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succession planning untimely death

Business Succession Planning: Unexpected Death

While planning for retirement is a fun part of the succession planning discussion, we must also cover the less pleasant subject of planning for an untimely death. Most of this information also applies to a permanent disability as well. According to Forbes, three out of five business owners are left vulnerable to consequences of an unexpected tragedy.

It’s April 30 and a business owner client of mine (Bill) has passed away and his spouse calls me. The spouse (Maria) is in a panic. She has never been active in the software Bill owned. Bill died of a stroke just 3 days prior. Maria just came to the realization that she didn’t know if there was money in the bank for payroll on May 4.

Together, we went through a series of discussions that day. I was able to give her all the contacts Bill and I shared with the law firm and financial planner. I was also able to provide information for his payroll service, banker, and the bookkeeper that worked on Bill’s software company. Bill’s management team shared the same concern. Who would run the company, oversee decision making, and make sure clients did not leave?

Planning for this situation, is a challenge as people do not like planning for these unfortunate events. However, there are a number of basic questions and scenarios to consider now. This will help make the situation easier on your surviving family members and employees.

Questions and Scenarios to Consider
  • Do you have life insurance in place that goes to the business to provide a boost to the company’s cash flow should something happen to you?
    • These funds could be used to hire a CEO or consultant to run the company while things are figured out.
  • Have you thought about what you want to happen to the business if you pass away?
    • If so, have you documented it in writing and shared it with your spouse, advisors, and/or management team?
      • Things like:
        • Would you want the management team to use life insurance to buy shares from your estate and run the business as owners?
        • Do you want to leave the business to your children and have them run it? Or hire a CEO to run it?
        • Should the business be liquidated and sold through an M&A transaction? If so, how do you incentivize the management team to stay during this time?

It is impossible to plan for every scenario a business could go through but it is helpful to consider a few possibilities. It is a business that you have built and no one knows better what you want the next phase to be of your legacy, than you. Begin this process today. Have discussions and documentation to help build a succession plan that stands up to many scenarios but provides flexibility as your life and business grow and change. Let us know if you need help with your business succession planning – set up a no-cost consultation today!

succession plan getting started

Business Succession Planning: Getting Started

The best time to have a succession plan in place is the day you start your business. If you do not already have a succession plan in place, today is the day. While many business owners believe getting started is difficult, it is quite simple. The majority of people think it can wait because it’s too big of a topic to cover. When creating a plan, remember to keep it simple and aim for progress, not perfection.

First, business owners need to consider what would ideally happen under two scenarios, retirement and death. The first is easier to think about for a lot of people, so we’ll start with that one and cover death in another post.

When considering retirement, business owners should think about it at least three to five if not ten to twenty-five years in advance. According to the Department of Labor, it is never too early to start planning for retirement. First, talk with your advisors and family, 3-5 years out. Your team of advisors should include your CPA, Attorney, and Financial Planner.

Conversation Starters for Your Team of Advisors:
  • What is my business worth today?
  • How much money do I need in retirement?
  • What can I do between now and my retirement date to build the business valuation?
  • What do I want to happen with the business when I retire?
    • Am I passing it to the next generation of family?
      • Will it be a gift?
      • Will it be bought with cash or over time?
    • Am I going to sell it?
      • Who are the potential buyers – individual buyers, financial buyers, or strategic buyers?
    • Should I let the management team run it, but I will own it still?
      • Are they capable?
      • What type of incentives do I need to put in place to make this work?
  • What am I going to do in retirement?
    • Am I going to stop working completely?
    • Will I do some consulting or gig-economy type work?

This is the starting point. Of course, there are many subsets of questions that will drive the conversation. Discuss these topics with your family to ensure everyone is aligned about what retirement looks like from a timing and lifestyle perspective. These questions can lead down many different avenues. Your team of advisors will guide you down the path that best fits your goals. Business succession planning is far from one-size-fits-all plan and more like a custom “one-size-fits-one”. Build a plan to satisfy your desires, needs, ambitions, employees, and family.

Not sure if you have the right team of advisors in place to help? Contact us today!

business succession why

Business Succession Planning: Why is it Important?

You may know what business succession planning is but do you know why it’s important?

It’s January 5th and I get a call from a client who wants to sell their business. They had a great holiday break and decided they no longer want to run their business. They do not want to deal with the headaches, stress, and people issues that accompany being a business owner. As their business advisor, I make the following statements and ask a few important questions:

  • Have you met with your financial planner to see if you have enough to retire?
  • Do you know what your business is worth?
  • Your business had a really bad year 2 years ago. Remember, almost all buyers will look back 3 years. This will hurt the value in the sale.
  • Does your executive team know?
  • Have you thought about incentivizing them to stay with the buyer?
  • What are you going to do next?
  • Most buyers of businesses your size, will use a loan to buy the business, and will require you to be out of the business in less than a year.

The list continues during the next few discussions with the client. It’s clear they have not thought of any of these, however they want to sell anyway. During the process, the valuation is lowered by the bad year they had, and a few members of the management team leave as they hear of the sale. The transaction closes after months of trying to sell and going through due diligence with a couple different buyers.

This scenario happens every year. Business succession plans help make sure that if you wake up on January 5 and decide to sell, you have the opportunity to easily answer these questions and many more. Having a plan in place will help you maximize the exit value when the times comes, and also make the process of selling or transitioning much easier for the business.

Contact us for a no-cost consultation to find out if your business is ready to be sold.

succession planning

Business Succession Planning: What is it?

From the day you start your business, you are focused on both present and future growth. However, many people never think of life after the business or succession planning until it’s too late. How do you know it’s too late? Typically, business owners don’t start thinking about this until a major life event occurs, they are burned out and need to sell, or someone comes knocking and wants to acquire their business. According to a Wilmington Trust Survey, 60% of business owners do not have a succession plan in place.

None of the times previously mentioned are the best time to start a succession plan or think about it, as you are under stress. The best time to put together a plan is when you start your business. If you didn’t do it then, the next best time is today!

What exactly is business succession planning? It starts with answering a series of questions with yourself, your family, your executives, and your advisors. The purpose is to make sure what you have built in your business continues on, not just for legacy, but for the people, and families, that you are providing a job to. There are a lot of critical things to think about in a succession plan. It helps you decide what happens to your business if something were to happen to you.

Does it go to management? Does it pass to your estate? Will the business just fold up and close? How is all of this planned both structurally and financially?

A succession plan is an iterative process. Business owners need to pick it up once a year and re-read to say, yes this still fits where I am in my life and where my business is, or it needs changes.

If you are a business owner without a succession plan in place, contact us to schedule a no-cost consultation.

3 Design Tips For Your Exit Strategy

A successful and effective exit from a business usually takes more than a miracle. I do believe in miracles, however gaining the greatest value for your company doesn’t usually happen without a solid design and execution. As a business owner contemplating a future exit, you should be focused on a plan that includes the following 3 design tips:

1. Timing

Is the market right? Are other parties interested in acquiring your company? Do you have plans for after your exit? Do you have more passion or anxiety over the business?

Timing is everything if your objective is to maximize the value of your company. Don’t be a statistic, too many company owners run the company up the growth curve, and down the other side before relinquishing control and exiting the business. Companies frequently grow beyond the capabilities of the owner, so all these considerations will help you determine the right timing.

2. Value

Have you completed a valuation on the company? Can the value of the company be improved? Will the exit event provide the revenue, cash and stability you desire and need?

Value is the number one driver for most executives contemplating an exit. However, value is nearly impossible to change if you have one foot out the door. Value creation is difficult but will yield the greatest financial reward for each dollar invested. Reducing costs, improving processes, increasing margins, managing debt, hiring the right resources and growing the top line are all important factors in gaining the greatest value for your business. A good business advisor can help you navigate through the projects that offer the highest return on value.

3. Succession

Do your leaders have the skills, interest and passion to carry on and improve the business? Do you financially need the business to perform after your exit?

Succession is not an issue if you are emotionally and financially detached from the exit event. In this scenario, succession is the problem for the acquirer and the seller can take the money and run. However many small business owners can’t afford to detach financially and therefore must be concerned about the quality of the successors (family members or employees). Complicated exit scenarios tend to create succession challenges and as a result will have a negative impact on the value.

Exiting a business is not an event, it is a process. Albeit an emotional process, it requires a proper design to get the most out of the final exit event. Exiting your business is much easier when you understand the 3 design tips and  have a plan to answer the tough questions regarding. . . Timing, Value and Succession.  Then you can ” Exit by Design”,  and not exit by mistake or miracle.

QuickBooks Online: Is It Right For Your Business?

QuickBooks Online has become a widely used alternative to the traditional desktop versions of QuickBooks. With up-to-date bank and expense information that is accessible by both the business owner and CPA (once the CPA is granted accountant access to the company) it’s easy to see the immense benefits. Business owners have no down time as they wait for their CPA to do monthly, quarterly or yearly work and CPAs have the most recent data in order to efficiently and effectively assist their clients in day-to-day business dealings.

Unlike the desktop versions of QuickBooks, QuickBooks Online provides users with the most current version without the yearly added cost of upgrading software. The highly secure QuickBooks Online servers provide immediate backup of your company files and is accessible from virtually anywhere you can access the internet. There is even an awesome app for the iPad that enables you to take photos of receipts and enter them into your bank or credit card register on the go. The portability and functionality of the program makes keeping your company’s financial records a breeze.

QuickBooks Online is allowing us at LBA Haynes Strand to stay ahead of the curve by achieving results through a fully engaged approach and diligent planning. To see a visual guide on converting to QuickBooks Online, click here or contact our office for additional information on the benefits and limitations of the software. 

Julie Ayers: The 2016 NAWBO Woman Business Owner of The Year!

Julie Ayers has been named the 2016 winner of NAWBO’s Woman Business Owner of the Year Award!  This award recognizes the NAWBO member who has most demonstrated strong leadership skills in growing and managing a successful business that is more than five years old.  Julie accepted the award at NAWBO’s 31st Annual Awards Gala on Tuesday May 17th.  Other finalists for the award included: Jennifer Maier, President & CEO of WDS, Inc. and Suzy Johnson, President and Owner of Employee Benefit Advisors of the Carolinas, LLC. 

Julie who is the Immediate Past President of the NAWBO Charlotte Board was blown away by the award and had this to say, “I am so honored and grateful to have received this award. In my time with NAWBO, I have learned and grown so much – from becoming a member, to being named Treasurer and then President, and now winning this award.  I think this speaks volumes for how important NAWBO has been to me and the way that I look at business now.  I have met so many great friends and developed such amazing relationships with other Charlotte women business owners, and I thank them for always being a resource to me and for helping me grow into what I have become today.  I also need to thank my fellow Members and my team at LBA Haynes Strand – we have developed a special Firm and one that holds a very exciting future.”

This marks Julie’s second exciting announcement this year, as she was named one of the 50 Most Influential Women in the Greater Charlotte area by The Mecklenburg Times in March.

What is NAWBO?

NAWBO stands for The National Association of Women Business Owners.  Since 1975, NAWBO has helped women grow their businesses by sharing resources and providing a single voice to shape economic and public policy.  NAWBO is the only dues-based national organization representing the interests of women entrepreneurs across all industries.

In 1999, the Charlotte-based women’s organization WBO joined the National Association of Women Business Owners to become NAWBO Charlotte.  There are chapters of NAWBO in almost every Metropolitan area, and NAWBO is represented in 33 countries across the world through its affiliation with Les Femmes Chefs d’ Enterprises Mondiales (World Association of Women Entrepreneurs).

Today, NAWBO Charlotte is the only organization specially designed to serve, support, and strengthen the 42,000 women-owned businesses in the greater Charlotte, NC metropolitan area.  To learn more visit www.NAWBOCharlotte.org.

Attention Business Owners: Don’t Just Survive….Thrive!

Are you helping your business thrive or are you helping it survive? If you are a business owner you may be spending too much time focusing on how to keep the ship afloat and not focusing enough on the opportunity to shift your time and attention to helping your business thrive.  One option to assist you is outsourcing business functions to professionals.  Look outside your company for consultants, for example a CPA firm that provides bookkeeping or outsourced accounting services.  This can save you time and money, as the fee will likely be less than hiring a full time accountant on your staff.

The moral of the story: Don’t try to wear all the hats!

Business owners that try to wear all the hats simply don’t have time to focus on their business.  They are too busy focused on the mundane activities such as accounting, marketing, hr, etc. As the leader of your business, you should be spending 0% of your time crunching numbers of everyday finances, and 100% of your time finding ways to increase the overall value of your business.

Let’s examine how outsourcing your accounting function can give you a tighter grip on managing your business in its entirety:

Outsourcing Saves Time

Your accounting department shouldn’t require a babysitter. You might think it’s your duty to manage work flow, or you might just be intent on keeping a close eye on your company’s finances. Is this really the best use of your time as the leader of your business? What you should be doing is checking in to each of your departments, ensuring smooth sailing, and then getting back to running your business as a whole.  

Outsourced accounting allows you to do this by taking all accounting issues off your hands. With an outside accounting firm, you are relieved of the day-to-day oversight of your company’s finances. Your available time increases, and you feel confident in taking that time to tackle other, more important, business issues.

Outsourcing Gives You An Organized System

When you ask your bookkeeper for a specific document, they should be able to retrieve it immediately. There shouldn’t be massive amounts of time spent digging through files and searching through desktops.

If you’re like most successful business owners, disorganization conflicts with your strategically structured approach to running a business. When you have a CPA firm on your team, your files are classified by revenue, or expense or location – however YOU want them to be classified. Which brings us to your next point…

Outsourcing Puts You In Control

You obviously have control over your business if you own it, but are things being managed according to your guidelines? Are the financial policies and procedures your company requires being put into place? You may not have tremendous accounting knowledge, but you have ideas on how you’d like to see your reports compiled and presented.

A good CPA firm abides by these ideas, taking your business plans and reporting preferences and arranging them in an easy-to-read, comprehensible format. For example, if you’re not 100% in tune with 100% of your expenditures, a CPA firm might recommend a weekly, monthly or quarterly cash flow analysis, depending on your needs.

The fact that you are not an accounting expert shouldn’t prevent you from creating policies around your finances.

Leading your business means bringing about a brighter future, looking at the overall picture, and not busying yourself with daily duties throughout your departments. Even if your accounting department is performing adequately, as a leader, it is your responsibility to turn “adequate” into “effective” if you want to achieve sustainable business success. Outsourced accounting services ensure this effectiveness, and give you the time and tools you need to lead your business.

Want to learn more about the benefits outsourced accounting provides for your business?  Click here to start the conversation about your financial future with LBA Haynes Strand or click the button below to download your free whitepaper on the subject!

Delegation

Business Owners: Delegation Is The Key To Sustainable Value

Business Owners need to learn how to properly delegate roles in order to create a sustainable business. We have seen instances where business owners, who have worked as an “army of 1”, leave their business or retire and the value of the business leaves as well. If you really want  to make a difference in your employees lives and you want to create a lasting business long after you leave, you must learn the art of delegation!

Delegation is tough for some business owners. It is about empowering others to step up and make decisions on behalf of YOUR business and it is about you TRUSTING those employees to do so. Let me ask you a simple question:  Why did you start your business? Look back to when you were a wide eyed, optimistic entrepreneur. You started your business probably because you had a passion and wanted to make a difference in some kind of capacity. You have now created a successful business, one that has value and one that employs actual people! It has been successful, however you still feel the need to make every decision on your own.

What is your company going to do when you retire? Is it going to continue to run successfully or is it going to run like a ship without a captain?

If you want it to run successfully when you are gone, you must master delegation. Stop wearing every hat in the business and find people who are capable and willing to help your business grow. Find people you can trust to make the right decisions, that work within your value system and your business’ objectives. If you fail at this your business will likely fail soon after you leave.

To learn more, contact our team at LBA Haynes Strand Capital Advisors for your no-cost consultation!

Accounting For Growing Companies: What To Consider

Do you know the old adage of “it takes one to know one?” We believe this to be a characteristic of LBA Haynes Strand, that just isn’t available at other CPA Firms. We of course are talking about a growing company. Growing companies face all kinds of challenges: accounting, hr, marketing, operations, etc, etc. There are two areas that we see growing companies needing the most assistance in: Cash Management and Internal Controls.

Cash Management

The truth of the matter is, it takes a LOT of cash to grow a business. Think about it – when a company grows their receivables grow, their work in progress grows, they have to hire new employees, they may need more inventory to sell, different technology needs, etc. All this costs money, but it is essential to creating a business structure that is capable of handling the business growth. If you are a business owner and you are looking to grow your company, you need to be aware of this.

It is a common story in the business world that businesses grow quickly, but then fail quickly, because the business was not properly prepared to handle the growth.  Business growth does not always equal success. When you grow you must look at all sides of your business and make sure that each function is strong and able to handle the increasing workload. Cash is going to be spent quickly to do these things, but the business owners must realize that this is necessary! The trick is not running out of money and working with your CPA can help you accomplish that.

Internal Controls

We see it often that a company comes to us asking for assistance because their company’s growth is outpacing their business structure. Sometimes these companies have little to no accounting function, because they just haven’t had the time to put the right systems in place, the right internal controls in place, or put the right people in place. This is a big area of concern for us.

Internal controls are often pretty logical measures that can make the difference between the success or the failure of your business. Implementing strong internal controls early on in the growth process can save the company a lot of time and money in the long run. This will also ensure the company that they will have efficient and effective business functions, reliable financial reporting, compliance with laws pertaining to the businesses activities, and the company’s assets are properly protected. So how do you know what internal controls you need to strengthen? This is where a certified public accounting firm with a team of internal auditors comes in handy. The internal audit team will come in and learn your business, conduct testing of your internal controls, create solutions for any issues they find, and then make recommendations to the management team.

If you are a growing company and have questions about your internal controls and your accounting function, contact LBA Haynes Strand today. As a two-year Inc. 5000 fastest growing company, we understand growing companies. What better advisors to your growing company than ones who knows how to handle it themselves!  Contact us today for your no cost-consultation!

LBA Haynes Strand Makes Inc. 5000 List…AGAIN!

LBA Haynes Strand, PLLC Ranks No. 1695 on the 2015 Inc. 5000 with Three-Year Sales Growth of 239%

We are pleased and excited to announce that Inc. magazine has ranked LBA Haynes Strand NO. 1695 on its 34th annual Inc. 5000, an exclusive ranking of the nation’s fastest-growing private companies. This ranking makes for LBA Haynes Strand’s second straight year on the Inc. 5000, as we were ranked NO. 3762 in 2014. The list represents the most comprehensive look at the most important segment of the economy—America’s independent entrepreneurs. Companies such as Yelp, Pandora, Timberland, Dell, Domino’s Pizza, LinkedIn, Zillow, and many other well-known names gained early exposure as members of the Inc. 5000.

“We are honored as a firm to be included on this list of the fastest growing companies,” says John Bly, Co-Managing Member of LBA Haynes Strand. “This ranking is a testament to the hardwork and dedication of the Principal Members and all the employees at LBA Haynes Strand.  Our team is second to none, and we are very excited for what the future holds and the direction the firm is headed in.”

The 2015 Inc. 5000, unveiled online at Inc.com and with the top 500 companies featured in the September issue of Inc. (available on newsstands August 18 to September 22) is the most competitive crop in the list’s history. The average company on the list achieved a mind-boggling three-year growth of 490%. The Inc. 5000’s aggregate revenue is $205 billion, generating 647,000 jobs over the past three years. Complete results of the Inc. 5000, including company profiles and an interactive database that can be sorted by industry, region, and other criteria, can be found at www.inc.com/inc5000.

“The story of this year’s Inc. 5000 is the story of great leadership. In an incredibly competitive business landscape, it takes something extraordinary to take your company to the top,” says Inc. President and Editor-In-Chief Eric Schurenberg. “You have to remember that the average company on the Inc. 5000 grew nearly six-fold since 2012. Business owners don’t achieve that kind of success by accident.”

Methodology

The 2015 Inc. 5000 is ranked according to percentage revenue growth when comparing 2011 to 2014. To qualify, companies must have been founded and generating revenue by March 31, 2011. They had to be U.S.-based, privately held, for profit, and independent–not subsidiaries or divisions of other companies–as of December 31, 2014. (Since then, a number of companies on the list have gone public or been acquired.) The minimum revenue required for 2011 is $100,000; the minimum for 2014 is $2 million. As always, Inc. reserves the right to decline applicants for subjective reasons. Companies on the Inc. 500 are featured in Inc.’s September issue. They represent the top tier of the Inc. 5000, which can be found at http://www.inc.com/5000.   

How To Find A Company To Buy

Our firm receives many questions on M&A, but by far the most common question is: “How do I find a company to buy?” The answer is a simple one… start with Google and search for companies that are currently for sale. The search will most likely lead you to brokers. Within each industry, there lies a group of brokers who focus on mergers and acquisitions.

One very popular business broker firm in the Charlotte area is Viking Mergers and Acquisitions. On Viking’s website, there is a section for people looking to buy a business and another for people looking to sell their business. Under the “Buying A Business” tab, there is a business listing of all their clients who are looking to sell their business. There you go – you have your answer. It’s that simple!

What else can you do besides searching online?

I recommend trying a direct mail piece. To quote Wayne Gretzky, “You miss 100% of the shots you don’t take.”  You may never know that a company is interested in selling if you don’t ask them! Do some market research and look for companies that can add value to your business. 

What else should you look for in a business to buy?
  • Location – Do you want to enter a certain city or geographical area?
  • Lack of a Succession Plan – This one is hard to tell unless you have a dialogue with the owners.
  • Specialized Service/Product – Do you want to offer a new service or a product?
  • Culture – A similar work culture will help the merger or acquisition succeed.

Find a list of companies that fit the profile you are looking for and send them a letter or a postcard. This mailing should address your intentions, show off your background, gauge the interest of the business owner to sell, and be short and to the point. After that, it is up  to you to either follow up or foster the relationship. If you hear back from a business owner, you can fine tune your approach and learn what worked in your mailing or what you should change in order to make it more effective the next time around. You also might learn more about what kind of business owners are interested in selling and you can target similar business owners with your next correspondence.

Interested in learning more about how to find a company to buy?  We will release more blogs on this topic in the near future so stay tuned! In the meantime, feel free to reach out to the team at LBA Haynes Strand for your no cost consultation!