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As You Exit, Who Will Do Your Job? - Sep 25, 2011

Posted by: Frank Mancieri in Articles


Exit Planning and Estate Tax Strategies Until December of 2012 - Aug 11, 2011

Posted by: Frank Mancieri in Articles

Exit Planning and Estate Tax Strategies Until December of 2012

On December 17th, 2010 President Obama surprised many in the tax and planning worlds by not only extending the Bush Tax Cuts through the end of 2012 but also expanding those cuts in many ways. The problem with the directive is that it’s time-frame is limited to the end of 2012. Therefore, since most of an owner’s net worth is typically tied up in their illiquid business, and there are unique opportunities for tax-efficient transfers of that business through the end of 2012, all owners are encouraged to review these changes as well as to see if some of the unique strategies that are available are applicable to your overall estate and exit planning.

Taxes and The Privately-Held Owner

The government’s tax structure can be onerous to business owner wealth. Unlike privately-held businesses that need to complete in a marketplace in order to generate revenue, the government funds its ongoing operations through the imposition of taxes. There are essentially two (2) types of taxes, those paid during our lifetimes such as income taxes and taxes on [certain] gifts as well as taxes paid at our deaths, including estate taxes.

Also note that taxes are levied at both the federal and state levels. This newsletter addresses the federal tax changes.

What Changed and What Stayed the Same?

Some of the highlights of the Bush Tax Cuts were the lower income tax rates and the preferential federal capital gains tax rate of 15%. Also, the Bush Tax scheme included an increasing limit by which more and more assets could pass free of tax for those who died in certain years.

In 2009 the estate tax limit was at $3,500,000. President Obama raised this limit to $5,000,000 per person with the Dec. 2010 changes.

Should You Raise Your Company’s Debt Ceiling to Plan for Your Exit?

With the United States Congress considering whether or not to increase the debt ceiling to avoid defaulting on our country’s obligations, owners may want to consider whether or not they should increase their personal debt ceiling as part of their exit plans. This newsletter highlights the fact that all debt is not created equally and that ‘transaction’ and ‘exit’ debts may empower you to have more options and to assist you in creating an exit plan that meets your goals.

Would you Buy the United States Today?

As an exiting owner, you need to identify what type of owner would continue to benefit from your business into the future. Most exit transactions include the elimination of debt at the closing of the transaction as the exiting owner pays off the company’s liabilities and/or the new owner assumes those or new liabilities to fund the business. To help with an analogy, would you purchase America today, knowing that our debt ceiling needed to be raised in order to fund our current obligations?

Despite your answer to this question, it is important to remember that there are two (2) types of debt, good debt and bad debt as debt is, itself, not an inherently bad thing.

Debt of Two Different Kinds – Personal versus Business Debt

A privately-held business owner’s view of debt is quite different than that of a government or a publicly-traded company. Owners recognize this unique nature of their corporate debt when they sign the Why an Exit Plan will Help with Your Business Growth
Avoiding the Business Capital Mousetrap Syndrome

The illiquid nature of private businesses often forces owners to wonder where their investment dollars truly are. Since a company is valued by the cash flows that it produces, the people and products that you have sell, deliver and generate those revenues. To make a simple point, growth requires an investment in people and products before they generate revenue. And, sometimes the additional revenue and profits do not come back. Moreover, even if the revenue and profits do arrive, owners generally take out the cash from the ongoing cash flows. However, if an exit plan was in place, owners would have more confidence in investing in their businesses. And, as the retirement income needs grow amongst baby boomer owners, there are competing needs on owner’s cash and, hence a reduced desire to reinvest in your business.

Let’s begin with a few general concepts about businesses and about what an exit plan does to assist with growth plans.

Businesses are Either Growing or Shrinking

Similar to other living organisms, a business is in a constant state of growth and decay. If not tended to, the business will decay. If properly watched over, the business will survive. Tending to a business requires capital and management. And, as mentioned, this is where the baby boomer owner will get stuck. There will be a lack of desire to fund the business because there is a competing need to fund one’s retirement.

The Problem with Illiquidity – the Business Capital Mousetrap Syndrome

So, the owner who does not want to fund their privately-held business will be reluctant to do so because there is no vision of how the money that is invested will turn into cash in the future. This problem is one of illiquidity. In other words, a capital infusion into a business will generally go in a number of directions within that bus....

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Increase Traffic To Your Website Through Search Engine Optimization - Jul 18, 2011

Posted by: Frank Mancieri in Articles

 

 

 

Increase traffic to your website through Search Engine Optimization

 

By Kevin McNally

 

Having a website is a good first step toward greater exposure for your business. Once it’s up and running, what can you do to make sure you are getting the most from your website? With a few fundamental SEO (Search Engine Optimization) measures, it’s easy to increase the “hits” and build that desired awareness.

 

In the same way that real estate is defined by “location, location, location,” in the world of websites a top ranking on search engines –such as Google or Yahoo – is king. 

 

One of the best methods to increase search engine ranking is through the optimal use of keywords; knowing what specific words or phrases people are searching for and then targeting those phrases on the site.  A website designer can conduct the appropriate research to determine and target those keywords and also provide further analysis to pinpoint the most important terms – or terms “with opportunity” – that might help bring the right visitors to the site.

 

Website linking is another technique used to attract traffic to a site.  In brief, this mechanism interlinks words or phrases key to a business website to other relevant pages on the site.  In addition, consider linking images from your website to other important pages in the same way; this can attract traffic through “image search” results.

 

A website’s news section is where content rules.  Instead of short paragraphs or brief press releases, it’s wise to include articles of 500 words or more.  This approach both allows for comprehensive information about your offerings or other newsworthy information, and also adds to that all important keyword total.  In fact, search engines are always on the look-out for expanded website content, so use it to your best advantage.

 

For businesses with several locations you should have a separate Google Places listing for each facility, thereby further optimizing web presence.

 

And another principal method to increase search engine ranking and that is through meta tags. A meta tag is a line of coding that contains metadata about a web page.  Although not visible to website viewers, meta description ....

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Balancing Your Post Exit Lifestyle With The Need To Run Your Business - Jul 7, 2011

Posted by: Frank Mancieri in Articles

Balancing Your Post-Exit Lifestyle with the Need to Run Your Business

 

There are short-term and long-term needs for your business.  When thinking about an exit, you are considering the long-term implications to your business and life, while simultaneously balancing the short-term needs of your business.  The saying here is ‘not to take your eye of the ball’ while designing your optimal exit.  The challenge is one of where to focus your attention – too much time spent focused on your exit and the business suffers.  Too much time spent on your business and your exit is likely never to happen.  This newsletter is intended to get you thinking about your exit while keeping an eye on your business.

 

Let’s begin with a basic statement about exits.  You need to have a vision for how you will live your life beyond running your business.  And, in order to establish that vision, it is recommended that you focus on how you will spend your time.  And, very importantly, you should begin, in part, living that life so you can experience what your exit will actually feel like.  How will it feel to spend your time on activities that inspire you the way that your business drove your needs for fulfillment and success?  The best way to answer this question is to begin to experience this post-exit lifestyle.  Owners with the most successful exits have something that they are ready to step into after their business.  These time-filling activities transcend the hobbies and past-times such as golf, fishing, exercise, and leisure time.  They are meaningful activities that fill your days.

 

Here’s the challenge.  At what point in time will you start to live this new life while gently letting go of the business that still needs your attention?  Here are a few tips.

 

The best first thing that you can do that is not too distracting to your running of the business is to commit your goals to writing.  If you can answer the following question you are taking a great step forward:

 

* What do you want to be doing twenty (20) years from now?

The Fragile Nature of a Business Exit

 

A wise business owner once said when asked about his exit that there is a difference between leaving your business and employees and abandoning them.  This is an interesting perspective through which to begin thinking about the survival of your business after your exit.

 

A key component of a successful exit is understanding that it is in the nature of planning an exit that one needs to make himself or herself irrelevant to the business operations.  In this regard, it is important to plan for your exit in a very counter-intuitive way.  What does this mean?  Well, in essence, your business success was very dependent upon your vigilant oversight – this was particularly true during the formative years of the business.  However, during the mature stages of the business, a different type of fragility exists.  Namely, it is the ability of the business to function without you, the owner.  Therefore, we can safely say that business exits are a fragile endeavor, much the way that your business inception had a high degree of fragility.

 

Let’s put this in a simple context that many can relate to – parenthood.  It is a natural dynamic of the cycle of human life that an infant needs an extreme amount of attention and caring.  On its own, the infant is not equipped to survive.  And, as a result of the dependency that the child has on its parent, the parent has an opportunity to raise this child in a manner and with standards that reflect that parent’s belief system and sense of ‘family’. 

 

Once grown, it is the proud parent who watches their child blossom into adulthood.  And, in the maturity stage, the child become less and less dependent upon parental guidance . . . so much so that it is typical for many teenage children to rebel against this authority.

 

Has your business matured to the point of rebellion?  If so, that is a good sign because your exit will include less fragility and the business will be better suited to survive on its own.

 

What actions have you taken to allow the business to stand on its own?

 

Top qualities: Expert, On Time, High Integrity

“Frank was responsive and professional. He systematically approached problems and knocked them down one-by-one to get the job done. I would hire him again.” May 13, 2011

Michael Morrissey, Principal and Director of Business Development, Inverness Graham Investments


Will Jobs Return With Owners Focusing On Exit - Apr 23, 2011

Posted by: Frank Mancieri in Articles

Will Jobs Return with Owners Focusing on Exit?

 

The politicians in Washington seem to be finally asking the right questions about job creation . . .  i.e. how can small business begin to hire again.  Well, amongst other reasons why small businesses are reluctant to begin staffing up again, one of the primary reasons is that lower costs means higher exit values.  And with so many owners having a ‘value gap’ to fill, it is imperative that they protect and drive value through profitable bottom lines.

 

Let’s discuss the concept of a value gap.  This begins with the amount of money that an owner needs to declare financial independence.  Typically, an owner’s illiquid business is their primary asset so a liquidity event needs to take place to turn the business into cash.  The value of that business, for the most part, will be driven by the company’s cash flows.  And, lower expenses and higher, per-employee productivity is what makes a business valuable.

 

Now, the recession has increased the value gap for many owners as they realize that both their liquid and their business values have declined.  Worse yet, owners were likely to have contributed personal assets into their businesses as credit tightened and these owners needed to capitalize their businesses.  The answer, of course, was to reduce expenses by laying off employees – an unfortunate plan to enact but a necessary one for survival. 

 

So, where does the baby boomer owner go from here?

 

Well, with a business recovery under way, the owner’s are seeing recovery of their businesses and, with the help of technology, they are getting more done with fewer people.  Moreover, as the owners begin to measure their value gaps, they see that they need to extract a high value in order to meet their personal needs. 

 

Let’s look and an example.  An owner lays off four (4) workers during the recession that reduces labor costs by $300,000.  During the recovery, revenues are coming back and lower labor costs have this owner projecting higher profitability.  Cash flow, or EBITDA (earnings before interest, taxes, depreciation, and amortization) improves by $300,000.  And, as a typical busine....

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Your Exit Plan Is A Living Document - Apr 23, 2011

Posted by: Frank Mancieri in Articles

Your Exit Plan is a Living Document

We’ve all done it.  We paid a consultant to assess our current situation and then did not follow through on the recommendations.  The final product of the assessment and the written report, sits on a shelf.  And, although the answers to many of our issues are provided within those pages and analysis, it just seems like we are too busy to focus on taking action on them.  This, by the way, applies to many areas of our lives, including past attempts at:
 

  • Personal investment planning
  • Estate planning
  • Business planning
  • Retirement planning
  • Insurance & risk management planning
  • Succession planning

The reality is that accumulating wealth comes with certain responsibilities that take time to manage and execute properly.  We could easily point the finger at the advisors who were complicit in not assisting us in the completion of these plans, but ultimately we are all responsible for our own planning.  And, as time passes and situations change, the planning actually also needs to be updated to reflect the new circumstances.

 

The Exit Plan

 

Adding to the list above should be your written plans for an exit from your business.  The exit plan should never be a static document.  In fact, as the world, economy, your industry and your business changes, your plans for your exit should be re-evaluated.  Is your company sustainable, valuable and transferable today?  These are questions you need to know.  Beyond that, who could own it, run it, and successfully leverage what you have already created after you no longer own it?  If you don’t know the answer to these questions, you should really consider finding them because these too will change.

....

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Writing Your Own Press Releases The Do It Yourself Guide - Apr 3, 2011

Posted by: Frank Mancieri in Articles

Writing your own press releases: the do-it-yourself guide

By Jim Farrell

 

I occasionally hear business owners lament that they don’t have much luck “getting announcements into the papers.” 

 

If that has been your experience, you’re missing out on some excellent marketing opportunities!  The use of the media to promote your business news (in the form of press releases and articles) is a great way to amplify your company’s visibility and showcase its credibility.

 

Some people refer to public relations as “free advertising.”  While there is some truth to that, no editor will ever agree to that characterization.  Newspapers and magazines aren’t in the habit of giving away free advertising space, but they will print legitimate business news.  That’s where your marketing efforts should be aimed. And, PR is very valuable advertising.

 

So, let’s say that you fancy yourself “the next Hemingway” and want to write your own press release.  First of all, what are the kinds of topics that papers will print? Here are a few legitimate opportunities for press.

 

1.     New hires: Everyone from your new administrative assistant to that well-known CFO that you just hired away from the competition represents a PR opportunity.  And, the new hire needn’t have just joined your firm two weeks ago to qualify.  “Recently” covers a wide range in business news.

2.     Promotions: If your staff accountant is promoted to Senior Accountant, that’s news. Tell the world (or at least your press audience).

3.     New products: If your company manufactures energy saving devices and you’ve just unveiled a new widget, that’s the kind of information business writers and editors love to see.

A number of business owners who enter the exit planning process have a management team who helped them bring the business to where it is today.

 

These owners want to see their management team take the same sense of urgency towards the business that the owner has taken to make it successful.  In fact, owners fear that without this proactive approach, the management team will not succeed with either a new buyer (external transfer) or as future owners of the business (internal transfer). 

 

As an owner begins to think about the future of the business, a natural reaction is to make the management team owners of stock in the business to align their interests and motivate better behavior.  The theory here is that whether the owner sells to the managers or to an outsider, this management team will be vital to the businesses’ future success.  In addition, these owners begin to think in terms of solidifying this leadership team and taking a step towards a new form of ownership in the future.  The question that needs to answered, therefore, is whether or not sharing equity is the best solution for the succession and exit planning issues?

 

Let’s first look at the positive aspects of sharing equity in your business.  On the one hand, the managers may feel appreciated and pay more attention to the business if they ‘own’ a piece of it.  In addition, the granting of stock has a symbolic gesture that accompanies the event – the idea that the manager’s participation in the business is highly valued and their status is sought to be elevated in the eyes of the owner.  In fact, these are some of the driving forces that cause stock grants to be undertaken.

 

But, there are some downsides to sharing ownership of stock.  Let’s look at a few.

 

What it Means to Own Stock

When someone else owns stock in your company it puts a burden on you, the primary shareholder, to meet certain obligations.  Minority shareholders have rights – mostly under the laws of the state of incorporation – which require the owner to be mindful of how these shareholders are treated.  It is helpful to know these rights because if the original intention of sharing stock is to motivate behavior, it is often the unintended consequence of this action that owners end up with obligations that they do not expect.

 

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No Exit Is A Panacea The Pros And Cons Of External Transfers - Feb 28, 2011

Posted by: Frank Mancieri in Articles

No Exit is a Panacea: The Pros and Cons of External Transfers

It is human nature to think in terms of things beginning and ending.  We tend to stereotype and categorize events in our lives, such as the exit from a business.

 

What images come to mind when you think about your exit?

 

Do you think of your exit in terms of selling a home where the house is cleaned and painted, the value is relative to other sales in your neighborhood, buyers arrive, papers are signed, proceeds are exchanged, and each party moves into a new and better situation?

 

Well, the exit from a business is rarely that clean and easy.  And, as you investigate the different options for exit, you will quickly see that no exit is a panacea.  In other words, the detachment from a business is an event that is both financial and emotional and both elements can last for quite some time . . . no matter how you structure your exit. 

 

This newsletter examines the pros and cons of ‘external’ transfers, reserving discussion of ‘internal’ transfers for another writing.

 

Although there are two primary exit options for an external transfer, i.e. a sale to either an industry player or an investor (or investment group),

each has its pros and cons and it is likely that neither option will fulfill all of your needs and be ideal for your situation.  Let’s begin with the most obvious and intuitive exit option – the sale of your business.

 

Selling your business

 

The most obvious exit option for many business owners is the sale of the business to another buyer, perhaps someone in the same industry.  The immediate vision that forms is that someone else is going to take care of the problems that you currently face and they are going to pay you handsomely for the privilege of owning your business while you celebrate and dream of spending days in an idle manner, fulfilling the desires that you did not have time for previously.

 

Let’s take a look at a more realistic pic....

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No Exit Is A Panacea The Pros And Cons Of Internal Transfers - Feb 28, 2011

Posted by: Frank Mancieri in Articles

No Exit is a Panacea: The Pros and Cons of Internal Transfers

Many owners know in their hearts that they built their businesses to create a legacy.  Their companies do important work in a unique way with a team that they hand-picked and groomed over many years.  These business owners take a parental view of the business, caring for it and the employees, always building upon the strengths and core values of the company.  The business provides a nice lifestyle for these owners as well as a strong identity in their community.  To say that the business provides much more than simply surplus cash flow would be an understatement.

 

For these owners it is somewhat inconceivable that an outsider would own their business.  Therefore, these owners spend time giving careful consideration to the internal transfers that are available to them and how to empower their managers with future ownership.

 

There are three (3) primary methods of transferring a business internally.  First is a management buyout, next is an employee stock ownership plan (ESOP).  And finally, there is the option of gifting ownership to family and others, which this newsletter will not cover as gifting strategies do not generate a ‘buyer’ for company shares.

 

This newsletter reviews the pros and cons of each of these internal transfers, providing insights into what details owners should focus on when considering a transfer to their current employees (and/or family).

 

Let’s begin with the idea that your managers will buy the business from you.

 

Management Buyout

 

So you look to your management team and think that your transition out of the business may best be handled internally and privately by selling to your managers.  You are willing to give the managers a fair shake so long as they can behave like owners and make their payments to you.  After all, you got these employees to help you grow the business successfully, why not just reshape your coaching and get them excited about buying you out?

 

Three (3) Big Benefits to Internal Transfers

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How Will Your Exit Be Impacted By The Extension Of The Bush Tax Cuts - Jan 23, 2011

Posted by: Frank Mancieri in Articles

How Will Your Exit Be Impacted By the Extension of the Bush Tax Cuts?

Just before the close of 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). The Act centers on a temporary, two-year reprieve from the sunset provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), together known as the "Bush tax cuts"*. The big question is, how will the extension of these tax cuts impact your potential exit from your business?

Let’s first take a look at an area near and dear to every owner’s hearts – taxes.  Note that your exit transaction will be taxed at a certain rate.  If you are able to sell stock in your business, the capital gains tax will [most likely] apply.  Therefore, the extension of the 15% capital gains tax rate is meaningful for exiting owners but creates a 2-year window without much visibility beyond.

Capital Gains/Dividends Tax Rates

The Act extended the current maximum tax rate for qualified long-term capital gains and dividends (i.e., 15 percent for most taxpayers, and zero percent for taxpayers in the 10-15 percent tax brackets) through December 31, 2012.  Therefore, we have only a window of certainty on how long capital gains taxes remain at this historically low level.

In the absence of a resounding Republican victory in the House in November, the consensus had been that the Bush Tax Cuts would expire and/or be modified upward.  Many speculated that the 15% capital gains tax rate would never be seen again given our rising national debt and eroding tax base. 

Now that the window has been extended, perhaps you should think about exit planning over the next two (2) years and whether or not that is a reasonable amount of time within which to plan and execute your exit.  If so, you could be the beneficiary of these historically low rates without the uncertainty of future changes.

Individual Income Tax Rates

The Act also extends all individual income tax rates at their 2010 levels for two additional years through December 31, 2012. Under EGTRRA, the rates were originally scheduled to revert to pre-2001 levels beginning January 1, 2011. The 35-percent tax bracket will continue to be the top rate.

This is more good news for owners as the Bush Tax Cuts for income taxes will remain where they were at the end of 2010.  But, once again, how much longer will this continue?

Throughout 2010 a number of exiting owners were expressing an interest in actually drawing income from their retirement plans (without being subject to the penalty for being under 59½ years of age) to ‘capture’ the existing tax rate.  This was out of concern for where the personal income tax rate was heading.

Beyond taxation of income and sales of stock while you are living, the estate taxes were also impacted in a manner that could effect your total exit planning.

Increases to Estate Tax Limits

For business owners, regardless of what stage of your business exit you are, it is vital that you update your estate plan so you can be certain that your wealth is protected from excessive and unnecessary taxation. Under the provisions of the Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA), the estate tax was repealed during 2009 and was scheduled to return in 2011 at a significant rate of 55% with a $1 million exemption. With the extension of the tax cuts, it has return as planned but with a top rate of 35%, instead of 55%, and an increased exemption of $5 million per person/$10 million per couple. This exemption does not include the $1 million individuals can give away without paying a gift tax.**

Business owners often neglect to include the full value of their business in their estate and estate tax planning.  The new limit for estate taxes increases the amount that can pass without [federal] estate taxation to $10 million (for a married couple, $5 million individually).  This is a welcome change as an exemption of only $1 million per person, or $2 million per married couple, would have exposed many, many more business owners to estate tax, and put a lot more wealth at r....

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Top 10 Reasons To Plan Your Exit In 2011 - Jan 23, 2011

Posted by: Frank Mancieri in Articles

Top 10 Reasons to Plan Your Exit in 2011

1.  Like it or not, you are one year older.

Long hard hours are what built your business and long hard hours have kept it running. How many more years of your life are you willing to invest in your business?  Wouldn’t you prefer to reap the rewards of that hard work instead?

2.  This recession was either a shot across the bow or it may have hit the boat.

It is difficult to get a clear picture of how hard this recession has been on small businesses. To get a glimpse, we can look at the increased bankruptcy numbers and the peak unemployment rates. Even if you’ve kept all your employees and managed to keep your business afloat, we can pretty much guarantee your business isn’t what it was four years ago.

3.  The next upswing may be the last one you’ll see before you are in your 70’s.

In real estate, the saying is ‘location, location, location’. With business exits, the saying is ‘timing, timing, timing’. If we then look to the transfer spectrum chart, it indicates that the next exit ‘window’ is fast approaching from 2013 to 2018.  If you are in your late 50’s or early 60’s, the window after this one puts you in your 70’s. How long will it take you to assemble your plan, your team, align your business and get prepared, both personally and within the business, for your exit? 

4.  More than ever, your kids probably don’t want the business.

Less than one-third of family-owned businesses survive the transition from the first generation of ownership to the second - and only 13 percent of family businesses remain in the family over 60 years. Why such challenging longevity statistics? It could be in part the added challenges that come with running a family owned business or, quite possibly, the many hurdles that can come with succession of that business. Take the time to analyze your exit options to determine which one works best for you as well as for your children. You may be surprised at what you decide.

5.  Recessions make us realize how much is at risk.

Most often, the majority of a business owner’s wealth is tied to their privately held business. In addition, most of these owners depend upon that business for income, perks, and for the overall maintenance of their lifestyle. You are not alone if this recession has made you realize how much of your financial well-being is at stake in your business. 

6.  Building it back up is a long road, make sure you know how it ends.

 It has been a difficult recession for most business owners. With the glimmer of an economic recovery, now is the time to decide the ultimate direction for your business to make the most of this upturn. Building your company back up is going to take a lot of work, so make sure you are working in the right direction. If you align the growth of your business with your exit option, you’ll have a much smoother and more successful transition.

 7.  Banks are back, but maybe not forever.

The Small Business Jobs Act of 2010 allowed for the creation of a $30 billion fund run by the Treasury Department that is being used to deliver capital to banks with less than $10 billion in assets. 0:00 /9:12Small business: Stop ignoring us! The idea is that community banks do the lion's share of lending to small businesses, and pumping capital into them will get money in the hands of small business.* This financial support is something business owners can take advantage of now, but no one knows how long it will last. 

8.  Capital gains tax rates are frozen for 2 more years.

The recently extended tax cuts have maintained the current maximum tax rate for qualified long-term capital gains and topping out at 15% through December 31, 2012. Without the extension, capital gains were slated to rise to a high of 20% - something that may now occur in 2012**. 

9.  Life plans have advanced.

Recessions force us to consider our personal priorities. Have you considered your personal goals? What are your conclusions? Is there a life beyond a business?  Perhaps you are ready now, more than ever before, to begin enjoying the fruits of your labor in your business by transitioning your focus to your personal life.

10.  Resolve to let business challenges be the other guy’s problem.

Becoming mentally prepared to exit your business may be harder than you’d expect. Exiting a business that has been built by years of hard work and ....

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Are You Playing To Win Or Playing Not To Lose - Jan 4, 2011

Posted by: Frank Mancieri in Articles

Are You ‘Playing to Win’ or ‘Playing Not To Lose?'

In any competitive endeavor there are two prevailing mindsets – there are those who are playing to win the ‘game’ and there are those who are playing not to lose.  Business owners are playing the game of business.  Each player in this game has quite a bit at stake.  Statistics reveal that the majority of most business owner’s wealth is tied to their business and those same owners are reliant upon the income from their businesses for their livelihood.  With so much on the line and with an ailing economy, one needs to ask themselves whether they are playing this game of business to win or not to lose – the answer can make all of the difference towards your exit.

 

What Does Playing to Win Mean?

Owners who play to win are those who are looking at the opportunities within their business the same way that they did when they first got into business – they look out ‘over the horizon’ and see that they have chosen an industry – and perhaps a niche within that industry – which holds great promise for future profits.  They survey the structure of their organization and see that there are opportunities for continual improvement to the efficiencies.  They seek out partners and investors who believe in what they are doing and convince them to further invest in their business.

 

By contrast, owners who are playing not to lose see things quite differently.  These owners look upon the past as the most prosperous times and that the present is merely here to assist them in transitioning out of the business.  These owners cannot see a path to returning to the profitability of the ‘old’ days.  They look at the speed at which business moves in today’s global economy and are bewildered instead of inspired to participate.  In this regard, these owners feel fortunate to continue to have what is left of their businesses after this Great Recession and are simply looking not to lose anymore.

 

Your Mindset and Your Exit

These competing mindsets will impact the effectiveness of your business exit. 

If you consider that someone other than you will be running your business in the future, what type of future owner will you attract with each of these mindsets?  In stock market investing, it is statistically more profitable to purchase a stock that is steadily rising in price rather than trying to buy ‘on the cheap’, or when a stock has dropped so low that you feel you can purchase it ‘at the bottom’.  Only the rare fe....

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Management Versus Leadership Why This Distinction Is Important To Your Exit - Nov 15, 2010

Posted by: Frank Mancieri in Articles

Management versus Leadership
Why This Distinction is Important to Your Exit

 

 

The Objective of ‘Management’

 

The owner of a privately-held business is many times also the manager of that business.  When you manage your organization, you drive it to success and profitability.  But when you consider your exit plans – i.e. how and when you want to leave the business – a different skill set is required.  A large part of this new skill that exiting owners need to learn is leadership. 

 

If you are considering an exit from your business, you are likely way beyond the point of needing to survive in your business.  With a financial cushion, you need to consider the more personal and emotional aspects of departing your business.

 

 

The tools of exit are different than the tools for growth

 

Let’s first examine how the skills of leading an exit are different from those required to build the company.  We will use a helpful analogy – mountain climbing. 

 

Climbing up a mountain requires determination, focus, strength, and management of many obstacles.  The ascent is often arduous, creating doubt in the mind of the climber as to whether they will reach the Pinnacle.  There is a summit that can be identified and a specific point at which one turns to begin the equally, if not more so, challenging act of descending down the mountain.

&n....

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From Revenue To Exit A Trend Forward - Nov 15, 2010

Posted by: Frank Mancieri in Articles

From Revenue to Exit: A Trend Forward

Most entrepreneurs follow a predictable trend when growing and managing the enterprise that they also own.  The owner’s mindset moves from driving revenue to achieving a successful exit.  But there are many steps in-between.  The question this newsletter seeks to answer is how the mindset of a business owner needs to progress regarding cash flows that will lead them to a successful exit. Therefore we desire to provide a guide to give you, the exiting owner, a better perspective on thinking about revenues, profit, valuation and how they will impact your exit.

Initial focus on revenues

In the first few years of a business, the business owner, almost always, is solely focused on attracting revenue to the new company. Simply put, revenue is the gas that keeps the engine going and without it there can be no growth. So, the importance it plays in the mind of the business owner is very real – it is the businesses’ survival that is at stake.  At this stage in the business, and with the mindset of the owner, there is a myopic focus on revenue.

 

From revenues to profitability

Once the business is successfully growing, there should be a shift in a business owner’s mindset from solely focusing on revenue to beginning to think about profitability. At this stage owners begin to think not only about the amount of revenue they are bringing in, but how this revenue is helping to drive and shape the business. Their vision starts to broaden and they start to become more strategic in their thinking, seeking to attain higher-quality, more profitable revenue.

 

From profitability to increased enterprise value

The next step in an owner’s thinking is when that owner starts to ask themselves ‘what is my business worth?’ The focus at this point in time begins to look past revenue and profits and begins to look at the company as a whole and what value it holds.  Here, an owner is thinking in terms of what a future owner would see worthwhile to continue to pursue.  They are also thinking about whether or not the business is providing a good return on investment for them, relative to the risk assumed in continuing to own and run a privately-held business.  When the owner begins to ask these critical questions about the value of the enterprise, they are only one small step away from asking the ultimate question in the lifecycle of a business, i.e. ‘who will own and run my business in the future and how will I benefit and/or get paid for the transfer?’

 

Measuring Risk in Privately-Held Businesses

Given the recent difficulties in the U.S. financial markets, this Exit Strategies Newsletter is focused on helping business owners assess the risk inherent in owning and running a privately held business.  Understanding this risk measurement is critical to building an exit strategy plan because it helps an exiting owner understand the value that a buyer or successor will place on that business.

 

There is an old saying that 'there is no return without risk.'  This is taught in finance classes around the country and intuitively understood by every business owner.  Risk is measured in many different ways including default risks, credit risks, country risks, volatility risks, as well as 'opportunity cost' risks - to name a few.  These risks exist for publicly traded, liquid securities as well as for privately held, illiquid business interests.  However, there are two risks that are measured differently.

 

First, many business owners believe that the risk in their business is 'controlled' because they run the business.  This is, in part, true. However, the riskiness of any business, as a whole, should be measured more accurately by examining what a buyer or successor would be willing to pay for a controlling stake in that privately held business.

 

An exiting owner should ask: What would my businesses return on investment be to another buyer? 


Often times it is surprising to see that buyers are looking for an annualized average return on investment from the business of fourteen (14) to thirty-five (35) percent; sometimes greater returns are required for earlier stage companies. When there are higher perceived risks [to the buyer/successor] there will be lower offers (i.e. lower value) for the business. 

 

Another way to look at this is to see that the 14% to 35% expected returns translate into selling multiples of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of approximately 2.8 times to 7.1 times - for a majority / controlling stake of the business.

 

So why does the buyer of a privately-held company require a 14% to 35% return from owning privately held stock?


The primary reason is due to the illiquid nature of privately-held businesses. Unlike publicly traded companies, there is no 'ready market' for the trading of shares of private businesses. Therefore, there is no liquidity for these investments - which raises the risk associat....

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New Law A Sign Of Hope For Small Business - Oct 17, 2010

Posted by: Frank Mancieri in Articles

New Law A Sign of Hope for Small Business

Owners of privately-held businesses are an independent group, accustomed to taking care of themselves and their businesses.  But, in the wake of the financial crisis of 2008, many businesses are without the credit that they need to advance forward.  After months of debate, and after a Senate holdout on the Small Business Jobs Bill, on September 27th, 2010 President Obama signed into law a $42 billion bill aimed at helping small businesses and, in turn, hopefully spurring the economy.

This new law includes tax breaks as well as government-backed loans, all targeted at small business. President Obama commented on the passage; ‘"It's going to make a difference in millions of small business owners across the country who are going to benefit from tax breaks and additional lending so companies have the capital to grow and hire".

If the clouds of this severe recession have any silver linings, they may simply be the focus that is now being afforded the small business segment of this country, the very same sector that is responsible for providing 65% of all new jobs in the US. Providing these new jobs, however, is something that can’t be done if the capital to fund the jobs or the capital to grow businesses is not available.  Case in point, the number of loans to small business has dropped by 17.8% since the second quarter of 2008 and in that time new jobs from small business have also been shrinking*. According to a Senate summary, the measures in the newly passed bill are expected to create 500,000 jobs in the US.

Let’s take a look at the highlights of this new law and ask the important question of how this can positively impact your exit.  The law includes:

·       The Small Business Jobs Act authorizes the creation of a $30 billion fund run by the Treasury Department that would deliver capital to banks with less than $10 billion in assets. The idea is that community banks do the lion's share of lending to small businesses, and pumping capital into them will get money in the hands of Main Street businesses.**

·       $1.5 billion in grants to state lending programs that in turn support loans to small business. 

·       Extension of the popular ‘loan swe....

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The Recession Ended In June Of 2009 But Owners Disagree - Oct 17, 2010

Posted by: Frank Mancieri in Articles

The Recession Ended in June of 2009 But Owners Disagree


It’s a funny thing when someone tells you that something has come to an end when all of the evidence around you indicates otherwise.  That is exactly what happened in September of this year, when the National Bureau of Economic Research (NBER) determined that the current – or past – U.S. recession that began in December 2007 officially ended in June 2009. The NBER, a nonprofit group composed of leading economists in business, academia and trade unions, are entrusted by the government to determine when recessions begin and end. This past recession, which by the way is the longest recession since World War II, may be ‘officially’ over where the government is concerned – but business owners disagree. Let’s take a look at how exactly the NBER determined that recession had ended and then ask how this can assist you with forming a plan for your future exit.

 

 

The NBER showed that gross domestic product (GDP), gross domestic income (GDI) and industrial production all hit low points during June and July of 2009 and then rebounded somewhat. Employment, hours worked, and personal income didn’t bottom out until later in 2009, but the committee decided to follow established practice and rely mainly on the GDP figures, which track output across the entire economy. Basically, the committee has a very precise definition of what a recession is – a

period when economic output shrinks*.  Since outcome and income stopped contracting in June 2009, this is when they deemed the recession “over”.

 

In total, the NBER has determined that the U.S. economy has experienced 10 recessions from 1946 through 2006. The ‘past’ recession lasted 18 months compared to the 10 previous postwar recessions which ranged in length from 6 months to 16 months, averaging about 10 1/2 months. The severity of a recession is determined in part by its length; perhaps even more important is the magnitude of the decline in economic activity. The 2007-09 recession was the deepest recession in the postwar period; at their lowest points employment fell by 6.1 percent and output fell by 4.1 percent. So, we should be grateful it’s behind us – or so they say**.

 

Obviously, the NBER doesn’t think we are sitting pretty – in their official statement they never claimed that economic conditions since June 2009 have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. The decision by the NBER means that any future downturn in the economy would be considered a new recession and not a continuation of the recession that began in 2007. The majority of Americans, especially small business owners, feel that they can call it anything they want, they can say its over, they can start a new one if they like– but it won’t change the financ....

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Family Business Exits And Transfers Pitfalls To Avoid Part Ii - Oct 16, 2010

Posted by: Frank Mancieri in Articles

Family Business Exits and Transfers: Pitfalls to Avoid – Part II

In this second in a series of articles on family business transitions, we address five (5) additional issues, which we call pitfalls, that should be considered when building a plan for your exit and the transfer of the business to family members.  Transferring a family business from one generation to the next is a delicate process.  Focusing on these five (5) additional areas should increase the success of your overall business transfer and provide you with a more successful exit.

 

I.    Trying to give everyone an equal share

 

Where multiple children (or other related family members) are involved, it is often the case the parents want to treat the children equally.  While this is a nice idea in theory, dividing your business equally may not be in the best interest of your business.

 

Remember that the management of a business and ownership of that same business are separate issues and should be considered and handled in their own, unique ways.

For example, it may be more fair for the successor(s) you have chosen to run the business to have a larger share of business ownership than family members not active in the business. Or it may be best to transfer both management and ownership to your chosen successor and make other financial arrangements to benefit your other children. Many exiting owners try to focus on the notion of being ‘fair, but not equal’ amongst the children, knowing the trying to keep everything equal may actually prove to be more unfair in the end.

 

 

II.  Not adequately preparing the transfer for a potential audit

 

For preparing the transfer of ownership to the next generation, it is important to properly value the amount being transferred for the event of a potential audit. The IRS has a statute of limitations of three (3) years to challenge the value gifted. It would be in your best interest to have the business professionally appraised before the transfer to avoid paying more taxes at a future date. If you are audited and cannot document the value of the business at that time, it will be left up to the IRS to determine the market value.

....

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Family Business Exits And Transfers Pitfalls To Avoid Part 1 - Sep 18, 2010

Posted by: Frank Mancieri in Articles

Family Business Exits and Transfers: Pitfalls to Avoid - Part 1

Amongst the millions of privately-held businesses in the United States, a large percentage are ‘family’ businesses.  This means that there is more than one generation of a family working in the business.  As you, the exiting owner, begin to consider how you and the company will live without the business as it transitions to your children, there are a few key areas where you should focus your attention.  This newsletters lists five (5) of the pitfalls that you should avoid when planning your family business succession.

 

It is helpful to begin with a few statistics illustrating how often family businesses are trapped within these pitfalls.  Namely, less than one-third of family-owned businesses survive the transition from the first generation of ownership to the second - and only 13 percent of family businesses remain in the family over 60 years.

 

Why such challenging longevity statistics? It could be in part to the added challenges that come with running a family owned business or, quite possibly, the many hurdles that can come with succession of that business.  Given the importance of the business to the families involved – including your family members, the employees, the management team and your community, it is worthwhile to review this list of pitfalls and incorporate these ideas and plans for greater success in your overall exit planning.  The five (5) pitfalls are as follows:

 

I. Transferring when the parents are not financially ready

 

Being a parent, you want the best for your children. Some business-owner parents who have children that are ready, willing and able to take over their business sometimes put their children’s needs above their own and rush into succession. For parents who are not financially stable to transfer a business, this premature move could be devastating to their retirement planning and financial security (not to mention what could happen to the business). There are also some business owners who may feel financially ready but have retirement plans that require significant funding, which may draw from the business, impeding possible growth. Waiting until you, the owner, are financially prepared for a transition is of utmost importance to your retirement and the success of the business.

 

II. Transferring before the parents are mentally ready

 

It was recently said that talking to business owners about long-term planning in today’s economic environment is a bit like a doctor telling a critically wounded patient in an emergency room that ‘they need to exercise more and watch their diet to be healthy’.  Of course, the emergency room patient is mostly focused on their short-term needs, such as fixing whatever put them in the emergency room so that they can go into a recovery mode and, hopefully, restore their lives to a normal status.

 

We all know what the problems are today with our small businesses – consumer confidence is shaken, purchases are down, accounts receivable are tougher to collect, everything seems more expensive, the banks will not lend us the money to meet our growing working capital needs, and, because this recession is almost two (2) years old, it all seems like it will never come to an end.  These all seem like very good reasons not to be setting aside time for planning you exit.  But that is a faulty assumption which can lead to disastrous results.

  

Ironically, this recessionary economy is one of the best times to be planning your exit because it is when you are focused on rebuilding your business

 

Here’s the thing about long-term planning . . . most of us don’t do it.  The fact of the matter is that the American psyche is built around positive thinking and immediate action.  Coupled with this issue is the psyche of the average business owner.  The prevailing attitude of the average business owner is one of ‘invincibility’.  And why not?  After all, it is the small business owner who has defied the odds of success, defied this economy and remained positive despite all of the troubles of the last few years.

 

Most owners who believe strongly in a positive future and continued prosperity in their businesses do not take the time to consider long-term planning – after all, the future seems so distant and largely inapplicable to the issues facing them today.  And because the economy is used as an excuse for their lack of planning, most owners leave their entire wealth and financial well being exposed to loss.

 

Let’s take a look at the 10-year cycle of business transfers to see why, despite the terrible economy, today is the optimal time to begin planning your exit. 


  

The cycle of business transfers follows a rather predictable trend.  And, right on schedule,....

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Transfer Options Beyond The Outright Sale - Jul 19, 2010

Posted by: Frank Mancieri in Articles

Transfer Options: Beyond the Outright Sale

It’s nice to have options.  Haven’t we all heard that before?  It’s something many business owners would probably say and sigh with relief when they realize that ‘selling’ a business isn’t the only way to exit that business. In this article, we’ll dispel this myth and talk about the many options available to exiting business owners.

 

Today, a large number of Baby Boomer business owners face the challenge of meeting their retirement needs with illiquid wealth tied to their privately-held businesses.  According to an NFO WorldGroup study performed in 2002, the number of business owners planning to retire was expected to increase from 50,000 per year in 2001 to 750,000 per year by 2009.  Now, more than ever, it is crucial for owners to become educated about their options.

 

There are primarily seven (7) different options by which a business owner can transfer the interests in a privately-held business:

 

·       Employees

·       Charity

·       Family

·       Co-Owners

·       Outsiders (owner retires)

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Exiting Your Business Successfully - Jul 16, 2010

Posted by: Frank Mancieri in Articles

Exiting Your Business Successfully:
What You Need To Know

If you are like most business owners, you have devoted an immeasurable amount of work and resources into growing your company. With all that you have invested, doesn’t it make sense to plan an exit from that business that protects the wealth you have accumulated in it? After all, exiting your business will certainly be one of the most important financial events of your life. The first step is to understand that an exit is not simply the sale of your business. Rather, it is a process that may occur over many years and selling your business is just one of many options available to you. Designing your exit strategy will take time, planning, and forethought but will allow you to reap the greatest reward for your years of hard work.

 

EXIT PLANNING EXPERTS

John M. Leonetti , CFP, CM&AA, is the founder and managing director of Pinnacle Equity Solutions, an exit strategies firm specializing in exit strategy design and execution services to advisors and their privately held business owners. In addition, John is the author of the highly publicized book “Exiting Your Business, Protecting Your Wealth: A Strategic Guide for Owners and Their Advisors”. John is a nationally recognized leader in the Exit Planning field and has been interviewed on ABC News Now, NECN, and numerous national radio programs. In addition, John's book has been the hot topic for many national industry and business owner publications.

 

Frank Mancieri, MBA has been working with clients on exit strategies and exit planning since 2001. He is a professional Chief Financial Officer and Exit Planner. Frank is a Partner at B2B CFO®, USA’s largest CFO firm focusing on mid market companies. He serves owners of emerging and mid-market companies with revenues up to $75 million who want to increase cash, profitability, sales and company value. He is also an adjunct Accounting Professor at Rhode Island College.

Frank graduated from Bryant University with a Bachelor of Science (B.S.) Degree in Accounting and a Master of Business Administration (MBA) degree in Management. He currently lives in northern Rhode Island with his wife, and has two adult children.

What is an Exit Plan?

An exit plan outlines your options as a business owner for transition of your business in the most wealth-protective way. This plan takes into account all factors related to your personal life, your business, the timing you would like for the exit, as well as potential successors or buyers.

The most obvious exit option to most business owners is the sale of the business to another buyer, perhaps someone in the same industry. It is important to know that less than 20% of businesses successfully sell to an outside buyer. What if you are one of the majority, and selling your business is not an option, do you know what exit choices are?

 

Free Seminar for Business Owners


Join us for a free seminar with exit planning experts who will discuss the six steps to planning a successful exit from your business:

  1. Planning for the exit
  2. Determining your financial and mental readiness
  3. Determining what type of exiting owner you are
  4. Learning about the exit options available to you
  5. Understanding the value of the options you choose
  6. Executing your exit strategy plan



Event Details:

Free Exit Strategy Planning For Business Owners

Tuesday, August 3, 2010
7:45 AM Registration and breakfast
8:00 AM to 10:00 AM Presentation

Hearth N Kettle Restaurant
250 Washington Street
Attleboro, MA 02703-5595

If you are interested in attending, please contact Frank Mancieri
401-651-1585 or fmancieri@b2bcfo.com


Ten Things A CEO Should Remember About Succession Planning - Jul 16, 2010

Posted by: Frank Mancieri in Articles

Ten Things a CEO Should Remember About Succession Planning

by Kevin Kennedy
 

You can read several books or my white paper about “succession.” The purpose of this article simply is to differentiate “exit planning” and “succession” and outline the    main points for a CEO to think about with succession planning.

 

In the simplest terms:

  • Exit Plan focuses on monetizing the trapped illiquid wealth in a private business.
  • Succession Plan focuses on a company successfully performing without its present owner/CEO.

An exit plan is a customized written plan that monetizes a business, meets the owner’s personal and financial goals, protects his or her wealth, and moves the owner into his or her next stage of life. 

 

A succession plan provides a customized written plan that focuses on the human side of a business. Succession replaces the owner by moving the chosen performers to a professional level of management and into leadership. This requires time, training and stretching the team.

 

A succession plan may take several months to write and several years to execute. Depending on the readiness of a company’s management and the type of exit and current payout, a succession plan may last from three to 10 years. On the other hand, if the business is systematized and has clean financials and mature management is in place, the company could be “sale ready” in less than a year.

 

Ten Things a CEO Should Remember About Succession Planning:

 

1.     The O....

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Exit Planning The Business Side Of The Equation - Jul 5, 2010

Posted by: Frank Mancieri in Articles


When getting ready to exit your business, it is important to set a plan.  One of the most valuable insights into designing an exit is to remember that the skills that you used to build a successful business are not perfectly transferable and useful for designing your exit.  From this bit of wisdom comes the quick conclusion that you need to think differently in order to form and execute your business exit.  The following bullet points address the general business areas that you should be considering for your business exit.

 

Who will take over the business?

Do you know who you want to run your business after you?  This question is easier asked than answered.  You see most owners have not given due consideration to the pros and cons of each potential future owner for their business.  For example, an outside company can provide money and management skills to help run your enterprise into the future.  If you don’t need either of those, you may consider a management buyout.  Or, if you want a partial exit, keeping control of your business, you may choose an ESOP.  Or there may be a combination of these strategies to assist with your planning.  Let’s examine each of them. 

 

Know your Exit OptionsExternal Transfers versus Internal Transfers

Transfer to outsiders

If you envision selling your business to a competitor or to a financial or equity group, you need to look at your business the way that they would see it.  What are your value drivers?  Are you the primary asset or can the business run without you?  What resources are available to sustain your business in your absence?  Do you have protected and unique property that can be acquired in the transaction? 

 

If you can ask these questions and envision a future sale, than you can also ask the next series of questions to validate your notion of selling to an outsider.  Are you very concerned about the future of your managers and employees?  Remember that a sale of your business means to sale of control to an outsider.  Many owners get stuck here as they feel responsible for employees and family. 

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Preserving Cash Through Cost Segregation - May 23, 2010

Posted by: Frank Mancieri in Articles

PRESERVING CASH THROUGH COST SEGREGATION
by Leo Charpentier

A safe and effective way to depreciate income-producing real property faster than over the typical 39 or 27.5-year lives We have great news for owners of income-producing property who are looking to shelter that income through depreciation.  The IRS has accepted an important tax strategy called a Cost Segregation Study that sharply increases depreciation deductions in the first few years of ownership.  More tax depreciation deductions result in a lower tax bill and that means more money in your pocket.
 
Typically, the entire cost of a building is lumped into a 39-year or 27.5-year depreciation category.  Multiple tax court cases have established that certain elements of a building's cost can be depreciated over much shorter periods such as 5, 7 or 15 years.  Those elements have to be identified and the cost assigned to them has to be determined by an acceptable method, must be reasonably proportional and needs to be supported by appropriate documentation. 
 
The IRS has published an Audit Technique Guideline that defines a standard for a "Quality" Cost Segregation Study.  By carefully adhering to that standard, your Cost Segregation Study can be a safe and extremely effective tax strategy at the same time.
 
Just how effective is a Cost Segregation Study?  Usually, anywhere from 10-30% of a building's cost can be reclassified to shorter depreciable lives.  As an example, an average building costing $1M will produce federal tax savings between $14,000 and $40,000 in the first five years of ownership.  In many cases, state tax savings can be realized as well.
 
And don't forget, for each of those early years of ownership, you'll have tax savings that can be used to further invest into real property, to lower mortgage debt or to use as you see fit
Here's more food for thought:  those higher tax deductions are protecting income that otherwise would be taxed at ordinary tax rates. Each time you take a depreciation deduction, you lower your basis in the property for tax purposes.  Lower basis means a higher capital gain.  By using the higher depreciation produced by a cost segregation study, you effectively take income that would have been taxed at ordinary rates and instead subject it to lower capital gains tax rates. 
 
One last thing, if you're ruing the fact that you didn't know about this valuable strategy four years ago when you bought that building, the IRS allows you to "Catch-up" in the year of the Study by making a Section 481(a) adjustment.

Anyone who has bought or built an income-producing property with a cost of $500,000 or more over the past four years would be well-served by looking into this safe and very effective strategy to preserve cash through tax savings.

 
Dynamic Business Solutions
a division of Dynamic Lease Corporation
1395 Atwood Ave., Suite 209E
Johnston, RI 02919
Tel. 401-432-7700, Fax 401-432-7701
www.dynamiclease.com

Exit Planning The Personal Side Of The Equation - May 22, 2010

Posted by: Frank Mancieri in Articles

Exit Planning: The Personal Side of the Equation

This newsletter provides an overview of what every business owner needs to consider - from a personal perspective - when planning a future exit from your business.  This information should be used as a guide to assist you in preparing your personal life and finances by aligning your liquid and illiquid assets towards achieving your goals for your exit.
 
Setting and Measuring Personal Goals
The first step in any planning process is setting goals.  Just like you choose a destination prior to setting on a voyage, so too must you define your goals and what you want to achieve with your exit.  Think back to when you started your business.  Aside from the ability to control your own destiny, what were the dreams and aspirations that you valued when your future success would arrive?  How did you envision living once you had the financial freedom to choose how you spend your days?   
You see, not only are the most successful exits planned in the owner's mind well in advance of any transfer of ownership, this type of forward thinking is essential to reaching your envisioned milestone.  Amidst a recession and the ongoing challenges of running your business, deep down there is a life that you were envisioning living once the dust settled and your business venture were complete.

How would you spend your time if you're not working in your business?
Often the threshold question when contemplating your future life is 'how would you spend your time without working in your business?'.  This is the question upon which all things rest because without this type of focus, it is unlikely that you will escape the ever-present demands of your private business.   
As a tool to assist you in developing these goals, it is helpful to construct a calendar of events that you would participate in once your business exit is complete.  Take detailed notes, filling in the days on a future calendar and how you would fill them.  You should visualize this occurring and act as if it already exits.
 
One helpful tool to assist in this exercise is to detail each of the expenses that are a part of your future lifestyle [without your business].  When you engage your mind in this direction, you begin to form thought of your exit and let them guide your decisions within your business.  This can be tough to do for owners who simply live and pay for their lifestyle out of their business.  Remember that this is a critically important step, not to be overlooked due to its seeming simplicity.
 
Increase your personal savings
Most owners of private businesses have very little money saved outside of the business.  This is largely because you have successfully bet on yourself throughout your career, not trusting the volatility of liquid investments.  But remember that personal diversification can only be achieved by increasing your liquidity.  You cannot pay your bills with real estate equity or shares of your private business.  So even if it means being taxed on those dollars, you ultimately have more options for your exit if you are personally prepared from a financial perspective.
 
Close your 'Value Gap'
The value gap is the amount of money that you need to extract from your business, net of fees and taxes.  Once you can measure this amount, you can look to achieve your equity extractions through a series of exit options scenarios to figure out which one best meets your goals.
 
Checking your insurance plans
Too often, insurance is purchased for a variety of reasons - for issues that exist as well as potential contingencies that need to be managed through the use of insurance.  It is likely that time has removed many of these risks but you are continuing to hold onto those policies.  Remove excess policies where risks no longer need to be insured.  After this exercise, be certain to bolster areas that do require continued insurance.
 
Updating your buy-sell agreements
If you have partners in your business, you have likely had exposure to a buy-....

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Believing In Your Exit - May 21, 2010

Posted by: Frank Mancieri in Articles

Believing in Your Exit

The U.S. Chamber of Commerce reports that only 20% of private businesses that are for sale will successfully sell to an outside buyer.   
What does this mean for your exit and why is it important to develop a strong belief system around the proper way for you to plan for that eventual exit?
 
First, what the Chamber of Commerce statistic likely means for your business exit is that you will not be selling to an outside buyer unless you are prepared on a number of different fronts.  In other words, you need to prepare for your future exit no matter which exit option you choose.  However, if you are planning to exit via a sale to an outside buyer, you need to pay particular attention to a number of items, not the least of which is the fact that most businesses will not successfully do so.  What will make your exit a success?
 
The answer is how strongly you believe in your exit.  What does this mean?
 
Quite simply, beliefs are typically things that we inherit from our parents and other influences in our lives.  These beliefs quietly guide all of the decisions that we make in our businesses and our personal lives.  
We have beliefs about our families, our values, about money, about religion, about the government, about political parties, and countless other items in our lives.  So, why don't you have a belief about how you will one day exit your business?   
The likely answer is simply that no one has yet asked you this question.  Furthermore, you have likely not taken the time to evaluate which exit option and strategy would be best for you.  
So, knowing that most businesses will not successfully sell to an outside party, it is a bit hard to hold a firm belief that you will successfully do so.  It defies the odds and the statistics for you to boldly state that 'my business is saleable' without having some strong evidence to support that statement.  And this is where the exit planning and the education come into play.
 
You need to build a belief around your eventual exit by applying yourself to the process of developing that exit.  There are actually many ways to exit a business other than selling to an outside party.  We will not recount the many ways to exit your business here, but you should know that without a plan for your exit, those options may not exist for you.  
In addition, without a plan, it is very hard to believe that your exit will be successful - how can you?  It is said that one cannot 'learn in a vacuum'.  What this means is that you need to engage in the process of learning about how to exit your business and then critically examine the options that will most likely get you to your goals.   
Let's take a look at an example.  Business owner, Bill, thinks that he will one day sell his business to one of his competitors.  He does not have a plan as to how this will occur but he believes in his ability as a business owner to strike a good deal.  Bill knows very little about planning for his exit but a whole lot about running a successful company.  Bill believes in himself but really has no idea how challenging an exit can be.  Simply put, Bill is applying the tools of business building to his exit, and they are the wrong tools for the job.
 
By contrast, Phil recognizes that his exit will be the largest financial transaction of his life.  Phil is aware that all that he has learned in business was taught to him by someone else.  Fortunately, he accumulated this knowledge over many years and corrected the many errors that he made in the process of building a successful business.  Most importantly, Phil recognizes that he does not have a strong belief in how he will exit or his ability to do so on his own because he sees that the process of exiting a business is not only complex, but occurs in a time period much shorter than that of building his business.  Phil is ready for a planning process by which the education builds up his belief about his exit.  Once Phil has all of the information that he needs, his belief in his exit will be strong, and hence successful.
 
When you engage in the exit planning process, you build a belief around your future exit.  Similar to the way that your current belief systems help you give meaning to events around you, your belief about your future exit will help shape the direction of your business.  With the proper strategy and belief system, you will build your business so that it accommodates your future exit.
 
Take a look at your plan for your exit and ask if it is something that you have confidence in.  If not, meet with your advisors to discuss you....

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Testimonial - Innovative Mold Solutions - Dec 22, 2009

Posted by: Frank Mancieri in Testimonials

Frank has been very helpful in establishing and maintaining our Company’s new banking relationship.  He has also been instrumental in improving both our internal and external financial reporting systems.  Frank’s interpersonal style makes problem solving an effective and rewarding experience for myself and ultimately the organization.  I highly recommend Frank for any business solutions you may need.

Rick Tessier
Controller
Innovative Mold Solutions


Testimonial - From Cliff Grimm Finance Administrative Manager Epivax Inc. - Oct 1, 2009

Posted by: Frank Mancieri in Testimonials

"I’m glad I made the call to Frank to come in and evaluate our organization’s financial strength. He approached our situation with a one step at a time focus that allowed us to recognize our financial reporting shortfalls and improve our accounting processes. Frank has also been very flexible in allowing us to bring him in as needed. In addition to helping us feel more confident in our financial structure, Frank has been valuable for my own professional development. He does not just do the work for us. He teaches us, allows us to follow through and is there to review our changes and reporting."

Cliff Grimm
Finance & Administrative Manager
EpiVax, Inc.


Testimonial - From Dr Annie Degroot CEO CSO And Director Epivax Inc. - Sep 20, 2009

Posted by: Frank Mancieri in Testimonials

“Frank did an excellent job evaluating EpiVax and re-organizing our internal financial structure while providing ongoing advice. He has proven to be an invaluable asset - mentoring our finance team as well as allowing the company to evaluate past performance and project future expenditures. He is first rate, totally knowledgeable, incredibly personable - can't recommend him highly enough!”

Annie De Groot
CEO/CSO and Director, EpiVax, Inc.
Professor and Director of the Institute for Immunology and Informatics at University of Rhode Island
Associate Professor of Pediatric I.D. (Adjunct) at Brown University.

 


What Separates B2B CFO From Its Competition - Jul 24, 2009

Posted by: Frank Mancieri in Articles

Radio interview: Marketing SOS - Marketing that Makes Sense

Host: Kristen Boie, Marketing Consultant, MBA for a Day Consulting

[video:http://www.youtube.com/watch?v=wds41AcFXik 640x385]


What Is A CFO And How Does B2B CFO Help Increase Cash Profitability And Company Value 661 - Jul 18, 2009

Posted by: Frank Mancieri in Articles

Radio interview: Marketing SOS - Marketing that Makes Sense

Host: Kristen Boie, Marketing Consultant, MBA for a Day Consulting

[video:http://www.youtube.com/watch?v=c-lKUCxx46Q 640x385 100x100]


Testimonial - From Dr George Cladis Coo New England Dream Center - Apr 4, 2009

Posted by: Frank Mancieri in Testimonials

"I am not a CFO and need the help of one to understand fully our financial operations. We are too small, however, to have one on staff. Frank did a superb job by helping me develop the tools I needed to understand our financial status and create important forecasting tools. I highly recommend him."

Dr. George Cladis, COO - New England Dream Center


Testimonial - Precision Web Marketing - Sep 18, 2008

Posted by: Frank Mancieri in Testimonials

Frank had an important impact on our business.  We had hired an administrative assistant to set up our QuickBooks account, and as the company grew, we felt it was important to have an expert review at our books, advise us as to best practices, and suggest improvements.  Frank did all of that and more.  We are in much better shape financially today because of his audit, suggestions and guidance. He not only reviewed the line item details, but gave us great suggestions about how to improve our accounting processes. I highly recommend talking to Frank if you are a business owner who feels your business financials are not 100% rock solid!  He'll give you back that confidence you need to focus on other important elements of your business.

Michelle Girasole, former President
Precision Web Marketing

currently Author/Writer/Blogger
TheSassyLadies.com


Testimonial - From Jeff Dunphy President Design Label Manufacturing - Sep 18, 2008

Posted by: Frank Mancieri in Testimonials

Frank has been a great help and hard worker. He has really helped us a great deal in a time of transition for the company.

Jeff Dunphy, President
Design Label Manufacturing


Tammy Beckwith Operations Manager Re Mentor - Sep 18, 2008

Posted by: Frank Mancieri in Testimonials

Frank is doing a fabulous job.  He has really straightened out our books and has us on the right track.  He is able to explain situations in an understandable way.  He is a great guy to work with.  I'd recommend him to anyone.

Tammy Beckwith, Operations Manager
RE Mentor (real estate mentors)


Testimonial - From Tony Naser Owner Naser Jewelers - Sep 18, 2008

Posted by: Frank Mancieri in Testimonials


Franks Service is outstanding. His knowledge and experience has been a tremendous help to my company. I would highly recommend his services to anyone needing CFO services.

Tony Naser, Owner
Naser Jewelers


Tom Stocker Former Regional Chairman Chairmans View Currently - Sep 11, 2008

Posted by: Frank Mancieri in Testimonials

I brought Frank in to one of my clients to help with an inventory problem. Frank was able to help and provided valuable counsel to my client. His approach was operational and comprehensive. I wouldn't hesitate to bring Frank in to other clients where I can utilize his expertise.

Tom Stocker, former Regional Chairman
Chairman's View

currently Principal
Boardroom Advisory Group, LLC

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