Tim Kinane


Posts Tagged "Business Exit Strategy"

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 3rd, 2019

Why an Investment Banker is Like a Wedding Coordinator, and an Exit Planner is Like a Minister


By: Patrick Ungashick

There once was a man engaged to be married. He had never married before, but he had seen what a happy marriage could do for people, and unfortunately, he also had seen what an unhappy marriage could do to people.

The man hoped his marriage to his future spouse would be happy and successful. So, he committed to working with a minister experienced in preparing people for marriage. The minister helped people know, anticipate, and address the issues and challenges that often come with marriage. The minister got to know the man, assessed the man’s readiness for marriage, and then gave feedback and advice to help the man enter into a happy and long marriage.

The man also wanted to share the wonderful moment of his marriage with the people closest to him and his future spouse. So, he committed to working with a wedding coordinator. The wedding coordinator designed a wedding event that would share the couple’s joy and happiness with all of the people whom they cared about, and would run smoothly without stress or unwelcome surprises.

Eventually, the man married. He and his spouse had a wonderful wedding, thanks at least in part to the wedding coordinator. And they lived happily married ever after, thanks at least in part to the minister.

This simple parable can help explain the difference between an exit planner and an investment banker, which is a common question we hear from owners who intend to sell their company. It’s an understandable question, for in many ways an exit planner helps prepare the company for sale, a sale that the investment banker is charged with making happen. But there are key differences between exit planning and investment banking, which is why it is important to think about these two roles separately. In some cases, it can make sense to work with the same firm or team to fulfill both roles, but in other cases, it’s beneficial to work with separate teams.

The man (or woman) seeking to marry is like a business owner seeking to exit, in this case, by selling his company one day. Just as the man has never married before, but he has seen good and bad marriages, the business owner has never exited before, but is aware that some exits are happy, but many are not. Exit, like marriage, changes one’s life in many ways. Being unprepared for exit can lead to significant struggles, just as being unready for marriage.

The minister (or priest, rabbi, counselor, etc.) is like an exit planner. Just as the minister is concerned with the individual’s overall best interests and happiness, so too is the exit planner. The exit planner’s mandate is to help the owner achieve his or her overall exit goals, which often includes: reaching personal financial freedom, leaving the company in good hands, exiting on his/her own terms, and having a sound plan for what to do next in life after exit. To be effective, the exit planner must get to know the owner and the company, and then advise the owner on the best plan and course of action, which may include—depending on the owner’s goals—selling the company. However, at all times, the exit planner must remain objective and committed to achieving what is best for the business owner.

The wedding coordinator is like an investment broker (or business broker, M&A advisor, etc.). Just as the wedding coordinator is focused on a singular event and outcome—the wedding day, the investment banker is focused on a singular event and outcome—the sale of the business. To be effective, the investment banker must be dedicated to the difficult and sometimes fragile process of selling the company. Selling a company is never guaranteed, not to mention selling for an attractive price and favorable terms. Just as the wedding coordinator seeks to make sure everything goes off smoothly with no critical detail unaddressed, so too the investment banker must carefully choreograph the process to minimize factors or risks that can hinder or even block the company sale.

When working for the business owner who wants to sell his or her company, a close and synergistic working relationship typically exists between the exit planner and the investment banker. The exit planner, typically engaged three to five years prior to exit, can help the business owner identify and implement tactics that will increase company value at sale and reduce risk. This tees up the company for the investment banker, who typically comes into the picture about a year before the final sale.

However, note that the two professionals, while serving the same client, do not share the same focus. The exit planner, like the minister, is focused on the business owner’s overall goals and best interests. The investment banker, like the wedding coordinator, is focused on the sale process and closing. Ideally, these two elements remain in alignment, meaning that selling the company (what the investment banker wants) is in the best interests of the business owner (what the exit planner wants). However, things can happen that bring into question whether selling the company is in the owner’s best interests at that time. Common examples include:

  • The offer(s) to purchase the company is for a lesser amount that the owner needs or wants
  • The offer(s) to purchase the company include terms and/or conditions the owner finds unfavorable
  • The offer(s) to purchase the company come from a potential buyer(s) that the owner feels is not a good culture fit
  • The business owner comes to realize that he or she is not personally ready to sell the company at that time, often because the owner is unsure about what he or she would do without the business
  • The business owner grows unsure about selling the company to an outside buyer and instead seeks either an inside sale or passing the company to the next family generation

Should any of these occur, the investment banker and exit planner may find themselves working toward different outcomes. This benefits nobody, especially the owner. Experienced exit planning and investment banking advisors know these issues and seek to minimize the likelihood that these situations occur. In all cases, business owners and their advisors need to remain clear through the entire process what role every advisor is playing.

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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Tuesday, May 28th, 2019

Business Valuations: How to Select a Business Valuation Professional


Change money


By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part four of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only. 

How to Select a Business Valuation Professional

There is no such thing as a completely objective business valuation. Every business valuation involves some degree of judgment, which means subjectivity. A human being who values a company has countless decisions and judgment calls he or she must make during the valuation process: which valuation methods to use, what data to include or exclude, how to factor in non-quantifiable issues such as risks, opportunities, market conditions, and more. Even if you are using a software program to do a valuation, subjectivity is introduced by the judgment calls made by the person(s) who programmed the application, and again by the person entering the data. Therefore, if you need a business valuation a critically important question becomes who do you use to do the work?

There is an additional reason to carefully consider who should perform your business valuation. Getting a business valuation is like buying an insurance policy—that valuation may be called up to help protect you against claims against your interests from unfriendly parties, such as a disgruntled business partner, a divorcing spouse’s lawyers, or perhaps even the IRS. Not all business valuations are created equal. The quality of the valuation, and the party who performed it determines how durable that “insurance policy” will be if called upon.

Unfortunately, it’s never been more challenging to determine who you should use to get a business valuation. There are no formal college or university degrees in business valuations, and no state or federal licenses exist. Consequently, many professional advisors will say “Sure, we do business valuations” if asked. An online search turns up countless websites, programs, and calculators that offer low-cost or even free valuations. While free online valuation calculators may be fun to play with, they cannot provide the level of accuracy and assurance that comes with a valuation done by a qualified expert. So, when investigating who to turn to, consider the following:

Professional Experience

While no formal education or licensing requirements exist for business valuations, several organizations offer professional certifications in this field. Look to work with valuation professionals who have at least one of these credentials (listed in alphabetical order):

  • Accredited in Business Valuation (ABV). This designation is only to certified public accountants (CPAs) who have passed an exam and have met several thresholds of minimum valuation experience.
  • Accredited Senior Appraiser (ASA). To earn the ASA, an applicant must meet specific educational requirements, pass a comprehensive exam, submit their work product to a peer review process, and possess five years of full-time business valuation experience.
  • Certified Business Appraiser (CBA). Applicants must meet certain educational requirements, pass a comprehensive exam, and achieve either 10,000 hours of business valuation experience or complete 90 hours of advanced course work. As with the ASA, applicants must also undergo a thorough peer review process.
  • Certified Valuation Analyst (CVA). Like the ABV, this credential is only available to CPAs. Applicants must pass a comprehensive exam and complete required course work.

As of the time writing this article, only about 5,000 professionals in the US hold at least one of these credentials. The good news is once you know what to look for, it is not difficult to find them.

How to Find Your Valuation Professional

Should you need a formal business valuation, consider the following steps:

  • Ask your existing trusted advisors to refer you to valuation professionals that they know, and hopefully have worked with in prior situations. As a backup method, research online valuation professionals in your area and/or who have experience in your industry.
  • Meet or speak with several candidate professionals, share your situation, and ask them how they would approach your needs.
  • After initial discussions, ask for a written proposal including a fee schedule and project timeline. Be sure you understand the information and work required of you during the valuation process.
  • Once you have selected the valuation professional whom you prefer to work with, have your lawyer review their service contract or agreement. It should contain clear and favorable language about how this professional will respond if called upon to defend their valuation in court, arbitration, or in front of a regulatory agency.

Be sure to review the previous articles in this series (if you have not already) to learn when you might need a valuation, how the valuation process works, and to understand the more common valuation methods. Valuations play an essential role in many business owner’s exit planning process—it pays to know the basics of how they work.

Your Next Steps

Click to register to receive subsequent articles in this series.


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, May 13th, 2019

Business Valuations: How to Value a Business

Valuation binder

By: Patrick Ungashick

Business Valuations & Exit Planning: A Business Owner’s Guide

This is part two of a four-part series on business valuations, written for business owners who need to understand how business valuations are used in the process of preparing for your business exit. As this series deals with tax and legal subject matters, readers are advised to consult their tax and legal advisors. This material is for educational use only.

How to Value a Business

To understand business valuations and how they work, it is helpful to understand the general process most valuation professionals (appraisers) use. The process is more involved and collaborative than many business owners expect. To perform a valuation, appraisers usually do not simply gather financial reports, input numbers into a spreadsheet, and then spit out a figure. You the owner, your company management (especially your CFO and/or controller), and your advisors will work closely with the valuation professional at key steps. The general approach consists of:

Getting a Business Valuation Step 1: Define Your Goals

You and the valuation professional start by discussing the project and defining your objectives and purpose for the valuation. For example, why are you commissioning this valuation? Your purpose will guide the process and, may influence the appraiser’s analysis and conclusions where appropriate. For example, are you seeking the valuation for tax planning purposes? Or are you preparing the valuation pursuant to a pending event such as a marital divorce or business partner buy-out? It is imperative that you and the valuation professional understand your goals. The appraiser’s goal then should be to ultimately, deliver to you a comprehensive and defensible business valuation.

(Note: You may have specific assets such as real estate, equipment, or intellectual property held within your company, or owned in another entity and leased back to your company. Depending on your situation the appraiser may need to review these assets as part of the valuation process, and determine a distinct value for them separate from the company’s value.)

Getting a Business Valuation Step 2: Gather Data

Typically, the valuation professional then provides you and the involved members of your leadership and advisory team with a list of required financial reports and information, usually going back three full years. Commonly the appraiser will want to see income statements and balance sheets, but they may ask for additional detailed financial and tax reports. They likely will also ask for non-financial information such as the company organizational chart, business plan, budget, and any industry data or reports you can provide.

The valuation professional will then study and review the information, using questionnaires and templates they have developed for this purpose. They will subsequently meet with you and the company management to ask additional questions to clarify and deepen their understanding of the company, including its strengths, risks, market, and direction. The better the valuation professional understands the financial and operational aspects of your company, the better prepared they are to achieve your valuation objectives and support their valuation conclusions.

It is critically important that your company’s financial reports and records be current, accurate, and formatted consistent with industry norms and expectations. Otherwise, the valuation exercise could end up becoming a garbage-in-garbage-out exercise. The valuation professional may need to make financial adjustments to account for owner benefits, perks, and non-recurring expenses (commonly called add-backs) as well as understand any intangible assets not fully reflected on the balance sheet. The appraiser must also ask about operational and industry risk factors that can substantiate higher or lower valuations. The valuation professional will also ask for projections of the company’s anticipated future financial performance, commonly called pro-forma financial statements. If you and your management team do not currently prepare projections, the appraiser may assist you in doing so if relevant and advantageous.

As you can see, it’s a collaborative process with a lot of back and forth discussion and exchange of information. This presents the opportunity for you and your management team to give the valuation professional your perspective on the company’s strengths, opportunities, risks, and threats.

Getting a Business Valuation Step 3: Further Research and Analysis

From there, your valuation professional now has plenty of data to analyze from these documents and discussions with you and your leadership team. They may need to recast your historical financial statements, which are often prepared with an eye toward tax minimization and may need to be normalized for business valuation purposes. Additionally, the appraiser may need to research external factors such as economic conditions, industry trends, and comparable transactions within your industry. At each step of the way, if the valuation professional has additional questions, he or she likely will be asking you for further information. In some cases, the valuation professional may need data from your other advisors, such as your accountants.

Getting a Business Valuation Step 4: Preliminary Valuation Findings

While different valuation professionals follow different processes, at this point many will now circle back with you and your team to present preliminary findings. Before issuing a final report, the valuation professional may share their initial thoughts and reasoning, in order to gather your reaction and get additional input from you. What will be significant at this point is not just the preliminary valuation, but just as importantly you need to know how the appraiser got to this preliminary valuation amount. This is the time for you and your team to offer additional input to help the appraiser substantiate a higher or lower valuation, if appropriate.

Getting a Business Valuation Step 5: Final Report

Last, the valuation professional now issues a final report. The reports consist of far more than just the bottom-line number, although understandably that’s what you will initially focus on. Valuation reports should cover an analysis of the company’s risk factors, a detailed description of the company and its market position, and a review and assessment of the prevailing economic conditions and industry trends. Recast financial statements and projections should be included in the report. Then, the valuation professional should clearly state what assessment methods they used to determine their conclusion, and why.

Most appraisers will sit down with you, and relevant members of your management and advisory team, to go through the final report. They should explain all the key points and answer your questions.

Getting a Business Valuation: An Important Tip

There is one important tip to consider if you believe you might need a formal business valuation. Contact your attorney and ask him or her about commissioning the valuation study on your behalf. In other words, you pay your attorney the fee for the valuation and, then your attorney hires the valuation professional for you. The potential advantage this creates is, if done properly, the valuation results will come to your attorney and then may be covered by attorney-client confidentiality. This may be important for protecting your interests. For example, suppose your purpose for getting valuation was tax planning related and you were expecting (or hoping for) a low valuation, but the number came in higher than desired. With the valuation covered by privilege, you and your attorney can safely and confidentially discuss the findings and determine your next steps, including potentially trying another appraiser. Or, the reverse scenario could be true. You could have commissioned the valuation hoping for a high number (perhaps if you are expecting to be bought out by a business partner), but what if the valuation comes in lower than desired? Again, having attorney-client confidentiality may preserve options for you. As with all legal and tax issues, discuss this with your advisors.

Your Next Steps

Click to register to receive subsequent articles in this series.

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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Thursday, April 18th, 2019

Do You Really Need an Audit as Part of Your Exit Planning?



By: Patrick Ungashick

One of the most common questions business owners ask us as we help them prepare for exit is, “Do I need to get audited financial statements?” It’s an important question because the wrong answer can lead to wasted money, greater risk of your exit falling through, or both.

The answer to the question is…maybe. Here’s how to know.
To start, there are three levels of financial statements available from your accounting firm: compiled, reviewed, and audited.


With compiled statements, your accountants collect your company’s data and organize it into financial statements that meet your specifications and commonly-held accounting standards and principles. Your accountants neither analyze nor verify the data with a compilation. As a result, the accountants provide no assurances on the data’s accuracy.


A review provides limited assurance on your company’s financial statements. During a review, the outside accounting team will examine selected portions of your company’s data and make limited inquiries related to the accounting practices and principles used by the business.

The accountants also may analyze certain figures, such as current-year and prior-year balances, to verify they meet expectations. In this way, a review can provide limited assurance about the company’s financial statements, but not to the same degree as a full audit.


An audit provides the highest level of assurance of a company’s financial statement accuracy. An audit explicitly states that the company’s financial statements are free of material misstatement or fraud and conform to generally accepted accounting principles.

In an audit, the accountants will obtain evidence of the financial data’s accuracy by thoroughly examining source documents, meeting with company management, and verifying information from important parties such as customers, vendors, and lenders. Then the accountants will rigorously test the data to verify accuracy in the final financial statements.

Audited financials require the most work and thus cost the most money, but they provide the highest level of assurance to creditors or buyers.

Do You Need an Audit?

Now we can explore if you need to invest in audited financial statements as part of your exit planning. The first step to answer this question is to know your likeliest exit strategy.

There are only four ways to exit your business: sell to an outside buyer, sell to an inside buyer (typically one or more key employees), pass it to family, or shut it down. Knowing which of these four will be your exit strategy goes a long way in determining if you need an audit.

If you intend to pass your business to family or shut your business down, rarely would you need to invest in an audit. That leaves the remaining two exit strategies of selling to an inside buyer or selling to an outside buyer.

If you intend to sell to an inside buyer, then typically you will not need an audit as long as a large portion of the sale will be financed by you, the seller. However, you may need an audit if you intend to bring in significant amounts of outside debt or equity to help finance the sale to your inside buyer, as lenders or investors may want assurances that an audit creates. (Ask us how to do this.)

So, if you intend to sell to an inside buyer, you might need an audit, depending on how you structure the deal. Therefore, you have to plan ahead.

The fourth possible exit strategy is to sell to an outside buyer. Under this strategy, you will typically want to invest in the audit prior to selling the company. Most outside buyers including strategic buyers and financial buyers will finance some portion of the deal, and their lenders will prefer or outright require the audit.

However, there’s more than just the buyer’s requirements to consider. It helps to look at the audit as an investment, not as an expense. Audited financial statements may help your company command a higher sale price and/or receive a greater portion of cash paid at closing.

Additionally, an audit may shorten a buyer’s due diligence period, which saves time and money and reduces deal risk for you. (Ask us how an audit reduces deal risk.)

Meet with Your Tax and Exit Advisors

Ultimately, there is no one-size-fits-all answer, but the above information should help you get started in the right direction. You must meet with your tax and exit advisors to discuss this question and determine your best course of action — ideally several years before you plan on exiting, because many outside buyers prefer to see three years or more of audited historical statements.

Knowing the right answer to this question will likely save money, time, and energy. A wrong answer, or waiting too long to answer the question, can derail your exit success.


What to know how all of this applies to you?

Schedule a 45-minute consultation to see how you can achieve a financially rewarding exit.

Contact Tim for a complimentary consultation: 772-221-4499 or email.



Friday, April 5th, 2019

13 Things That Will Kill Your Exit Happiness

Desk man


We believe business owners deserve to exit happily. After all, what is the purpose of working as hard as you do if you never manage to reach your business and personal goals at exit?

Exit impacts nearly every area of a business owner’s life. Failing to exit happily one day could ruin a lifetime of dedicated work and sacrifice. Therefore, it helps to know the most common reasons why owners fall short of exit happiness.


Let’s call these the Happiness Killers, and these are the 13 Happiness Killers you should know about.

1. Failing to reach financial freedom. It’s not enough to exit the company and sell for a good price or maximize value. The more important question is, are you financially free after exit? If you exit but come up short of financial freedom, you may find yourself regretting having exited at all.

2. Getting too little cash at closing. It’s natural to fixate on the total price you expect to receive when selling the company. However, just as important as total price is how much cash you get at closing. Any dollars that you do not receive at closing are dollars you might never see. If you never receive those dollars, you could end up exiting unhappily.

3. Working with (or for) people you don’t like or respect. Many owners keep working after exit with (or for) the company’s new owners/leaders. If you later learn that you do not like or respect these people, you may find yourself deeply unhappy. This is especially true if you did not reach financial freedom (see #1) and therefore cannot afford to just walk away from the situation.

4. Doing something that you don’t love. It does not matter how much money you have in the bank if you wake up every day facing doing something that you do not enjoy. As with the previous Happiness Killer, this can undermine your personal happiness regardless of how financially successful your exit may be.

5. Not knowing what you are going to do in life after exit. After exit, most owners search for something to do that provides the stimulating challenges and sense of identity that they enjoyed from running their companies. If you never find this, you may struggle to be happy after exit.

6. Feeling like your top people were mistreated. Your business’s value is undoubtedly rooted in its people. You likely will not be happy if your exit causes your people to unfairly lose their jobs or if it strands former employees in an inferior work environment.

7. Feeling like your customers are getting less value. An exit that significantly diminishes the quality of goods or services you had been providing customers is not a happy exit.

8. The exit breaks up relations between business partners. If you have business partners, you will probably care deeply about how they fare during your exit – and theirs. There are many ways that one partner’s exit can undermine another partner’s goals or plans. Partners who lack alignment regarding these issues often end up exiting unhappily.

9. Leaving before you wish to. Leaving your company before you want or intend is a Happiness Killer. You will likely feel as though somebody ripped your company away from you.

10. Sticking around longer than you want to. The opposite side of this issue is having to stay with the company any longer than you prefer after your exit. If you have other things you’d rather do and pursue, then being forced to stick around with the company will not be a happy exit.

11. Exit causing stress at home/in marriage. Exit brings massive change in an owner’s personal life and relationships, especially with your spouse or significant other. Many couples are caught off guard and find themselves disoriented in the post-exit world. Left unchecked, this can lead to regret and unhappiness.

12. Not leaving the company in good hands. If you exit the business only to realize later that the company’s new leaders are not competent to run the company and/or not equally committed to its success as you were, you may find yourself unhappy long after your exit.

13. Paying more taxes than you could have. Your exit will probably be the most expensive transaction in your life, with taxes comprising the largest line item costs in most situations. An excessive tax bill can undermine not only your nest egg but also your sense of fairness and satisfaction.

With so many exit Happiness Killers out there, it’s prudent and wise to evaluate which of these potential threats you have adequately addressed and which may still be in your future. Ask us how to do this. You are working too hard and have made too many sacrifices not to be sure that you are on the path to future exit happiness.

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Thursday, March 21st, 2019

Case Study: Larry Legacy Takes a Lesser Offer

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This short case study tells the real story of a business owner who intentionally sold his business for millions of dollars less than what he could have received — and why he did it. The key insight that this case study offers is “legacy vetoes price.” (Note: The names and some of the details have been changed and noted with an asterisk* to honor this former client’s confidentiality.)

By: Patrick Ungashick
Larry* never wanted to lead the biggest electrical contracting firm when he first opened his doors, but he did want to be one of the best.

He wanted customers to get great service. He wanted employees to be treated well and to have good jobs. He wanted a company that he could be proud of and for which others would be proud to work.

And he succeeded. For 20 years, he ran a fine company that met or exceeded all of his hopes and plans.

All was good.

Until the doctors told him he had perhaps a year to live and would never see his 50th birthday.

The cancer was inoperable and untreatable.

Preparing for a Quick Sell

That’s when Larry contacted us for help expediting his exit plans. Larry wanted to spend his remaining time with family. He also wanted to get maximum value for his company to ensure that his family would be financially secure despite losing him at a young age and despite facing significant medical costs in the months ahead. Larry wanted to sell as quickly and for as high a price as possible.

Many potential buyers were contacted, and after months of work, Larry had two competitive offers from qualified buyers from which to choose. Offer #1 was for $18 million*. Offer #2 was for $14 million*. Both offers would allow him to make a quick transition, freeing up time to spend with his family and address his medical care. Both offers were all-cash deals.

Larry reviewed the offers with us, his other advisors, and with his family. He took a few days to think about his decision and, as a devout man of faith, undoubtedly prayed for guidance as well.

Then he accepted the lower offer of $14 million and sold his company.

Choosing to Turn Down an Extra $4 Million

Why would anybody in his situation walk away from an extra $4 million? Why would any business owner, regardless of health, age, or any other circumstances, voluntarily relinquish that much cash? Not to be callous, but was Larry’s battle with his health interfering with his decision-making?

Larry was perfectly sound and sane when he took the lesser offer. Larry’s medical situation may have been unusual and unplanned, but his decision to take the lesser offer is not unusual. For Larry, legacy vetoed price. Larry had an additional set of concerns and objectives that he wanted to achieve when he exited from his company, beyond selling for the highest price.

As the sale of his company drew near, Larry realized — like many owners do — that he strongly preferred to sell his company to a buyer that would treat his team and customers well. Larry cared deeply that his company’s reputation and values remain untarnished during and after his exit process. When it came time for Larry to choose between his two qualified offers, these other concerns were powerful enough that they could veto a higher sale price.

Of the two offers Larry had to choose from, he knew both buyers by name and by reputation. The buyer making the higher ($18 million) offer was a local company. He strongly suspected that this buyer would let go many of his people and close down his facilities. He felt his customers would not be treated by this buyer in a manner consistent with his values.

Larry also knew a bit about the company making the lesser ($14 million) offer, too. As an out-of-town competitor, he believed this buyer would keep Larry’s local team and operations largely intact and that this buyer would treat customers in a manner consistent with his high standards.

Larry was pragmatic enough to know that he could not guarantee anybody’s jobs nor control the future of his company after he sold it, but Larry strongly believed that he should at least hand off his business to people who would govern it in a similar fashion.

Valuing Legacy Above Sale Price

Larry’s decision was not an easy one. He had us crunch the financial models a dozen different ways to make sure that his family would still be secure if he sold his business for the lower price. (Ask us more about how to do this.) He demanded that we challenge his thinking and play devil’s advocate. But, in the end, he took the lesser offer because legacy can and does veto price.

Larry would not have been mistaken or unjustified in taking the higher offer. Neither his family nor his employees would have faulted him if he had done so. And, in our experience, many owners do take the higher price with a justifiably clear conscience.

But the lesson that Larry’s experience can teach all of us is that legacy concerns, such as whose hands you leave it in, are sufficiently powerful to outweigh a higher sale price.


Answers to your questions:

To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.


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Friday, March 8th, 2019

Tax Update for Business Owners: IRS Proposes No “Clawback” on Gift Taxes

The IRS has recently proposed new regulations to resolve one of the lingering questions raised by the sweeping Tax Cuts and Jobs Act (TCJA), signed into law slightly more than a year ago.

TCJA presented business owners with a number of important tax changes that impact how you do tax planning today and how you design and implement your future exit plans. (Read more on these new tax provisions, including a helpful infographic.)



TCJA Creates Questions

Like many extensive tax legislative packages, TCJA created a few questions along the way, leaving it to the IRS and other agencies to interpret and clarify the laws where needed.

One of those questions was, “How would gifts and estates be taxed after 2026 for taxpayers who have taken advantage of the temporarily increased gift limits under TCJA?” Here’s the issue. Before TCJA, U.S. taxpayers could gift about $5 million of assets ($10 million for married couples filing jointly) before potentially triggering gift or estate taxes.

Under TCJA, this amount doubled, allowing taxpayers to gift about $10 million of assets (about $20 million for married couples filing jointly). Gifting more assets without triggering a tax is better — especially if you contemplate transferring some or all of your business to your children as part of your exit planning. Under the TCJA, however, this ability to gift twice as much without triggering taxes will expire (or “sunset”) in 2026.

This sunset raises a big question — what happens to taxpayers who take advantage of the new and higher gift limits before the end of 2025 but then die in the year 2026 or later when the limits are lower again? Would these taxpayers or their heirs have to pay additional taxes under the restored lower limits in what is colloquially known as a “clawback”? Experts have been debating this question since TCJA was passed.

How Does TCJA Impact Exit Planning?

Here’s an example of why this question impacts exit planning. Assume a married couple named Oliver and Orphelia Owner gift their company, ABC Co., to their son. The company is worth $20 million. Under the higher gift limits now available courtesy of TCJA, it is likely that no gift taxes would be owed.

Now assume Oliver and Orphelia die in 2026 or later when the higher gift limits have fallen back to only $5 million per person ($10 million for married couples). At their death, Oliver and Orphelia’s estate and heirs could face taxes on the amount they gifted in excess of $10 million under this clawback approach.

The risk of a clawback complicates exit planning for business owners, especially within family businesses. Therefore, the IRS had to take action. The IRS’s proposed solution involves creating a “use-it-or-lose-it” approach, where taxpayers are not at risk of a clawback in 2026 and beyond but must take advantage of the higher gift limits before they expire in 2026.

The IRS’s proposed regulations are being reviewed and should be finalized shortly. If implemented as proposed, this development reduces uncertainty for business owners and creates a need to act to avoid missing out on a tax-saving opportunity.

Review These Issues with Your Tax and Legal Advisors

Many family business owners hesitate to transfer ownership to their next generation for fear of losing control of the company or out of a need to preserve the income stream they enjoy from the company. However, it is possible to make large tax-free gifts of your company without surrendering control or cutting into your income. Ask us how to do this.

Any opportunity to implement business exit plans at potentially lower tax rates is good news. But, if the IRS’s proposed regulations are enacted, business owners cannot afford to miss this opportunity as it will expire. It is important to review these issues with your tax and legal advisors to determine the best course of action for you.


Want to know how this applies to you?

Answers to Your Exit Questions

Schedule a 45-minute consultation to see how you can achieve a financially rewarding exit.

Contact Tim for a complimentary consultation: 772-221-4499 or email.

Thursday, February 28th, 2019

17 Signs You Might Need a ‘Partnerectomy’

Webster’s Dictionary defines a “partnerectomy” as “the procedure to remove a diseased or failing business co-owner.” Well, OK, that’s not true — it is a word that we made up.

But sometimes partnerectomies are required, regardless of the fact that the word itself is not officially recognized. Here are the symptoms to watch for to determine if you have a business partner who needs to go.

According to our proprietary research, about seven out of 10 U.S. companies have more than one owner. These partnerships feature two or more leaders coming together with the shared goal of growing the company.

Their combined effort and often complementary skills fuel the company’s growth and success. That’s the positive version of the story — and it is often true, especially in the beginning.


Good buy

When Business Partners Aren’t on the Same Page

However, sometimes business partners realize they may not be exactly on the same page on multiple issues. Sometimes it’s possible to reconcile their differences and resume a productive relationship. Other times, the necessary and perhaps only course of action is to remove the partner in question. In other words, the company needs a partnerectomy.

Some partnerectomies are more difficult than others. Some are painful, angry, risky, expensive, and cause lasting scar tissue. Others are more controlled, safer, less emotional, and leave the organization much stronger than it was before the procedure.

Either way, before resorting to this invasive and irrevocable course of action, business co-owners should exhaust every effort and resource to find another resolution to their core differences.

Here are the symptoms that indicate your organization may need a partnerectomy, any of which suggest that it’s time to take action. You may need a partnerectomy if:

  • You and your partner(s) disagree about where to take the company and how to get there.
  • One or more partner(s) want to take all of the company profits home while one or more partner(s) want to reinvest all of the profits back into the company for growth.
  • You believe that there are important topics that you cannot discuss with your partner(s) for fear of damaging the relationship.
  • Deep down, you are not sure that can trust your business partner(s).
  • Deep down, if you could turn back the clock you would not enter into a partnership with that person(s) again.
  • Deep down, you believe that if that partner(s) were to leave the company, then employees, customers, suppliers, or other third parties would be relieved.
  • You and your partner(s) have very different timelines for when each wants to exit from the company.
  • You and your partner(s) have very different opinions about your company’s value.
  • You and your partner(s) have not signed a buy-sell agreement. Ask us more about this.
  • Your employees clearly prefer or are aligned with one partner or another, such that divisive factions exist in your organization.
  • Members of your leadership team are unclear what a particular partner actually does inside the company.
  • You believe that if that partner(s) departed from the company tomorrow, the company would not experience any setback or difficulties.
  • You find yourself frequently having to do any of the following for another partner(s): “cover for” him or her, do “damage control,” or “take precautionary steps” to ensure that the other partner does not cause the company problems, intentionally or not.
  • Your partner(s) has ongoing personal habits or issues that create serious risk for the business.
  • You and your partner(s) do not have current, written, mutually agreed-upon job descriptions.
  • You and your partner(s) are working at different commitment and energy levels but take home the same pay.
  • You and your partner(s) are doing different jobs inside the company but take home the same pay. Ask us more about this.

What to Do If You’re Experiencing These Symptoms

It is worth noting that some of these symptoms set off obvious and immediate alarm bells (such as #4 – you might not trust your partner) whereas others seem trivial or harmless (#15 – you do not have written job descriptions). Yet, as the word symptom implies, each of these items may be a surface manifestation of a deeper root issue that, if left unaddressed, can lead to real catastrophe.

If you are experiencing any of these symptoms, just like any true medical issue it is advisable to discuss your situation with a knowledgeable advisor, and if necessary, do “more tests.” It is possible that further analysis of the symptom will turn up nothing or might reveal a minor and readily treatable condition. It is also possible that further analysis reveals an issue serious enough to cause real harm to the company, in the present and/or in the future, if left unchecked.

A partnership can be a company’s greatest strength or its most crippling weakness. If you are experiencing any of these symptoms, act sooner rather than later. To learn more, consider this article or contact us to confidentially discuss your situation.


To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.