiveness.
Where you will be 5 years from now is determined by and. the books you read and the people you associate with today. The "quarterback" is the. personal financial planning team % of business owners do not have a written FINANCIAL plan. 75 Proper financial planning answers a huge question - What is the? Wealth Gap A first step in financial planning: gather the personal data. balance sheet A provides for the stability and continuity of a closely held business and is a crucial part of a business owner's overall succession and estate plan. buy-sell agreement Triggering events may include:
Death of an owner, Disability of an owner, An offer by an outside party to purchase the owner's interest, Termination of an owner's employment, Divorce of an owner There are many acceptable ways to execute investment plans post-exit. The key is to manage the within a framework focused on. family expectations, goals. Families without advisors often decide to. do nothing The is one of the greatest wealth building tools if used correctly. IRC Systems don't solve problems, do. people You don't have to choose between today and the future. Doing the right things today ensures . a successful exit in the future When you consider your net worth, your business is the most significant line item on paper; in fact, according to most financial planners, it's like to % of your net worth. 80 to 90%
% of those who exit "profoundly regret" the decision within 12 months of exiting. 75 Owners don't really start thinking about transition and retirement until they reach around age because their work has been one of the most significant parts of their life, if not the biggest. 55 Historical successful transition rates are between and %. That means to % of the possible wealth will not transfer. 20%, 30%, 70%, 80% of owners are not familiar with all exit options. two-thirds % have no plans in place to cover illness, death, or forced exit. 40% Half of all owners need the company to remain profitable during and after the transition plan, yet % have not taken on a strategic review or a value enhancement project. 86%
% felt they had a good idea of what their business is worth, yet only % have had a formal valuation in the last two years 56%, 18% A business owner has three roles: Management, Family, and Owner/Investor % of business owners have not completed any formal education related to transitioning their business. 66% Most owners don't trust to manage their assets. third parties If you did sell and put the money into a diversified, professionally managed portfolio, it would never . produce the kind of income you produce in your business today. Exit planning is not a. Exit planning is. plan, dynamic Exit planning takes effort, but is not the itself. effort
If is the concept, Value Acceleration is how you implement it. Master Planning The reason that 75% of owners profoundly regretted the decision to exit involved reasons, not reasons. personal, financial S.T.E.P. stands for: Spiritual, Things, Experiences, and People. Aligning , , and objectives is a core principle on which the CEPA program is built. personal, financial, and business To succeed today and in the future, you need to make sure that you are giving EQUAL attention to . all three legs of the stool The walk needs to begin by making sure you are in touch with your and your
. This personal purpose will identify what your are today and in the future. center and your personal purpose, personal financial needs
Business is the primary long-term goal, not business. value, income Most owners of lower to middle market businesses have businesses. lifestyle businesses usually generate a nice income for the owner, but focusing on income alone doesn't mean the business has. lifestyle, transferable market value This difference between the , multiplied by your , is the incremental value. cost and benefit, EBITDA multiple There are five stages to creating a more valuable business: Identify, Protect, Build, Harvest, and Manage is always the first step and should never be skipped. It is completed in Gate of the Value Acceleration Methodology. Understanding where your business benchmarks in the range of value sets the for everything going forward. Identifying value, one, baseline to % of your net worth is locked up in your business.
The difference between protecting and building is that, in the Build Stage, you , prioritizing more to increase intangible capital over less strategic actions (a.k.a. de- risking). take a longer-term point of view, strategic actions The is the number assigned by the private capital market to the value of your tangible and intangible assets and the risks associated to your business. multiple Building value results from and improvements to your . increases in cash flow (EBITDA) and improvements to your multiple. Intangible assets can be divided into four areas: Human—the value of your talent; Structural—the value of your systems and intellectual property; Customer—the value of your customer relationships; and Social—the value of your brand and culture. Intangible assets are. knowledge capitals capital is the value of your talent. Human capital is the value of your systems and intellectual property.
Structural capital is the value of your customer relationships. Customer capital is the value of your brand and culture. Social Selling the business is often your best bet, even if is involved. family If you are going to transition to a son or daughter, make them buy it from you at . market value The most mature level of Value Acceleration is. It's last because it represents . managing value, full maturity Managing value begins with. identifying it
where you place in the range Most owners focus on and only. sales and income Focusing exclusively on is a mistake. Focusing on is where real value creation lies. income, the multiple Your multiple not only accelerates value, but it also drives. Focusing solely on income does not necessarily drive. income, value Exit planning is not accomplished by focusing on the. Successful exits are based on . endgame, what you do every day is the business's infrastructure. It comprises the and that augment the customer and human capital on which your company is built. structural capital, systems and tools Structural capital has two purposes: First, it takes what exists inside your brain and turns it into
. These are the best practices that can be and. The second purpose of structural capital is to .
a transferable form, purchased and repurposed, connect people to data, experts, and expertise— including bodies of knowledge—on a just-in-time basis include the people, processes, and technology, as well as intellectual property, that enable your team to do the things that make them so special, allowing them to meet and exceed customer expectations, and enabling them to build and sustain these lasting and recurring relationships. Knowledge assets Your knowledge needs to be and , such that someone else can learn from you and apply it. documented and transferable Structural capital can be divided into four areas: processes, people, technology, and facilities represents your culture, your brand, the way your team works, the rhythm of the day-to-day operations and communications, and the way you communicate with customers. social capital is hard to measure and it takes years to discover it. But you know it when you have it. Social capital
execute is the greatest unaddressed issue in the business world today. Its is the single biggest obstacle to success. execution, absence Execution is more than a set of tactics. It is a ; a system that needs to be built into a company's , , and. discipline, strategy, goals, and culture. If you are not producing results regularly, it means one of two things: (a) your team is ; or (b) you have misjudged the they face to make them happen. not capable of making them happen (they don't have the skill, knowledge, or willpower), challenges Accountability is a. learning process Your key role in the accountability process is. Good leaders regard every encounter as an opportunity to. teacher, teach You not only want to measure accomplishment; you want to. influence behavior
requires discipline grounded in action. execution The way you do business is a reflection of your. culture sustains action. vision Before goals comes. purpose expresses personal values, inspires and unifies the team, focuses action, and disciplines you to think strategically. purpose Purpose is a reflection of your. vision You cannot transmit an idea unless you. have it yourself
