Michigan Estate Planning Blog

Do You Know The True Value Of Your Business?

A business is a tricky thing to plan. First, the business is a thing in motion rather than an asset at rest. And second, businesses are a hard asset to value appropriately. Does your retirement plan and maybe your estate plan for your heirs rely upon the business? Well then, do you know what your business is actually worth? For a sobering problem many business owners end up facing when it comes to valuing their business, be sure to read a recent article in Forbes titled “Is Your Business Worth As Much As You Think? Many Aren't.” At the core of the article is an interpretation of findings recently released by Pepperdine University in its 2014 Capital Markets Report. The key finding: buyers and sellers of businesses cannot agree on how much they are worth. Instead of negotiating back and forth to an eventual middle ground value, about 1 in 3 engagements fell through without any sale at all. Now, keep in mind that it is always in the nature of high-pressure deals to come to such divisive and decisive ends. However, all the same there is a lesson to learn when so much is at stake. What is your business worth and how do you prove it? How do you approach the sale and how do you structure your assets thereafter? This is a complex transaction. Putting it into the proper context and value is essential both in the beginning and the end of the process.

Reference: Forbes (March 2, 2014) “Is Your Business Worth As Much As You Think? Many Aren't”

For more information, see www.jerryreiflawyer.com

The Aftermath Of Selling The Business

Selling your business is no easy task, nor is it a quick one. At some point an agreement is presented and, if accepted, the changes can happen as fast as the pen can sign. Nevertheless, in the aftermath of the sale any deal can turn acrimonious. If you and your family are considering the sale of the family business, and maybe considering an actual offer on the table, there is some business thinking that should enter the mix. This is especially true when it is your exit from the business. Consider the warning alarm sounded by Forbes in a recent article titled “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin.” It is in the interests of most sellers to make the price of the business dependent upon its future success. Consequently, there is some money upfront with a promise for full payment upon full performance. Sometimes, the idea is just to stagger full payments for the sake of financing. Plans like these can give both buyer and seller the best of both worlds, or it can mean a world of litigation when there is a disagreement or things go wrong. Remember, when planning for the sale of the family business, it really does matter just how you sell the business and it pays to be aware of the issues in advance. Read the original article for a number of common scenarios. Finally, do not forget that the family business is likely an important part of your estate, too. More often than not, the family business is your estate. If that is the case, then be mindful to structure the sale in accordance with the family needs.

Reference: Forbes (February 21, 2014) “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin”

For more information, see www.jerryreiflawyer.com

Prepping Your Business For Sale Mid-Michigan

Building the business is about a lot of things. First and foremost, there is that pesky reality of getting out there and doing things: getting to market, cornering the market and, eventually, turning a profit. Little surprise, then, selling the business takes a lot of doing too. After all, you are actually planning for yourself, the lives of your loved ones, and your loyal employees. Done right, a business succession or sale requires the ability to ask the right questions, let alone have the right answers. And there is no shortage of good questions to ask of yourself, your company, your family, and of course, the potential buyer. Fortunately, a recent article in The Business Journals titled “Key questions to ask when planning to sell your business” will give you a head start on the questions, but you must supply the answers. While you can tailor the questions to fit your unique circumstances, here are the four questions the author of the article thinks you need to ponder: 1. Is seller financing feasible in accomplishing my future endeavors? 2. How involved do I really plan on being post-sale? 3. How should I mitigate the emotional connection to my business and my employees? 4. Should I sign that non-compete? Obviously, these four questions are not all-inclusive. However, they are a good start. In the end, the most prudent course of action may be to gather counsel from all of those who have a stake in what may be one of the most significant life event they and you may ever face. Consider soliciting the input of your loved ones, your leadership team, and your employees. Then, once you have determined the best outcome for all concerned, meet with your professional advisors to help you get there.

Reference: The Business Journals (December 2, 2013) “Key questions to ask when planning to sell your business”

For more information, see www.jerryreiflawyer.com

Prepping Your Business For Sale Saginaw, Michigan

Building the business is about a lot of things. First and foremost, there is that pesky reality of getting out there and doing things: getting to market, cornering the market and, eventually, turning a profit. Little surprise, then, selling the business takes a lot of doing too. After all, you are actually planning for yourself, the lives of your loved ones, and your loyal employees. Done right, a business succession or sale requires the ability to ask the right questions, let alone have the right answers. And there is no shortage of good questions to ask of yourself, your company, your family, and of course, the potential buyer. Fortunately, a recent article in The Business Journals titled “Key questions to ask when planning to sell your business” will give you a head start on the questions, but you must supply the answers. While you can tailor the questions to fit your unique circumstances, here are the four questions the author of the article thinks you need to ponder: 1. Is seller financing feasible in accomplishing my future endeavors? 2. How involved do I really plan on being post-sale? 3. How should I mitigate the emotional connection to my business and my employees? 4. Should I sign that non-compete? Obviously, these four questions are not all-inclusive. However, they are a good start. In the end, the most prudent course of action may be to gather counsel from all of those who have a stake in what may be one of the most significant life event they and you may ever face. Consider soliciting the input of your loved ones, your leadership team, and your employees. Then, once you have determined the best outcome for all concerned, meet with your professional advisors to help you get there.

Reference: The Business Journals (December 2, 2013) “Key questions to ask when planning to sell your business”

For more information, see www.jerryreiflawyer.com

Making The Most Of Your Business Sale Saginaw, MI

It is so easy to pour your life into the business. You may even regard the business as your life, especially if you love the work and it is a family business to boot. Unfortunately, for many a business owner the life after the business seldom gets the attention and planning it requires. If you might wish to sell your business in the future for the good of your future life, then there is much planning to do even now. Since the business is such an integral part of your personal wealth, and perhaps also of your family wealth, planning time is time well invested. Thinking about, planning for, and knowing when to pull the trigger on the sale is just good life-planning. It can be tricky, too. Forbes gave a few tidbits of wisdom on the topic of maximizing your business sale and the ensuing wealth in a recent article titled “How Business Owners Maximize Personal Wealth Selling Their Companies.” The article provides three steps worthy of consideration. Essentially, you must plan to put the business in the right place to be bought, plan to put the family and yourself in the right place to sell, and plan to come to the negotiation table ready to get what you need. Because your business, your family and your life goals are unique, be sure you “measure twice (at least) and cut once” when it comes to this major event. There are no mulligans you can use once the ink is dry and the money has changed hands regarding your business sale.

Reference: Forbes (October 1, 2013) “How Business Owners Maximize Personal Wealth Selling Their Companies”

For more information, see www.jerryreiflawyer.com

 

 

Successful Successions Require Planning Saginaw, MI

It was the best of business successions; it was the worst of business successions. There is a right way to sell the business to your own managers or your own family members, and then there is a wrong way. Since you cannot live long enough to make all of life’s mistakes, then it is wise to learn from the mistakes of others. In this spirit, consider a recent article in The New York Times titled “The Wrong Way to Sell a Business.” Essentially, there are two types of owners when it comes to the sale or succession of their business. First, there is the one who knows they will sell the business, but procrastinates all the way up to the bitter end. This is not the owner/manager to emulate, and the article showcases a proof-positive example. While you might think your managers are ready and willing to buy your business, they may have other ideas. Regardless, they likely will need time to acquire the capital and then structure their affairs accordingly. If nothing else, managers are not owners until they start thinking of themselves as such, and a bit of lead time can instill such a feeling. But what about the other type of owner? Again, the article provides an example of an owner/manager who has a very decided life-goal in place and can therefore work to instill life-goals in his managers. Accordingly, if you plan for yourself, and allow your managers to plan for themselves, then you can train managers who can transition into becoming owners. When the succession planning is successful, the transition is almost nothing more than economics. True, sometimes these transitions just do not work out, but it is rarely out of an abundance of planning or understanding. Instead, more than a few deals fall apart simply because they are all too sudden and unplanned.

Reference: The New York Time (August 29, 2013) “The Wrong Way to Sell a Business”

For more information, see www.jerryreiflawyer.com

 

Successful Successions Require Planning Mid-Michigan

It was the best of business successions; it was the worst of business successions. There is a right way to sell the business to your own managers or your own family members, and then there is a wrong way. Since you cannot live long enough to make all of life’s mistakes, then it is wise to learn from the mistakes of others. In this spirit, consider a recent article in The New York Times titled “The Wrong Way to Sell a Business.” Essentially, there are two types of owners when it comes to the sale or succession of their business. First, there is the one who knows they will sell the business, but procrastinates all the way up to the bitter end. This is not the owner/manager to emulate, and the article showcases a proof-positive example. While you might think your managers are ready and willing to buy your business, they may have other ideas. Regardless, they likely will need time to acquire the capital and then structure their affairs accordingly. If nothing else, managers are not owners until they start thinking of themselves as such, and a bit of lead time can instill such a feeling. But what about the other type of owner? Again, the article provides an example of an owner/manager who has a very decided life-goal in place and can therefore work to instill life-goals in his managers. Accordingly, if you plan for yourself, and allow your managers to plan for themselves, then you can train managers who can transition into becoming owners. When the succession planning is successful, the transition is almost nothing more than economics. True, sometimes these transitions just do not work out, but it is rarely out of an abundance of planning or understanding. Instead, more than a few deals fall apart simply because they are all too sudden and unplanned.

Reference: The New York Time (August 29, 2013) “The Wrong Way to Sell a Business”

For more information, see www.jerryreiflawyer.com

 

 

Selling Your Family Business with The Tax Wind At Your Back

Whether we’re coming out of the recession is still very much in debate. Nevertheless, at least for some small businesses, the balance sheets are starting to look a bit better. Having weathered the storm, some business owners are now ready to get out. According to a recent New York Times article, 2012 is going to be the time to sell the business for some owners. “Buy low, sell high” is conventional market wisdom. To some business owners coming out of the rut with a good year behind them, right now may be the “high sales” they’ve been awaiting. Yet for some investors right now may still be the “low buys” with an eye for growth. Behind the scenes, however, there’s more than simple market dynamics afoot in 2012. As you may recall, it also is the last year of the Bush-era tax cuts as they were extended only until the end of 2012. So, if you’re looking to sell the business, then 2012 will offer a lower capital gains tax rate, at 15% instead of the 20% slated to fall into place come next January. If your business IS your personal wealth, then this is real money for your future and for your family’s future. Why are you waiting? Unless you intend to keep you family business in the family, the tax planets are beautifully (albeit temporarily) aligned with those same Bush-era tax cuts in place – and the generous Gift and Estate tax levels. Accordingly, I recommend a consultation with your trusted accounting, legal and financial advisors without delay.