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Coaches Corner

Chart A Course For Your Future

by Bob O’Hara, CPA

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It may be a high priority for the near future or something to mull over the longer term, but the need or desire to sell their company for most business owners over the age of 50 will eventually become reality…and with the proper measures and advisers in place this critical transaction can be conducted with minimal stress.

Selling or transferring a company is a process that, to be successful, requires a written plan.  This plan should set your exit objectives – financial and otherwise – and document how you will achieve those goals.  

A checklist assigning responsibility for all tasks that must be completed throughout the exit planning process is vital.  This roster should also set task completion dates and designate parties responsible for completing each task.

Executing an exit plan should not be a solo endeavor.  If you go it alone, you will likely leave a lot on the table – in terms of money, time and perhaps even your emotional well-being. It is in your best interest to hire an experienced team of professionals, including a trained exit planner, an attorney, CPA and financial advisor.

To select an exit path, identify your most important objectives, both financial and non-financial.  Internal and external considerations impact an owner’s choice of exit. An example of an interior consideration is the owner who wants to transfer the business for cash, but is unwilling to place his established company and the fates of employees to an unknown third party; in this case he may decide that a carefully-designed sale to a key employee or group of employees is most suitable.  Exterior considerations include business, market or financial conditions.  If selling “right now” is not necessary, a business owner might wait it out a couple years to avoid dealing with an anemic market.

For many business owners, the answer to the following key questions determines if and when they will transfer or sell – how much is my business worth and what is its marketability?  An experienced appraiser active in the merger and acquisition marketplace can provide an accurate answer, largely based on a company’s financial statements.  

Whether you intend to transfer your business to someone within the company or sell to a third party, demonstrating financial stability is a crucial step in establishing a successful exit.  

Your exit planner, CPA and/or financial advisor must determine your company’s current situation.  This will require the review of business tax returns for a minimum of the past three years.  He/she must also review current financial statements of the business as they will provide a clearer picture of your current financial position to gauge what has already been accomplished and what still needs to be completed to create a successful exit plan.  

These statements supply cash flow information, historic earnings and financial trends, creating an indicator of the company’s financial future.  If you plan to sell your business during the first half of 2009, you should have cash flow projections for the remainder of that year, in addition to the years 2010 through 2013.  These projections must be grounded in the reality of past actual performance, not your rosy hopes for the future.    

A valuation specialist will provide you and your advisors with a good idea of your company’s worth. The last thing you want is to spend time and money planning your exit, only to discover that the value of your company can not support the exit.  

Evaluating various tax consequences is also paramount to your choice of exit plans.  This assessment will include several factors, such as the form of business entity as well as any changes that must be made.  

There are a couple significant advantages to an outright sale to a third party. If the business is properly prepared for sale, you can get cashed out – in other words, you receive the majority of your money at closing.  And if the market is “hot” for your business, you could receive more cash than anticipated.  

One disadvantage to selling to a third party is more emotional than monetary.  Regardless of what the buyer promises, the personality and culture of your business will undergo a radical change.  Maintaining the core “personality” of a business is typically best achieved by selling to a key employee or family member rather than an outside third party.

Ultimately, your exit plan must integrate your exit desires – when you want to leave, how much money you want for the business and who you want to own the business.  With the proper guidance and realistic expectations, your exit plan could be the start of something very good – for your future and your employees’.

Bob O’Hara, CPA/PFS, MST is President/CEO of O’Hara & Company, founded in 1995 to address the growing need for entrepreneurs to create a comprehensive exit strategy from their businesses. O’Hara & Company hosts an educational website for business owners at The company is located at One Olde North Road, Ste. 101 in Chelmsford MA. For more information please visit or call (978) 244-9860.

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