By Mike Mess, CFO, CEPA

As a business owner, the day will eventually come when it’s time to sell or leave the business you’ve worked so hard to build. Your exit could be a sale from a Strategic Buyer, Private Equity, Management Buyout (MBO), or Initial Public Offering (IPO). No matter the end result, it’s best to prepare for this day from the beginning. 

Advanced succession planning is critical to achieving long-term goals—both for the business and family. But nearly 48% of business owners who want to sell their business someday have no formal exit plan. For savvy business owners, creating an exit–succession plan early on could put you in a favorable position when the day finally arrives. 

Let’s take a look at what Veracity Capital covers in our strategic exit-planning process. 

Stage 1: Discovery Meeting

Defining exit objectives and goals:

• What is your desired departure date?
• What are your income/financial security requirements?
• What exit routes are open to you?

Stage 2: Review Current Plans

Personal financial analysis: 

• Review existing financial, estate, and business plans.
• Determine gaps in each of these plans, if any.
• Discuss your wants and needs. 

Stage 3: Business Valuation

Current valuation and the development of value drivers:

• Analyze each exit route to determine how to protect and increase business value and understand the tax implications of ownership transfer through sale, gift, and estate. 
• Obtain a formal valuation performed by an independent third party to set a fair price for company stock based on a consistent methodology for valuing the stock in the future. Include a reasonable discount for lack of marketability and minority interest, if applicable. This provides a benchmark for buy–sell agreements and executive compensation, equity-based plans, etc.

Stage 4: Selection

• Sell to an outside third party (financial or strategic buyer).
• Sell to employees using an Employee Stock Ownership Plan (ESOP).
• Sell the business to one or more key employees (management buyout).
• Sell to remaining shareholders.
• Transfer the company to a family member(s).
• Retain ownership but become a passive owner.

Stage 5: Implementation 

• Engage shareholders and the company to execute the chosen business exit route (external or internal sale or transfer).
• Develop a contingency plan for the business (outline key succession management and be able to answer who will run the business in the event of a death or disability of current operational shareholders).
• Develop a contingency plan for the owner’s family (financial, estate, and charitable planning).
• Develop an ongoing servicing plan for the business and family (ongoing review to ensure that planning is being followed and to advise in the event of life changes within the family or succession management).

We’re Here to Help

The transfer of your business may be the biggest financial transaction of your life. Veracity Capital utilizes ExitMap® to help clients understand their current level of preparedness so they can begin the succession-planning process. To learn more, schedule a complimentary introductory call by reaching out to me at 949.345.1954 or mike.mess@veracitycapital.com. 

About Mike

As a Founding Partner of Veracity Capital, Mike Mess set out on this endeavor to create a profoundly personal boutique for his clients with deep institutional execution. Mike serves as Chief Financial Officer and Wealth Advisor. As CFO, Mike is responsible for the company’s financial function and helping guide the direction of the firm. As Wealth Advisor, he helps his clients achieve their personal and professional goals through the lens of wealth management and financial planning. 

For more than 15 years, Mike has developed exceptional wealth management skills for business owners. He believes this process of best managing the family wealth starts long before any transaction event. Clients engage Mike to help maximize the value of their business early, best capture that value through the transition of the business, and then manage the wealth created following the transaction. As a business owner himself, he is acutely aware of these stages where he adds value before and after every transaction.

Prior to founding Veracity Capital, Mike invested over a decade of his time with AYCO, a Goldman Sachs Company. During this time, he built out a division responsible for meeting the needs of its institutional and private clients, which included C-level executives and entrepreneurs.

Mike earned his Bachelor of Science from California State University, Northridge, and his MBA (Hons.) from Chapman University. He also holds the CEPA (Certified Exit Planning Advisor) designation. Mike is a member of GoBundance, the high-level mastermind group for successful entrepreneurs. He is also active with Vistage Worldwide, a global CEO peer group. 

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.