Winter is coming

Features - M&A Outlook

As the summer season winds down, take time to think about your ultimate exit plan.

October 4, 2013
Tom Fochtman

Another busy summer season is behind us and it’s the coveted catch-your-breath time of year. For those who do snow removal, you are getting ready but have a break for a month or two before that season gets in full swing.

This is the time you should be having your winter planning meetings with key staff members. There are always to-do items around your office or yard, new policies and procedures that need addressing, retooling your sales campaigns and in general, planning for 2014.

Owners should also use this late fall downtime to strategize on their exit strategies. And I’m not talking about just your exit strategy regarding your business, but also your personal exit planning.

Take the time this winter to update your will and last testament. When was the last time you did that? Have you ever done that? It does not take that long and your spouse and family will be forever grateful if your will is current.

When you look at your will, you will have a conversation with your attorney about gifting. Are you aware that you and your spouse can protect $5.2 million each if you gift properly?

You can protect and skip paying taxes in excess of $10 million if your estate and will are properly updated.

Most company owners in all industries have too many assets in their own name and not enough in the name of their spouse or in the variety of trusts that are available to hold assets.

Amazingly, the IRS is somewhat liberal on certain aspects of estate planning and you would be amazed how you can protect your assets if you plan properly.

One example: You can gift stock in your company to whomever you want. Your spouse and children are obvious recipients but you can also give any stock (not just company stock) to an organization or individual of your choice.

At a minimum, have a preliminary meeting with your attorney and CPA. Get your arms around the legal process and start to understand the tax consequences.

Consider meeting with an industry professional, discuss your goals and learn what your options are. This will lead you to areas of your company that will need attention and that will take varying levels of effort but it will be necessary and rewarding.

Ultimately, you need to develop a strategy that will become a plan that you will follow. This is not unlike what you embarked on with your estate planning. And again, your spouse or business partner will be so thankful because you now have a plan. What happens if the unthinkable occurs and you pass away suddenly?

Let’s hope your spouse is plugged into the business because he or she is now the sole owner, or at least your business partner’s new partner. I’m sure that will be lots of fun!

True story: A green industry owner passed away suddenly a few years ago at the age of 51. His company was well in excess of $10 million in revenue. There was not a good succession plan in place and the key manager left eight months ago. The company filed Chapter 11 in July of this year. It is very likely that this could have been avoided if succession and exit strategies had been in place.

I cannot stress enough the importance of having a solid exit strategy.

If small to mid-size business owners have a healthy chunk of their net worth tied up in their companies, then that’s a healthy chunk of their retirement and a healthy chunk of what they pass to your spouse and family members.

It is short-sighted to not manage your exit exactly the way you manage your business; with precision and profitability on the forefront of your mind. Your estate is a business and the shareholders are your family members.

Now is the perfect time to get your personal estate and your company’s exit strategy in order. What are you waiting for?