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CEO Advisor® Newsletter
July 2017

Do you have a Succession Plan or Exit Strategy for your Family Owned Business?

For most family and closely-held businesses, planning for succession is the toughest and most critical challenge they face. 88% of current family business owners believe the same family or families will control their business in five years, but succession statistics undermine this belief.

According to The Family Firm Institute:

  • Only 30% of family-owned businesses survive in the second generation
  • 12% remain viable into the third generation
  • 3% operate into the fourth generation and beyond


There is a disconnect between the optimistic belief of today's family business owners and the reality of the massive failure of family companies to survive through the generations. Research indicates that failures can essentially be traced to one factor: an unfortunate lack of family business succession or exit planning.


Family Business Statistics


The statistics regarding family businesses does not provide optimism regarding their long-term sustainability: It's estimated that 40.3% of family business owners currently expect to retire, 70% of family businesses would like to pass their business on to the next generation, of which only 30% actually will be successful and nearly 43% of business owners have no succession plan in place.


For most family and closely-held businesses, planning for succession is the toughest and most critical challenge they face. Succession planning can be a great opportunity to maximize opportunities and create a multi-generational institution that includes the family's values and mission for generations to come. However, succession planning is not right for every business and sometimes selling your business may make more sense.


Keep in mind, selling the business might be the best option for you AND your family.

When does selling your business make more sense? Like so many things in life, timing is critical. To get the best price, the business should be sold on an upswing, with three consecutive years of good, improving financial statements, as well as, in a strong economy.


The 10 Step Process to Selling a Family Business


  1. Assemble the Transaction Team - A prudent potential seller will put together a team of advisors and consultants. The team should include an M&A advisor, corporate/transaction attorney and CPA. CEO Advisor, Inc. acts as an M&A advisor to both buyers and sellers of businesses with the needed expertise to get deals done effectively.
  2. Define What is Being Sold - Owners may neither be willing nor able to sell their entire business. Perhaps they are only interested in selling certain operations or assets and retaining others. Furthermore, with family businesses, it is particularly important to determine who are the actual owners and memorialize it in a Capitalization Table.
  3. Evaluate the Price Range and Structure of the Transaction - While many sellers think in terms of price, that really is only the first part of the calculation. The real key are the terms of the sale and what the seller will net after taxes. Usually the seller is better off selling corporate stock than assets, but asset purchases are more common. Also, a truly crucial issue is whether the seller is willing to take partial cash and accept payments over time through a promissory note from the buyer, vs. partial cash plus an Earn Out over two to three years.
  4. Resolution of Any Problems Within the Business - The seller's biggest fear is the deal falling apart. The wise seller works hard to eliminate the potential stumbling blocks to closing. By doing so, the seller makes the business more attractive to buyers, simplifies the negotiation process because there are fewer issues to resolve, and improves the odds of closing by eliminating the likelihood of deal breakers rearing their ugly heads. Some items to be resolved are: All Lawsuits Should be Resolved, Tax Records are in Order and Tax Returns Filed, Financial Statements are Up to Date and Accurate and Updated Capitalization Table
  5. Preparation for the Sale - The next step is to evaluate the needed preparation prior to selling. This includes a Sales Forecast, a Business Plan or well crafted Executive Summary, a monthly 3-year Financial Forecast, a compelling presentation, a clean Capitalization Table and a list of prospective buyers and other items. CEO Advisor, Inc., as your M&A advisor, plays a hands-on role in the preparation of selling your company.
  6. Negotiate the Sale and Execute the Letter of Intent - The normal process is for the buyer to provide, and the buyer and seller to enter into a non-binding letter of intent (LOI). The parties use the LOI to make sure they have agreed on the price and major terms. Typically, it is a document prepared by your M&A advisor and reviewed by a lawyer. The LOI states it is binding as to some provisions and not binding as to others. Both parties are expected to follow the terms that are set out in the LOI once agreed upon and fully executed.
  7. Undergo Due Diligence - Depending on the relationship of the parties, the due diligence period will begin after the signing of the confidentiality agreement and the letter of intent. While the due diligence period can be difficult for any seller, for the first-time seller it is often both difficult and a shock. Buyers want a substantial amount of information! With the help of an M&A advisor, providing the needed information will be a manageable and orderly process.
  8. Prepare and Execute the Purchase Agreement - While the experienced M&A advisor and your corporate/transaction attorney are accustomed to lengthy purchase agreements with numerous schedules and exhibits, the first-time seller often is taken aback by these documents. Creating realistic expectations is critical in this aspect of the sale. Usually, the buyer's lawyer prepares the first draft. The M&A advisor works with the CEO through the entire agreement in detail with the seller and then works with your attorney to finalize key deal points.
  9. Close - Depending on the personalities of the principals and the competency of all involved, closing can be a smooth and joyous occurrence or a bumpy and tense one. With care and some luck, all the details have been long since worked out and all the documents prepared and reviewed. The seller should be advised in advance that these documents are coming and all deal points are addressed.
  10. Celebrate - No business sale can be risk free and stress free. But a strong M&A advisor working with the CEO or business owner(s) who understand and follow the 10-step process described in this article can greatly reduce the risk and stress. In doing so, they meet the universal goal of all sellers - successfully closing the transaction.


At the end of the day, the goal should be to devise a plan that provides the best outcome for the family in the long term. Set emotion aside and consult experts who can recommend whether a succession plan or a business exit strategy will make the most sense for you and your family.


CEO Advisor, Inc. has decades of expertise in hands-on advising of small and mid-size business, including building value, growth capital and buying/selling companies. Contact Mark Hartsell, MBA, President today for a no cost consultation by calling (949) 629-2520 or emailing MHartsell@CEOAdvisor.com.

Sales Management: A Great ROI

Managing your sales team to maximize productivity can generate the greatest Return on Investment (ROI) for any CEO or business owner. Whether you have a one person sales team or you have a large salesforce, you can manage and leverage your sales effectiveness to generate a tremendous ROI.


If you want to achieve maximum productivity and double your sales you must focus on and refine every aspect of your sales efforts and your sales team, as well as, have the tools to properly manage and track your sales activity.


1. Prospecting
You need to set clear goals of the number of required calls per day, opportunities created in our customer relationship management (CRM) software, sales appointments per week, proposal presentations and sales per month. Tracking sales activity in your CRM is key. You must ensure that each salesperson on your team has their calls scheduled a week in advance in your CRM, and time and priorities are scheduled daily to accomplish these calls.


2. Prospect Meetings
Most importantly, your direct sales team of outside salespeople need to use the telephone for one primary thing - getting sales appointments with prospects. Have a well-crafted script including the added benefits of a meeting, credibility, qualifying questions, overcoming objections, and train your salespeople to ask for the meeting multiple times.


Make sure your salespeople do not have an overly elongated initial conversation and basically have the first meeting on the telephone - qualify the prospect, briefly determine their needs, secure the meeting and get off the telephone to ensure a productive first face-to-face meeting as the next critical step.

3. Probing Questions
Whether you sell by telephone, face-to-face or both, your salespeople need to begin by asking open-ended probing questions to both identify the decision-maker(s) and get a clear understanding of the needs of the prospect. Then, present the benefits of using your products and services and provide some examples of how current customers have benefited the same way. Benefits sell, not features.

4. Recommendation
Using a full range of questions to qualify the prospect and determine their needs, you need to formulate and make your recommendation. An inside salesperson will do this by telephone with smaller prospects, but an outside salesperson needs to do this face-to-face with larger prospects. This is critical to move the sales process forward, to gauge interest, reduce the sales cycle, fine tune their needs, and to formalize the next step toward closing the sale.

5. Closing the Sale
Closing the sale is a process in itself. In order to minimize the sales cycle and move forward with the close, you should ask close-ended questions in the form of a trial close, such as, "If we could solve your lead time problem, would you be interested in moving forward?" Or, "Do you feel that a company with our expertise and lead time responsiveness could meet your needs?"

The trial close does not ask for the business, but serves to verify their need, readiness to buy, address any hesitations, concerns or initial objections and gets the prospect in "Yes" mode. A yes response to your trial close will lead you right into the close and a positive outcome.

There are many types of closes to gain a new customer. You have heard the saying, "Close early and often." This refers to not waiting too long to ask for the sale and be willing to close, overcome objections and close again. If your sales team is not doing this, they are going through the motions and leaving a lot of money on the table.


A preferred type of close is the "Either or" close. By having two options in your proposal you can ask, "Do you prefer Option A or Option B?" Simply ask for the business and be silent until you get your answer. If you have done your job properly, a yes will follow, and you should proceed in locking up and signing your new customer. Remember, you cannot help someone if you don't ask for their business.


CEO Advisor, Inc. has helped many of our clients to hire, train and implement proper sales management techniques to optimize sales and increase profits in order to generate a tremendous ROI. Contact Mark Hartsell, President, MBA today at (949) 629-2950.

Testimonial  


"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc., provides a broad range of services and Mark is there for the CEO every step of the way."


Partner
Haynes & Boone, LLP

"As a President of a mid-size technology company, I have been very pleased with the services provided by CEO Advisor®. He contributed in many areas, but identified marketing and sales as our primary need. His guidance and contributions have been invaluable in establishing and maintaining a meaningful marketing and sales program for the company. He is a knowledgeable business advisor and a pleasure to work with."
CEO/President, Engineering Services/Manufacturing Company

"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.
Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc., provides a broad range of services and Mark is there for the CEO every step of the way."
Partner
Haynes & Boone, LLP


"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"Yesterday does not equal tomorrow. Forget the past and move towards your goals."


Tony Robbins
Motivational Speaker



"Yesterday does not equal tomorrow. Forget the past and move towards your goals."

Tony Robbins
Motivational Speaker

"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker
"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker



Prime Minister of the U.K.