How to Make Your Exit Successful.
Starting Now
Four Steps To Ensure a Financially Secure Exit
From Your Contractor Business
Step #1
Business Exit Strategies
Your 5 Exit Choices:
Sale to an independent 3rd Party (Outside buyer)
Transfer to insiders (Co-Owners or Employees:
Transfer to Children
Employee-Owned Cooperative
Closing Your Doors
There is actually a 5th path, and that is when business owners simply close their doors, and no transfer of the business takes place. Unfortunately, with this option, owners leave valuable years of repeat clients, established professional relationships, and dedicated employees to simply disappear once the company doors are closed. There is another way! You can plan for your eventual exit.
Time is our most precious commodity. For business owners, it can be difficult to convince owners to take time out of their already busy schedules to work on their business, not just in it. Planning a strategic ownership transition for your company is your role as an owner, and we can review steps that need to be taken to get there.
There are many different ways to execute an exit plan and various routes a business owner can successfully exit from their business. However, to obtain that successful exit, owners must avoid the pitfall of waiting to start planning until the point at which they are ready to exit. By creating a plan in advance, the process of planning will be more efficient and effective.
We offer an Exit Planning Assessment tool that allows business owners to understand the steps they need to take to where they want. By outlining the process, timeline, and necessary steps to an effective exit plan, owners can gain a clear understanding of the path ahead and the action items that will need to achieve an owner’s goals for their future and that of their company.
Your Assessment Summarizes Four Key Areas of Exit Planning
Operations
Finance
Revenue/Profit
Business continuity and estate planning
These are the key areas that most affect:
Timing
Proceeds
Options for Transferring the Business
It’s Time to Make the Time
Exit Planning can feel stressful and overwhelming to business owners because they often don’t know where to begin. The key is to start that conversation and laying the groundwork today so that contractors have adequate time to reach those goals.
A Questionnaire To Get You Started
I utilize The ExitMap Assessment to help clients start the planning process so they have a clear understanding of their current level of exit preparedness.
Step #2
Determine the Value of your Busniess
Top 10 Reasons For A Business Valuation
1. 98% of private business owners don't know their business value
2. 90% of businesses are not properly insured
3. 78% of business owners plan to fund their retirement through the sale of their business.
4. You can create a realistic succession plan
5. Explore funding opportunities
6. Better understand your business now and its future potential
7. Get what your business is worth at time of sale
8. Create buy/sell agreements with business partners
9. Establish a trust and create an accurate estate plan
10. Pay the right amount when you buy a business
Ready To Learn About the Value of Your Business?
The Cash Flow Normalization Spreadsheet:
• 3 years of past-weighted revenue
• Identifying any Seller Discretionary Expenses
• Arriving at your true company net profit (EBITDA)
Contact Dave to access the Cash Flow Normalization Spreadsheet to learn more about your company valuation! Find out now – there is no cost for this!
Step #3
Create a Continuity Plan
Make Sure That Your Business Survives If You Do Not
The thought of what will happen to our businesses should we die, is at most, fleeting. At that moment, we seldom think beyond making sure our families are protected should the unthinkable happen. Yet, in its most fundamental sense, business continuity has nothing to do with protecting an owner’s family. It is about preserving and protecting the business both for the short and long term, which is the most crucial component if its owner dies or otherwise becomes incapable of continuing in the company.
Continuity is planning for the unexpected so that family and employees are taken care of in the event of an owner’s unplanned accident or illness.
Continuity Issues:
Ownership continuity is the most major problem facing a company, but it is one of three possible continuity problems:
• Continuation of ownership
• Company’s loss of financial resources
• Company’s loss of key talent – the owner – and the cascading effect on employees and customers
How to Prepare
Business-continuity issues can be divided into two camps: those that occur while the owner is alive and those that arise upon the owner’s death or disability. In the case of transfers during an owner’s lifetime, you have the luxury of time to find and train your replacement. This is not so in the case of death. Your company must have ongoing management and adequate cash (almost al-ways subsidized by insurance on your life) to survive. A failure to plan for business continuity can irreparably damage your business’ sale value and prevent you from exiting in style.
Continuity of Ownership for Co-Owners:
The most obvious business continuity issue is: who will succeed you in ownership? If you co-own your company, an up-to-date, adequately funded, buy/sell agreement that completely addresses all possible transfer issues can solve this problem. Please pay careful attention to all of the qualifiers in that last sentence.
First: “Up-to-date" means that the agreement reflects the current value and structure of your business. It also means that you and your co-owners don't sit down once, discuss continuity, and shove the resulting agreement in a bottom drawer never to be removed again.
Second: “Adequately funded" means that one of your advisors has analyzed what the company's financial needs would be in your absence and has ensured that adequate funding is in place.
Third: Your agreement must fully address the below list of "possible transfer issues."
Possible Transfer Issues List
Death
Disability
Transfer to a Third Party
Termination of Employment
Retirement
Involuntary Transfer Due to Bankruptcy or Divorce
Business Dispute Among Owners
Continuity of Ownership for Sole Owners
If you have no co-owner, your ability to ensure continuity of ownership in the future depends on your ability to create and to implement a continuity plan today. Vital to that plan is the involvement of your key employees. You must create a plan that motivates your important employees to stay with your company even though you do not. One of the best ways to accomplish this goal is to create a stay bonus plan.
A stay bonus is a written, funded plan providing monthly or quarterly bonuses and salary guarantees, usually over a twelve- or eighteen-month period for employees who remain with the company during its transition from your ownership to new ownership. (New ownership may be a third party, a transfer to employees, or a continuation by family members.) The stay bonus provides a cash incentive for your important employees to stay, hence its catch name.
The stay bonus plan is typically funded with life insurance sufficient to pay the employee bonuses over the specified timeframe. You must tell essential employees that you’ve put a stay bonus plan in place so that they know you’ve put thought, planning, and money to pay salaries to ensure the company’s survival!
Working with us to complete a "Business Continuity Instruction Form" is a great way to organize and communicate your thoughts about continuity.
Completing a "Business Continuity Instruction Form" is a great way to organize and communicate your thoughts about continuity
Download a Business Continuity Form Here
What We Work On Together
Inside the group, you will:
✅ Improve Performance
• KPI tracking systems
• Financial clarity and job costing insights
✅ Increase Business Value
• Cash flow normalization
• Preliminary valuation
• Identify value drivers
✅ Plan Your Transition
• Exit options (sell, transfer, lifestyle)
• Timeline planning
• Tax and financing considerations
This is the roadmap – let me know how I can help you!
What Our Contractors Say
“David Lupberger does not push you into a system, rather he helps you bring out your own system that works to your unique giftings and strengths. I started working with David in 2006 and continue to work with him today. In recent months, he has helped me bring our business to a level that I wanted to achieve. Without David, I lacked the clarity and vision to be able to put in place step by step the necessary pieces to be able to realize my goals. God willing, I will continue to work with him for years to come. On a personal note, he is truly a great guy, someone I really like."
Craig Huseby, Huseby Homes, LLC
