Tim Kinane


Interesting Items

Wednesday, August 21st, 2019

Corporate Divorce: How to Avoid a Partnership Split, but What to Do If You Must Get One


Navix Webinar


About this Webinar

Corporate Divorce: How to Avoid a Partnership Split, but What to Do If You Must Get One

Webinar presenters 2019 8 27

August 27, 2019 2:00 pm Eastern


In this special educational webinar, NAVIX CEO Patrick Ungashick welcomes special guest William Piercy, an attorney with Berman Fink Van Horn who specializes in helping business owners end bad business relationships, and move on to better ones. Bill and Patrick will discuss why and how business partnerships potentially fail, and what all business partners should do to minimize the risk of a partnership failure. Bill will also present important steps to take if a business partner believes he or she needs to dissolve the business relationship.


Monday, August 19th, 2019

Seven Requirements to Pull Off a Family Business Exit

By: Patrick Ungashick

Fam Biz


If your exit strategy is to pass your business down to a member of your family, you face a unique set of issues, different from business owners who plan on selling their company when they exit. Woven into these issues are family dynamics, relationships, and realities which can at the very least complicate matters, and at worst prevent a successful exit. In our experience, there are seven conditions that you must address to successfully and happily pass a business down to the next generation. Reviewing these conditions helps you evaluate how prepared you are to pass your business down to family.

1st Condition: The Company Must Run without You

If you intend to pass your business down to your children and have the business not just survive the transition but thrive going forward, then the company must be able to run without you. There are two sides to “running without you.” The first deals with processes: all the company’s essential day-to-day operations including sales (from lead generation through closing), delivery of products/services, finance, problem-solving, etc. must operate effectively without your involvement. The second aspect deals with people: all critical internal and external relationships must conduct without your involvement and presence. If the company’s important processes or people relationships cannot function without you, then you cannot pass it down to your children without risking disaster.

Creating a company that runs without you is not easy. Building a team of sufficient caliber to run and grow the company without you takes years of planning and work.

2nd Condition: Your Child (or Children) Can Run the Company

Because the first condition is that the company must be able to run without you, the second condition must be that your child (or children) can run the company. It’s not enough to have hard-working, smart, mature children just working in your family business. One or more of them must have the talent, vision, and drive to lead the company today and into the foreseeable future. Finding successor leadership of this caliber is hard anywhere—finding or developing the leadership of this caliber within your family can be even more challenging. Also, it is important that your exit and succession planning build time into the process to let your children demonstrate that they can run the company before fully turning it over to them. They will need the opportunity to prove to you, other employees, customers, lenders, etc. that they have earned the future leadership role, rather than received it due to nepotism. (See the 5th Condition below.)

3rd Condition: Your Children are Prepared for the Risks of Ownership

Your children must be more than just qualified and proven to run the company; they also must be prepared for the risks that come with owning the company. Business ownership carries inherent risks, and in many family businesses, the successor children are unfamiliar with these risks and have never had to shoulder their responsibilities. For example, if you personally guarantee the company’s line of credit or other financial obligations, your children may be unfamiliar with this obligation and lack sufficient personal wealth to meet current and future credit requirements. Your children also may have never experienced owning the company through difficult economic times, such as a recession or industry downturn. It is not possible to protect your children from every business risk, but the key question is, are they prepared to handle the risks that you know come with ownership.

4th Condition: The Rest of the Family Supports the Succession

One of the great challenges within most family-owned and led companies is getting all the necessary family members on the same page while avoiding decisions or actions that cause dissention and strife. When it comes to passing a business down to the next generation of family leaders, preventing dissention often gets much harder, as most if not all family members are impacted in some manner by this event. For example, if you have some children working in the company but some who are not, then treating all your children fairlymay be difficult if only some children are going to “get” the business while others won’t. These issues can be emotional and sensitive within the most tight-knit, close families. Add into the picture complicating factors like second marriages or adult-age children who are not acting like adults, and fulfill every family member’s wants, and needs may seem impossible. Again, the sooner family-led companies start talking about and addressing these issues, the more time they give themselves to achieve a successful outcome.

5th Condition: The Rest of the Company Supports the Succession

To pass a business down to your children, your family must ultimately support the exit and succession plan, and the rest of the company’s key leaders must support it too. To the extent, you have addressed the 2nd and 3rd conditions described above, likely you will secure the support from the company’s non-family key employees because they will have seen your children effectively running the company and qualified to be owners. However, if you have co-owners (business partners) outside of your nuclear family, gaining their support may be more complicated no matter how qualified your children may be. Typically, your partners will not want to see the business that they own a portion of being passed down to your kids, either because they want their children (if applicable) to have the ownership opportunity, or because they want to sell the company for an attractive price. In these situations, the simplest solutions (share the company between everybody’s kids, or buy out the other owners) are rarely simple to implement.

6th Condition: You Can Reach Financial Freedom without Over Burdening the Company

Most business owners are financially dependent on the company. To some degree, you need your income from the company to support your current lifestyle, and one day you will need to convert some to all of your business wealth into personal wealth to reach financial freedom and retire. You can’t happily and successfully exit and pass your company to your children if that cuts you off from your financial security.

Owners who exit by way of selling their company to an outside buyer have an apparent mechanism for how they will reach financial freedom—the liquidity event created with the company sale. However, if you intend to pass the company to your children, there usually will not be a liquidity event. Alternative mechanisms, such as the company/kids borrowing money to buy you out, or the company keeping you on the payroll indefinitely, can help you reach financial freedom but they create significant long-term financial burdens (and sometimes tax problems) for the company. Ideally, family members will recognize and start addressing this issue long before the current owner(s) want to exit and adopt tax-favorable strategies to build wealth outside the company long before you are ready to exit.

7th Condition: You Have a Plan for Dealing with the Taxes

Passing a business to your children triggers potential transfer taxes—commonly gift taxes (if the transfers occur while living) and estate taxes (if the transfers occur at death). A high tax bill can cripple even the soundest succession plan. Recent tax law changes provide some tax relief, but only through 2025. After that year, the potential taxes owed on asset transfers are scheduled to return to significantly higher levels. You must consult your tax advisors to determine your situation, and if you need to consider taking action as part of your overall exit plan.

Your Last Five Years

Preparing and implementing an effective plan to pass a company from one generation to the next requires a thorough review of the company and the family, followed by discussions, brainstorming, modeling, and assistance from experienced advisors. In other words, exit planning takes time and work. If you are telling yourself you want to exit sometime in the next five years, now is the time to take action to address these seven conditions in your family business. For help, download our complimentary ebook Your Last Five Years: How the Final 60 Months Will Make or Break Your Exit Success to get started.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, August 12th, 2019

10 Reasons Business Partnerships Fail

Split people

By: Patrick Ungashick

“Unlike a marriage, business partnerships are supposed to end.” Attorney William Piercy offers this insight in the opening chapter of his book Life’s Too Short for a Bad Business Partner. Piercy, with the law firm Berman Fink Van Horn in Atlanta, Georgia, is a specialist in resolving and dissolving unwanted business partnerships—an area sometimes called “corporate divorce.” Many business owners have unspoken expectations that their relationship with their business partner(s) will last forever when, in reality, those affiliations are not intended to be perpetual. All business partnerships should one day end, hopefully with a successful exit featuring the “partners departing as friends with full bank accounts” as Piercy observes. In the real world, this does not always occur. Many business partnerships fail, some quickly and others after an otherwise long and successful collaboration.

In his book, Piercy identifies ten reasons partnerships can fail. Knowing these can help you avoid a breakdown in your business relationship, or perhaps recognize that it may be time for your partnerectomy. Listed below are Piercy’s ten reasons, along with some of our experiences that corroborate the author’s observations.

One: Lack of Communication

“When dialogue breaks down, bad things happen,” Piercy writes. Communication breakdowns among business partners are, unfortunately common. One contributing factor is that many co-owners do not consistently allocate time to meet and address ownership issues—shareholder-only meetings are held sporadically or never at all. This bad habit inevitably leads to communication breakdowns.

Two: Lack of Transparency

In healthy business partnerships, there must be a division of labor, which usually means that some partners have a more regular need than other partners to interact with data like, financial records and reports. This may be necessary for day-to-day operations, but all owners must have consistent and unrestricted access to important company operational and financial performance data. When this is not the case, that is when partnerships can get into trouble as accountability, communication, and trust erode.

Three: No Shared Vision

If the business partners are not all rowing the boat in the same direction, Piercy forecasts, “rough seas are ahead.” After many years of close alignment, different business partners may develop diverging plans and aspirations for where to take the company. Exacerbating this, many companies operate with only loosely defined, unwritten strategic business plans. Without a shared, formal business plan with clearly defined goals and tactics, each owner is free to row the boat in whatever direction he or she feels best.

Four: No Clear/Defined Roles

Piercy notes that in a “startup culture…founders roll up their sleeves and do whatever needs to be done”. However, with time and company growth, owners need to divide and specialize their roles in the organization. Sometimes this occurs smoothly, but within some teams, it leads to overlap or gaps. When partners allow themselves to work in the company without written job descriptions governing their roles and responsibilities, this issue is more likely to occur.

Five: Failure to Stay in Your Lane

Even if each partner’s roles have been defined, sometimes a partner strays and engages in behavior that disrupts other people or processes in the company. When this occurs, typically the offending owner is acting with good intentions, but the disruptive behavior often goes unchecked because it’s hard for any organization to tell one of its owners to “stay in your lane.” Regardless, if this continues the partnership and business can suffer.

Six: Disparity in Contribution

When one partner is contributing (or perceived to be contributing) less to the organization: less time, effort, money, results, etc., the seeds are planted for dissent within the relationship. This awareness can be a natural progression within many partnerships. If one partner is significantly older than other(s), his or her energy and engagement may wane earlier than the other’s. If this situation deepens and the partners fail to address it, a complete breakdown may occur.

Seven: The Business Outgrows Its Founders

Piercy points out that starting a business and leading a business demand a different set of skills. Many founders struggle with recognizing the transition and making it. If one co-founder is not effective at leading a maturing organization, it can stress the relationship and the company. Small to mid-sized organizations that emphasize an inclusive culture can struggle with how to handle employees who were once effective but have failed to keep up with the company’s growth; the issue is even more challenging when the no-longer-qualified person is not just an employee but also an owner.

Eight: Failure to Hire Professional Help

“Without outside help,” Piercy writes, “entrepreneurs find themselves dealing with issues well outside their skill sets. Balls get dropped. Fingers are pointed. Relationships fray.” Some owners never fully recognize the need to hire professional management and engage expert advisors. Other owners see this need but then struggle with finding, hiring, and leading those people. Failing to field a competent team not only hinders sustained business growth, but it also endangers the partnership.

Nine: The Kids Don’t Want to Work in the Business

Within family-owned and led companies, lack of interest, engagement, or alignment can undermine business partnerships regardless of how strong the family bonds may be.

In addition to Piercy’s valid point, we, in exit planning, see additional reasons family issues can undermine business partner relations. For example, if one partner has family who works in the company, but another partner does not, the partners may find themselves advocating different exit strategies. The partner with children in the company wants the company to go to his or her kids, whereas the partner without children in the company wants to sell to an outside buyer. These seemingly incompatible exit goals can erode partner relations without a plan on how to accommodate everybody’s desired goals.

Ten: One Partner Has Baggage

“If your partner has more issues than National Geographic, it may be time to cancel the subscription,” writes Piercy. The experienced lawyer also notes that while it is noble to support a partner who is experiencing serious personal matters, everybody must protect the company and not let personal baggage bring down the partnership or the entire organization.

We once worked with a $100 million company where one of the owners had a severe alcohol problem. For years his partners bent over backward to support this person, including covering for their partner during extended absences during periods of treatment, and relapse. However, their tolerance reached its end when the partner drunkenly confronted a client. After this, the other partners regretfully knew they had to pursue a corporate divorce.

How to Avoid a Corporate Divorce, or What to Do If You Need One

While Life is Too Short for a Bad Business Partner is essential reading for the business co-owner who recognizes that he or she must get a corporate divorce, all business partners should read this concise book. It will not only guide an owner through the operational, legal, and financial steps of a partnership dissolution, but Piercy’s book too can help all partners implement sound business practices and take corrective action within a struggling partnership before it is too late.

Click here to register for an upcoming webinar interviewing Bill Piercy about this topic.

To secure your copy of his book, visit Amazon.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.


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Monday, August 5th, 2019

Mastering the Rockefeller Habits Book Review

Learn the habits that highly successful, fast growing companies embed in their business.


By: Verne Harnish

What tools do you uses to run and grow your business?

Periodically, I share a favorite book review from Readitfor.me. There is never enough time to read all the latest books – this tool is a great way to learn and to stay on top of the latest topics and new ideas.

Mastering The Rockefeller Habits by Verne Harnish provides a how to on mastering a one-page strategic plan. Read this review to see if this a tool you can use to run and grow your business.


Mastering the Rockefeller Habits


Readitfor.me Book Review:

Verne Harnish is the founder and CEO of Gazelles, a global executive education and coaching company with over 210 partners on six continents.

He’s been at it for three decades, and his book Mastering The Rockefeller Habits has been used by thousands of companies world-wide to learn and apply the tools they need in order to profitably run a fast-growing company.

This book is heavy on “how-to”, which means we have a lot of ground to cover.

Let’s get started.

The Three Decisions and Three Habits

Over many years of working with successful entrepreneurs, and studying the life of John D. Rockefeller, Harnish boiled down their success into three simple habits and decisions.

The first habit is priorities. These are a handful of rules – some of which change, and some of which don’t (like your BHAG, for instance). You should have some for the company as a whole, and for each individual who works there.

The second habit is data. This is ensuring that the organization has sufficient data on a daily and weekly basis to provide insight into how the organization is running, and for what the market is demanding. Ensuring that everybody has at least one key daily or weekly metric driving their performance.

The third and final habit is rhythm – which are the daily, weekly, monthly, quarterly, and annual meetings to make sure that everybody is aligned with the short and long term goals with the business.

The decisions you need to make boil down into the following three questions:

Do we have the Right People? Are we doing the Right Things? Are we doing those Things Right?

Priorities: Mastering a One-Page Strategic Plan

As your company grows, it gets harder and harder to keep your team on the same page. The best way to do this, Harnish tells us, is to boil all of the most important things your company is focussing on into one page.

To follow along, you can download a copy of the plan here: https://gazelles.com/static/resources/tools/en/OPSP.pdf

It should cover the following items, most of which will be covered in more detail in the following sections.

Opportunities and Threats – list the five biggest opportunities and threats facing your organization over the time frame you are considering.

Core Values – these are the five to eight statements that define the “shoulds” and “shouldn’ts” that inform all decisions made at your company.

Purpose – this is the reason your company is in business. Why you do what you do. As an example, Wal-Mart’s purpose is “To give ordinary folks the chance to buy the same things as rich people.”

Actions and BHAG – this is your 10 – 25 year lofty goal, similar to Kennedy’s legendary goal to put a man on the moon.

Targets and Sandbox – the target is where you want your company to be in 3 to 5 years. The Sandbox is basically your market – where you’ll play, the product/service you’ll provide, and your expected market share in 3 to 5 years.

Brand Promise – this is the key need you satisfy for your customers. It should be measurable.

Key Thrusts/Capabilities – these are the 5 or 6 things you need in order to reach 3 to 5 year targets.

Goals and Key Initiatives – this is what your company needs to achieve this year, and the 5 or 6 key initiatives that will help you get there.

Critical Numbers – this is where you should have one or two numbers – ideally one from the balance sheet and one from the income statement. It should represent a key weakness in your economic model or operations, that if addressed, will have a significant impact on the business.

Actions and Rocks – these are your quarterly action steps.

Theme, Scoreboard Design and Celebration – create a quarterly or annual theme to bring focus to the year, and post your scoreboard where everybody can track your progress on the plan.

Schedules – determine when things need to happen. Unless activities show up on somebody’s weekly todo list, nothing gets done.

Accountability – this is where you identify which person is accountable for which particular activity on your plan.

Now that we’ve figured out what we need to be focussed on, let’s take a deeper dive into the most important areas of this plan.

Priorities: Mastering the Use of Core Values

Having a few rules, repeating them until everybody is sick of hearing you repeat them, and then making sure everybody acts in accordance with them, is how you create a strong culture.

It makes leading people much easier, and generally leads to better performance, higher employee retention, and better alignment across the company.

Once you have those core values, you should translate them into the quarterly Individual Performance Plan of each person on your team. For each core value that you have, each employee (and you) should be able to identify actions you’ll take to live it out.

Other things you can do include creating recognition awards for people who live out your core values, communicate examples of people living them out regularly, and make them a large part of your quarterly and year themes for the company.

Priorities: Mastering Organisational Alignment and Focus

Having too many priorities is the same as having no priorities.

In order to get your organization aligned with your long term goals, you need to identify the top 5 priorities in your company, and also clearly identify which of the 5 is the most important.

There are seven common leading priorities in fast-growing companies:

  1. Not big enough to compete in the market;
  2. Lacking a key player in a key role;
  3. Your economic engine is broken;
  4. Somebody else is controlling your destiny;
  5. You need a war chest to compete;
  6. You can’t raise money until you grow;
  7. You need to scale back or you won’t survive.

Once you’ve identified your top priorities, you should put them into your Management Accountability Plan. This will ensure that each priority is assigned to somebody, that you identify the actions that need to be taken, and when they need to be taken.

Priorities: Mastering the Quarterly Theme

Now we start to focus on the nitty gritty of getting the plans into motion. You’ve probably been in a work environment where goals and priorities are set, and then promptly forgotten.

One of the antidotes to this is to make sure your team has an emotional connection to the goals so that you generate commitment to them.

There are many ways to do this.

You could do it in a big and flashy way like Mark Moses of Platinum Capital, who once rode an elephant into a company meeting because they were launching an expansion campaign and he wanted his employees to “think big.”

Or you could do it in a more conservative way like one CEO who handed out watches to his executive team that had their three Critical Numbers engraved on them. Every time his executives looked at the time, they were reminded of the priorities and that “time was ticking.”

You can also create rewards for your employees to help further motivate them to reach the most important goals. As long as the goals are clear, and they can see progress being made towards the goals, these types of group incentives work well.

Data: Mastering employee feedback

Hassles that continue to come over and over again cost your employees a lot of time. This is the kind of work that makes people hate their jobs. It’s also likely that these issues cost you a lot of customers and revenues.

The answer is to create a system of employee feedback to figure out exactly what these problems are, and a systematic process to deal with them.

To get started, ask your team a three-part question: what should we start doing, what should we stop doing, and what should we continue doing? Ask them to think about these questions from both their perspective and from the perspective of your customers.

Then, ensure that you are responsive to the feedback. Find some quick wins and cross them off the list. Make sure that your team sees progress being made on them so that they continue to provide input. It’s not enough to just make progress, they have to be able to see it.

Here are 6 guidelines to keep in mind as you continue to work through your employee feedback.

  1. Relevancy – is this an important issue for us to tackle?
  2. Be Specific – make sure to capture the details of each issue.
  3. Address the Root – look at the root issue, not just the symptoms.
  4. Focus on the What, Not the Who – focus on eliminating process issues. 95% of the time it’s a process problem.
  5. Involve All Those Affected – get everybody into one room to discuss and resolve the issue.
  6. Never Backstab – never talk poorly of somebody that isn’t present.

Follow those rules for gathering and dealing with employee feedback and you’ll be well on your way to eliminating your thorniest recurring problems.

Rhythm: Mastering the Daily and Weekly Executive Meeting

At the heart of Harnish’s system for growth are tightly run daily, weekly, monthly quarterly and annual huddles and meetings. He suggests that these meetings should all have specific agendas, and should happen without fail.

Here are the meetings he suggests you should have:

The Daily Meeting

In a growing company, everybody should participate in a 5-15 minute huddle, daily. These huddles utilize three of the most powerful tools you have as a leader in getting team performance – peer pressure, collective intelligence, and clear communication.

You should hold the meeting at the same time every day, and hold it standing up which helps to keep the meeting short and to the point.

Your agenda should include three things – what’s up, daily measurements (data), and where are you stuck?

The Weekly Meeting

The weekly meeting has a different purpose and agenda. You should be focussing on strategic issues, and it should last approximately an hour for executives.

The first 5 minutes should focus on good news stories from everybody.

The next 10 minutes should focus on the critical numbers in your business.

The next 10 minutes should be customer and employee feedback. Focus on the issues that continue to pop up.

The last 30 minutes should be a focus on a single big issue. It should be one of your large priorities for the month or quarter.

Finally, close with “one-phrase closes”: ask each attendee to sum up with a word or phrase of reaction.

The Monthly Meeting

The focus of the monthly meeting is learning. It’s a 2 to 4 hour meeting for the management to review progress on priorities, review the monthly P&L in detail, to discuss what’s working or not from a process standpoint, and finally to do some training.

The Quarterly and Annual Meetings

Finally, the purpose of the quarterly and annual meetings is to review the progress made on the One-Page Strategic Plan.

The X Factor: Mastering the Brand Promise

The brand promise is the key factor that sets you apart from your competition. It’s the reason that your customers keep returning to you year after year.

This is the starting point for every other executive decision. Make the right call and execute on it, and you’ll win. Choose the wrong one and you won’t.

The key here is to focus on customer needs. Not their wants, but their needs. And you need to fulfill their needs in a way that is different than the competition.

After you’ve chosen that brand promise, you need to make sure that you do everything in your power to execute on it, and ensure that you can remove any bottlenecks or chokepoints that might get in your way.

It goes without saying that doing all of this is incredibly hard. It should cause you to sweat a little just by thinking about it.

Lastly, realize that everything changes with time, including your brand promise. If the market changes, or your customers needs shift, you need to be ready to respond with a new brand promise that fills that void.


There is a lot to take in with the Rockefeller Habits. Most of the information you’ll have heard before, somewhere. But putting it all together and executing on ALL of it is where the magic is.

Get started building your One-Page Strategic Plan, and you’ll be well on your way to building a scalable, profitable business.


Tim Kinane

Call 772-210-4499 to set up a time to talk about tools and strategies that will lead to better results.

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Monday, August 5th, 2019

Seven Reasons Why Selling Just a Piece of Your Company Might Make Sense

By: Patrick Ungashick


Business owners often think about exit as an all-or-nothing event. For example, “Should I sell my company?” is a more commonly asked question than “How much of my company should I sell?” Yet in many situations selling only some of your business can achieve many of your exit goals, while leaving you owning a portion (and perhaps even a controlling portion) of your business. Here’s how.

The Basics of Partial Company Sale

Selling less than 100% of your company to an outside buyer/investor is usually called a private recapitalization, or recap for short. Any amount can be sold, and private recaps occur where the buyer acquires anywhere from 10% to 90% of the target company. A critical question is whether the buyer acquires a controlling interest in the company, meaning, of course, more than 50% of the voting stock. However, buyers who acquire less than 50% will still negotiate into the deal-specific ownership rights, called supermajority rights, that give them a direct say in strategic issues such as whether or not the entire company is to be sold. Therefore, whether or not you sell more than 50% largely impacts who is in charge of the day-to-day operations of the company.

Potential buyers include wealthy individuals, private equity groups (PEGs), family offices, and sometimes other companies that see a strategic fit with your business. Buyers will often use a combination of equity and debt when they purchase a portion of an operating company.

Advantages of Selling a Piece of Your Company

Business owners are often surprised by the powerful advantages that can come with a partial sale of their company. Listed below are the seven most common and relevant:

One: Get Cash and Reduce Personal Risk

Probably the number one benefit of a partial sale is it offers an opportunity to convert some (but not all) of your ownership into personal cash. Private recaps are often described as “taking some chips off the table” for this reason. Getting cash increases personal liquidity and diversifies one’s assets, which in turn reduces stress and risk! Partial sales additionally reduce personal financial risk by often removing personal guarantees on company debt.

Two: Keep a Portion of the Company for a Later Sale

Typically, the second most attractive benefit of a private recap is you maintain some ownership in the company to sell the rest of your ownership at a later date after the company has hopefully increased in value with continued growth. In this way, private recaps are often described as opportunities to “take a second bite of the apple.”

Three: Stay Involved with the Business…Or Not

Another powerful advantage is you can customize your involvement in the business after the partial sale. If you want to remain fully involved in the business’s leadership and management, you potentially can. Or, if you wish to scale back your participation to a purely strategic or advisory role, such as serving on the board of directors, that too is commonly done. It is even possible to completely step down from all involvement in the company management or leadership and become a “silent investor.” This benefit allows you to pursue any degree of involvement—as long as your buyer agrees with and supports the plan. Perhaps the most common scenario is selling a portion of the company but remaining involved with day-to-day leadership, especially if you intend to enjoy that second bite of the apple later in the future. (Watch our recent webinar called “Cash Out Without Walking Out” webinar to learn more.)

Four: Secure Different Outcomes for Different Owners

If you have business partners, a private recap can allow different owners to pursue and potentially achieve separate and seemingly incompatible individual goals. For example, perhaps one owner is older and seeks to sell some to all of his or her ownership, but another owner is younger, eager to stay involved, and wants to increase his or her ownership. A partial sale can potentially accommodate these differing goals, whereas a full company sale could not.

Five: Create an Equity Path for Top Employees

Another advantage of the partial sales is the ability to create an equity sharing plan for top employees who currently lack ownership. Within a partial company sale, an equity pool can be created to incentivize top employees.

Six: Gain a Powerful Partner

With any partial sale, a new business partner enters the picture—the person or organization who purchases the partial interest. Ideally, this partner brings skills, knowledge, resources, and opportunities that your company leverages into accelerated growth. In the best scenario, this new partner can revolutionize your company’s future: providing capital for expansion or acquisitions, opening doors to new markets, introducing cutting-edge technology, or injecting industry-leading leadership and experience. More modest benefits can include operating cost reductions and efficiency gains if the partner brings larger economies of scale or greater market credentials.

Seven: Achieve Your Exit Goals

A partial sale of the business can be a key tactic in exit planning to achieve your exit goals. If you are like most business owners, at exit you seek to reach financial freedom, exit on your terms, and leave the company in good hands. Whether you ultimately intend to sell the company to an outside buyer, sell to your management team, or give the business to your kids, a partial sale can secure your major goals.

Conclusion and Next Steps

Private recaps are not for every owner or every company. Buyers/investors look for consistently profitable companies that, offer strong growth potential, and have capable leadership. Another point to consider: a partial sale may receive a lower valuation multiple than might be achieved with a full sale, especially if the buyer is only acquiring a minority position. However, this potential disadvantage is offset with the opportunity to pocket some liquidity now and retain ownership for the full sale at a later date—hopefully at a higher total valuation after having grown the company to the next level.

Next time you find yourself asking, “Should I sell my company?” consider rephrasing that question to read “How much of my company should I sell?” Contact us to get help answering this critically important question.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, July 29th, 2019

Why There are Only Four Exit Strategies and the Danger of Not Knowing Yours

By: Patrick Ungashick

phone guy

To the surprise of many business owners, there are only four ways to exit from a company. One day, you will either pass your company to family members, sell to an outside buyer, sell to an inside buyer, or shut it down. Those are the only four possible exit strategies. Period. They are:

1)    Pass to family

2)    Sell to Outside Buyer

3)    Sell to Inside Buyer

4)    Shut it Down

Accurately identifying which of these four exit strategies is yours can make or break your exit success. Here’s why.

But wait – What About Other Exit Strategies?

Before explaining why it’s imperative to know which of the four exit strategy is yours, you might need proof that only these four occur. Let’s start with “I never want to exit”—a common sentiment. Saying you never want to exit means, you intend to hold onto the company until you die (or perhaps get very, very sick.) Death is not a strategy—it’s a timing event. If you still own some or all of your business at your end, one of the four outcomes listed above will always happen: your interest in your company will pass down to family or be sold to an outside buyer or be sold to an inside buyer, or the company will be shut down. If you intend to own your company until death, that’s fine, but you still have to determine what happens to your company at that time.

What about the idea of holding onto your company and letting a management team run it while you sit back and deposit distribution checks? This is not an exit strategy either. Having a competent management team that can run your business without you is excellent. It can give you time to do other things and increase your business’s value. But it’s not an exit strategy. You still own the company. You will yet have to figure out one day what happens to it. You still have significant personal wealth tied up in the business that you will want to access at some point. Delegating leadership to a team may be the right tactic for now, but eventually turnover happens; at some point, you will have to get involved back again.

What about ESOPs? Employee stock ownership plans (ESOPs) are not an exit strategy—they are a tool to help sell a company to an inside buyer—the third strategy. What about going public? That’s a way to sell a business to an outside buyer—the second strategy. What about an intentionally defective grantor trust? That is a tactic to pass the company to your family members—the first strategy. The point is that there are many exit tactics and structures out there, but they are all tools to help achieve one of the four exit strategies.

Why it is Crucial to Know Your Exit Strategy

The primary reason to know which of the four exit strategies likely applies to you and your business is that each strategy requires a different and mutually exclusive path to maximize your results. In other words, to implement one strategy, you will need to make decisions and take actions that are incompatible with the other strategies. If you don’t know which strategy is yours (or if you pick the wrong strategy), then you risk making decisions that undermine or outright block exiting successfully. Here are a few examples:

Business Valuation

If your desired exit strategy is to pass your business down to your family (the first strategy), then you must take steps to establish the lowest defensible valuation for your company to reduce potential gift and estate taxes.

In contrast, if you intend to sell your business to an outside buyer (the second strategy), then you will seek to create the highest potential valuation for your company when pursuing potential buyers. These are entirely incompatible courses. And, if you intend to sell your business to an inside buyer (the third strategy) then in some situations you will want a low valuation (again—think taxes) but in other cases, you will benefit from a higher valuation. Not clearly knowing your chosen exit strategy risks making critically wrong decisions that impact the business’s valuation.

Leadership Succession

If you intend to pass your business down to family ( the first strategy) or sell to an inside buyer (the third strategy) it’s not enough to have a strong leadership team—you must also have a successor CEO trained and ready to go. Otherwise, your exit very possibly will fail because when you (presumably the current CEO) leave the company, you will not have anybody to replace you. Compare this with the second strategy, selling your company to an outside buyer. Most of the time, having a successor CEO when selling your business to an outside buyer is helpful but not necessary, because the buyer has its own senior leadership team. So, which exit strategy you adopt will determine how you need to hire and develop your leadership team.

Taking Money Out of the Company to Reach Financial Freedom

A third example involves taking money out of the company before exit. Too many business owners leave too much cash in their company, presumably to be used at some point to fund future growth. If you intend to pass your business down to family (the first strategy), sell to an inside buyer (the third strategy), or shut the company down at your exit (the fourth strategy), in most situations you should maximize distributions from the company at every opportunity to reach your personal financial freedom. In those three exit strategies, there may be little to no liquidity event at your exit. In contrast, if you intend to sell your business to an outside buyer upon exit (the second strategy) then reinvesting smartly in the company to maximize growth may be the best use of cash. Again, which decision you make should be driven by having a clear knowledge of your likely exit strategy.


There are many additional considerations and advantages associated with knowing your best exit strategy: it simplifies getting ready for exit, reduces confusion and stress, and can saves costs. But the most important reason is to avoid the danger of making the wrong decisions for the wrong reasons. To get started, consider our free ebook and begin with determining your ideal exit strategy.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, July 22nd, 2019

Three Reasons to Take the Surplus Cash Out of Your Company

By: Patrick Ungashick

Biz pair

Too many business owners leave more cash in their company than is necessary. Surplus cash inside the company can cause present and future problems. Here’s how.

First, How Much Cash Does Your Company Need?

Owners and their company’s financial leaders need to answer the question of how much cash the company needs. There are no absolute rules, and every company and industry have specific considerations. Also, how much cash the company needs will change with time as the business grows, market conditions evolve, access to credit changes, etc. While in some cases, the cash question may be difficult to answer; ‘difficult’ does not mean impossible. Leadership teams (with help from outside financial advisors, if needed) must review the company’s recent operations and expected future activities, and then discern how much cash the company needs to meet its operational requirements and growth objectives, with room for a conservative reserve. Many companies have not carefully conducted this analysis or may be working from out-of-date assumptions and paradigms. Once the leadership team has identified the target cash needed, owners should distribute any cash surplus unless there are extenuating reasons not to do so.

There are several reasons why companies might sit on too much cash. A commonly heard justification is holding extra cash helps the owner feel “safe.” Cash is king in times of trouble, so having money readily available in the company’s bank account helps many owners sleep at night. Additionally, many business owners treat “debt” as an altogether bad word. Consequently, the company must hold onto extra cash if there is no sufficient line of credit or other facilities when short term cash is needed. Finally, within entrepreneurial-led companies hoarding cash can be a habit left-over from the days when the company was young and fragile, and founder-owners kept excessive funds as a survival tactic.

Despite these issues, keeping surplus cash in the company is often counterproductive to both immediate and long-term objectives. There are three significant reasons why.

1.Cash in the Company is Exposed to Creditors

Ironically, the feeling that keeping cash in the company increases safety is misplaced. Cash held inside your company is exposed to business creditors, whereas cash held personally is not (unless specifically pledged such as under a personal guarantee). Creditors can be known, like your bank, vendor, or landlord, or can be unknown, acting as a disgruntled former employee or disappointed customer who is preparing to bring a claim against the company. The safest place for cash is likely outside your company.

2.Taking Cash Home Reduces Personal Stress

Many business owners have the majority of their net worth tied up in their company and its supporting assets. This concentration may have caused you little stress when you were younger and tolerated the risk, and when the company’s value was modest. Over time, however, the company grows in value while simultaneously, you get older and perhaps become less risk tolerant. Having a large portion of net worth tied up in the company eventually develops into a stressful situation, for both you and often your family members who share in this risk. Distributing excessive cash can reduce an owner’s stress level and help family members find greater peace of mind.

We see this frequently. A recent former client had a net worth of about $15 million, of which $12 million was the estimated value of his company and the balance mostly tied up in real estate. Troubled by his concentration and illiquidity, the client was rushing to sell some or all of his company. Before committing to a sale, we helped the client identify that his company was sitting on about $2 million in surplus cash. After some cajoling, the client agreed to take a one-time distribution for this amount. After taxes, the client had nearly $1.5 million sitting in his personal bank account. His eagerness to sell the company cooled, and he adopted a more disciplined and less emotional approach to his exit plans.

3.Excessive Cash in the Company Causes Problems at Sale

Excessive cash in the company can become a problem when selling the company. Buyers don’t want to purchase a company stripped bare of cash or cash equivalents—the business must have sufficient working capital to support its operations and expected growth. The funds required to support current and planned operations generally will remain in the company at sale, and thus go to the buyer. Any cash not needed for working capital will be a surplus and typically goes with you the seller.

You can foresee the issue—how much working capital needs to be left in the company will be a point of discussion (and likely negotiation) between you and your buyer. To the extent that you have left more cash in the company than it truly warranted, you have made it easier for the buyer to argue that a more considerable amount of money must be left in the business. That’s the value you would lose. If you find yourself in this situation, to avoid losing that cash, you can have an accounting firm review and reconstruct the company’s actual working capital needs—an expensive project in most cases. The alternative and better solution are to avoid the problem in the first place by not leaving surplus cash in the company.

Getting ready for exit often involves taking steps that seem contrary to how you have managed your company, and your preparations must start no later than five years before you intend to exit. Holding onto too much cash ironically can make it more difficult to exit successfully.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, July 1st, 2019

What Game of Thrones Teaches Business Owners About Preparing for Exit


By: Patrick Ungashick

Thoughts from a Game of Throne fan…

Whether you were a die-hard fan of HBO’s Game of Thrones, or you never saw an episode, likely you are aware that the most popular fictional series in television history recently ended in a manner that left millions of fans disappointed. (I am one of those disappointed die-hard fans.) In one crucial way, the Game of Thrones (GOT) ending offers an important insight for business owners getting ready to exit. Here’s how.

To explain the connection between GOT and your business exit, you must understand how sharply fans disliked the program’s ending compared to the entirety of the show. GOT consisted of 73 total episodes that aired over eight seasons. IMDB.com, a leading website for rating movies and television series, ranks the overall GOT program a lofty 9.4 out of 10. A quick review of the individual episode rankings reveals that episodes aired during the first seven seasons earned IMDB scores between 8.5 and 9.5, and several episodes even received a nearly impossible score of 9.9. However, during the eighth and final season, the scores fell dramatically. The highest rated episode from the final season received a pedestrian 7.9. The show’s climactic finale was the absolute all-time lowest scoring GOT episode, bottoming out with a dismal 4.2. How and why the show lost its way is not essential for our purposes. What is relevant is that after seven seasons of record-setting viewership and heaps of critical acclaim, at the very end the show blew it.

At this point, nobody knows how history will treat GOT. Years from now it may be regarded as one of television’s all-time great productions. But, what seems clear is there will always be an asterisk next to its name—a notation that despite all the show’s greatness, what happened (or did not happen) at the end tarnished its unparalleled accomplishments.

This is the lesson for business owners. What you do (or fail to do) at your exit will impact your company and personal legacy to a disproportionately large degree. In GOT’s case, the final few episodes overshadowed nearly ten prior years of artistic and narrative greatness. In your company’s case, if at the very end, your exit somehow fails or falls short, it may cast a dark cloud over your company’s previous years or decades of accomplishments.

An owner’s exit impacts practically every area of one’s business and personal life. Consequently, you cannot afford to have your exit be anything less than a big hit. Consider the following three examples of how a disappointing exit can have a disproportionately large negative impact on you and/or your company:

1.Failing to Reach Financial Security

Likely your hard work and business success have created for you a desirable standard of living that has benefited you and your family for many years. You also likely seek to preserve your financial security for you and your family for the rest of your life after you exit. However, if you fall short of achieving your personal financial goals at exit, you may quickly find yourself deeply disappointed and having to worry about money, perhaps for the rest of your life.

2.Employees are Treated Unfairly

Most business owners are deservedly proud of the careers and jobs they have created for their employees and strive to treat their people fairly. If, after years or decades of providing a stable and respectful workplace, your exit causes valued employees to lose their jobs unexpectedly, or thrusts employees into hostile work culture, that can quickly sour how people feel about your company even after years or decades of good relationships with employees.

3.Customers Left Unhappy

Businesses growth starts by taking care of the customer, and likely your company has done this well for years or decades. But if after you exit customers experience a noticeable decline in the quality of what your company provides, that too can quickly and perhaps permanently taint a previously sterling business brand and reputation. Few business owners will be happy after they exit if they realize that when they left the company, the company’s positive reputation rapidly turned sour.

The End Zone

My first book, Dance in the End Zone, opens with a quote from Elmo Wright, the former professional football wide receiver who is credited with inventing the end zone dance. After his career, Mr. Wright accurately observed: “I’ve accomplished a lot in my life, but what happened in the end zone is what defines my career.” This statement was true for Mr. Wright, and have been reaffirmed by what happened with HBO’s Game of Thrones. It will also define you and your company when you exit. Therefore, it is imperative that business owners start planning their exit as early as possible because what you do in the end zone will define your career, legacy, and post-exit happiness.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, June 24th, 2019

The One Scientific Reason Many Business Owners Do Not Exit Happily

By: Patrick Ungashick


Have you ever attended a presentation where the speaker asked audience members to raise their hands if they believed themselves to be an above-average driver? Typically, about 95% of the people in the room raise their hands. This would be impossible, unless the room was full of Formula One and NASCAR drivers. In a room full of randomly selected adults, 95% cannot be above-average drivers. There is a scientific explanation for what is happening, and it offers critical insight for business owners hoping to exit happily one day in the future. Here’s why.

The scientific principle at work is most commonly called illusory superiority, and most of us suffer from it at one time or another. Illusory superiority is a cognitive bias wherein a person overestimates his or her abilities and qualities relative to others. Several psychological experiments have revealed illusory superiority in action. For instance, in a 1977 study, a whopping 94% of professors rated themselves above average relative to their peers. Other studies have shown people tend to overestimate how charitable they will be, or of course their driving skills. Interestingly, illusory superiority seems to be rooted in North American culture—in many Asian societies; the phenomenon does not exist.

The illusory theory also applies to business owners contemplating exit. Most business owners know that the exit process is typically stressful and difficult and that a significant number of owners fail to exit when they want, how they want, and for the value that they want. But, most owners also seem to feel that they are unlikely to suffer any of the obstacles or setbacks that commonly plague others. In exit planning and our experience, most owners overestimate their readiness to exit and underestimate the challenges they will face. This behavior is illusory theory in action.

Psychologists who study illusory theory offer explanations as to why it occurs, which can help business owners better approach exit. A leading cause for illusory behavior is that “soft skills” like driving, lack rigorous mechanisms to measure and verify one’s competency, allowing us to assume that we are more qualified and prepared than we might actually be. That’s why people over-estimate their driving skills but are unlikely to over-estimate harder skills such as playing golf or piloting a plane, where one’s competence or preparedness are unequivocally revealed.

When getting ready for exit it is easy to assume that you are sufficiently ready and prepared, particularly if you have never exited from a company before. This assumption leads to underestimating the work that needs to be done and the time required to do it—arguably the biggest mistake owners make. Most owners lack tools and mechanisms to objectively evaluate how ready they and their company are to exit, and how likely they will achieve their exit goals. This too is the illusory theory in action.

If you are like most owners, you have too much at risk at exit to assume you are adequately prepared. Consider the following steps and resources to have a better plan:


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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Monday, June 17th, 2019

Seven Steps to Increase Your Company Value at Sale

Apple Orange

By: Patrick Ungashick

Two Mercedes-Benz sedans of the same make, model and manufacturing year are sold, but one goes for a higher price than the other. There are many reasons this commonly occurs. The car which sells for a higher price may have lower mileage, offer more amenities, is in better condition, or has a better service record.

This phenomenon is not unique to Mercedes-Benz or automobiles in general. The same reality happens with practically any asset, including companies. Take two companies from the same industry and similar size, offer them for sale, and one sells for a premium price compared to the other. It happens all the time. However, there is one important difference between cars and companies. The car that sells for a premium price may get its owner a few thousand dollars more at sale compared to the other car. The company that sells for a premium multiple may get its owner a few hundred thousand or a few million more for its owner. Therefore, it pays to know the right steps to take to maximize value at sale.

There are factors or conditions within a business—practically any business—that will increase (or decrease) its value at sale. If you are a business owner contemplating exiting one day in the future by way of sale, it is essential to know what these conditions are, and create them within your company. As you will see from this introductory article, the conditions take time—usually three to five years or longer—to fully achieve, so the sooner you get started, the better. Pursue these seven steps to make your company potentially sell for a higher price and better terms at your exit

Seven Steps to Maximize Business Value



1.Build a strong team. Companies with excellent leaders and managers are highly valuable. Practically every buyer wants top talent. If your organization has a strong leadership team that stays with the company after your exit, your business is likely more valuable.

2.Reduce dependency on you. If without you, the company will likely have lower sales, weaker operations, or make fewer profits, your company is nearly always going to be less valuable to a buyer. The business’s value cannot walk out the door when you do. (Here’s eight ideas on how to do this.)

3.Organize your financial statements and reports consistent with buyer expectations. Buyers want to see at least three and preferably five years of historical financial statements organized and formatted in a manner consistent with their expectations. Learn what the expectations are in your industry. These requirements could mean audited financials, using accrual and not cash accounting, or following GAAP standards. Make sure your EBITDA is normalized too. All of this work usually improves value at sale, assuming the company’s underlying financial results are attractive.

4.Be ready to present a compelling growth strategy and plan. Buyers purchase companies not for their past results, but their expected future results. Make sure your company can tell a credible and compelling story for how it will achieve significant growth over the next three to five years. This written document is commonly called a strategic plan. Ideally, your industry is a growing industry as well. Companies that can tell this story are nearly always more valuable at sale compared to companies that cannot.

5.Diversify your customer base. Buyers do not like risk, and often will either pay less for a riskier company or pass altogether on buying it. Customer concentration creates risk for buyers. When the faces around the table change, customers (even well-served customers) often pause and ask themselves if this wouldn’t be a good time to re-evaluate their options in your market. Ideally, no more than 10% of your sales and profits for the last several years have come from the same customer(s).

6.Create a brand that others want, and that you indisputably own. Your brand does not have to be the next Coca-Cola, Google, or Nike to offer value to a buyer. If your brand or brands are well-known and respected in your industry, that will nearly always add value at sale. Creating brand value takes time and effort. Make sure you own your brand—having a company, and a website or two is not enough in most situations. Work with experienced advisors to create a valuable and defensible intellectual property (IP) strategy and portfolio. (This webinar tells you how to build brand value.)

7.Remove obstacles to scale. Buyers do not want companies that have barriers to growth. They are attracted to businesses that seem to be well poised to achieve a significant increase in scale. Review all of your business’s vital systems and processes: sales, operations, customer service, financial, training, etc., identify potential or existing bottlenecks and devise strategies for removing them. Ask yourself and your team if your company doubled in size nearly overnight, could that increase in volume be supported? If not, address the limiting factors. Companies that can support growth are typically more attractive to buyers.


More Ideas and Resources

These seven steps will maximize your company’s value at sale. For this reason, we call the business conditions described above the Seven Areas of Transferable Value™.  These seven steps might not make your business bigger regarding revenue or profits, but they usually will make it easier and less risky for a buyer—thus increasing your company’s value when it transfers to a buyer or successor.

Certainly, there are other important steps to successfully selling a business. It’s important that you know your company’s critical performance metrics, and make sure that they are all pointing in the desired direction. Also, assemble a competent team to advise and assist you—resist chasing the latest “offer” that arrives in your email inbox.

Maximizing business value takes years of work prior to exit. Owners who wait too long to get started might still be able to sell their company, but they risk missing out on thousands to millions more at exit. If you intend to exit anytime in the next five years (https://www.navixconsultants.com/your-last-five-years-ebook) then it’s time to get started planning your exit.


If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

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