What Every Entrepreneur Should Know About Selling Their Business Featuring Randy Long - Genius Network Episode #165

If I have a company that runs like elf, easy, lucrative and fun, that makes it more valuable. I want it to be sellable, but I just don't want it to be sellable. I want it to be sellable for the highest multiple possible.

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Of selling your business or not, someday you will be. A recent survey found that over the next five years, 51% of the businesses in America will be sold. The sale will either be made to a third party, a family member, or the employees of that company. Yet millions of business owners have no exit plan. And if they do have a plan, it's usually not very effective, especially as taxes go. Because this is such an important subject, I've asked Randy Long to use his over 30 years of of experience in helping business owners exit their business share what he's learned. As a matter of fact, Randy's participated in 289 transactions for business owners exiting their businesses. Randy has dedicated his professional life to helping business owners get the most for their blood, sweat and tears. He's a lawyer, a wealth manager, and a certified exit planner.

The process that prepares the business, the owner and the family for the owner's exit. The important part about this is that exit planning is greater, broader than just preparing the company for a sale. It's so what kind of exit do you want? If you want a Rolls Royce version of that exit, then you have to plan for it. It takes some work. For most of you, your current exit plan, it's built one piece at a time, kind of a haphazard manner. You know, Johnny Cash did a song some years ago about a guy that went to work for GM and he decided while he was working there that he was going to steal parts and build himself a car. And so of course, after 10 years or so, he had the parts, he built the car, and when he drove it down the street, everybody laughed at him. And that's because it was a monstrosity, of course, with 10 different model years built into the car. So the point for me here and you is that one day your exit plans will be revealed. Good or bad. I don't want people laughing or crying over yours. So what one piece at a time can look like in real life is these binders represent binders sent to me. They're actual binders sent to me by one of my new clients a year ago or so. And he had lawyers and accountants and all this stuff do all this work for him. But he didn't know what to do. He just needed help, he said. And so the point is, he had no integration in his planning and no execution. And if you have no integration in your planning, you just have complexity without direction. And complexity without direction ends in the inability to make decisions and therefore you cannot execute and move forward. So what's your starting line to get this going for you? It's pretty simple. The first number I need is determining your net worth. That's an important number. We do that simply by business valuation. We'd get that done first. We add to that your personal resources and that gives us your net worth. Of course, net of death, net of debt is what we're after. The second number I need to know is how much do you need to live on? That is the life you've planned to live after your exit. I need to know that. Just remember, for most of you when you exit, company benefits aren't coming with you. So you don't have a company car anymore and you don't have health insurance and all the other things, which means, unfortunately, that the cost of living for you rises after you exit. So you have to, you have to plan for that. So again, if you never worked again, how much money would you need to provide the monthly income? You need to live the life you've planned? That's the question. So let's presume that we've determined you need $15 million post exit to live this life you've planned for and that you've got $10 million of net worth. That leaves us with a $5 million funding gap. That's a pretty good number. But we're going to execute and fill that gap. And you're going to do that by growing your company. And that's what we're all here for, right? And we know lots of people that can help us too if we don't know how to do that. There's three main features of a dream car and really a dream exit. Frankly, performance is a big deal in my Rolls Royce. It's also a big deal inside my company because if I have a company that runs like elf, easy, lucrative and fun, that makes it more valuable. I want it to be sellable, but I just don't want it to be sellable. I, I want it to be sellable for the highest multiple possible. That means I need things like a management team that can take it to the next level without my day to day input systems and processes that are documented and executed that are going to be effective. And they're actually operating marketing and sales that are going to provide revenue and profits that will fuel this engine of growth that we have to have to fill that gap. The second big feature of our exit plan, and frankly our Rolls Royce, has to do with safety. We want safety for our family in that car, by God, we want safety inside of this exit plan for our family too. And you know, in life, sometimes we get into crashes or things start happening around us, people start taking bullet shots at us. And if we're not ready for it when it happens, it's too late to prepare. As a matter of fact, it's not only too late, it's illegal. This is my buddy Tony. He's a former Green Beret private contractor. He's just a bad dude, trust me. I asked him one day, hey, Tony, what is the most important piece of equipment you take into a mission? I thought he'd choose an offensive weapon. He said, my bulletproof car saved my life over 50 times. Wouldn't trade it for anything else. So how do we make your exit plan bulletproof? We need to do that. We're going to first look at your business structure and make sure you're in the right one. And then we're going to make sure that it's being legally maintained appropriately. We're going to make sure if you've got shareholders or partners, that we have buy sell agreements in place. I'm amazed at how many people, when we take them on, have little to none of this. So we want to roll that business structure planning into tax and estate planning and the tax side of things, of course, real simple. The code has recently changed and there's some changes going on in the industry. Sometimes we add entities around the one we have right now, and sometimes we change it out. The same thing for estate planning. We always, almost always add entities around our basic estate planning in order to accomplish the owner's objectives, which can be substantial. So, and then the other thing here has to do with insurance. Again, if we have that, that crash scenario or somebody starts taking the shots at us, if we don't have the insurances in place, then it's too late. And I can tell you I don't want anybody suffering the loss of their business or substantial hardship to their family because they didn't plan. And I find immense amounts of mistakes in insurance. And then the third main feature of this for us is the ride in that Rolls Royce. We want it to be. Well, I want this to be a sweet Ride for you and your family too, through this exit plan because it's intended to be awesome for the family. Family relationships in this whole thing are really important. We want to plan understanding that the family is considered. We want a legacy focused estate plan that we can take care of the family, provide maybe for generations to come if it fits the family. And then for the owner, we want to make sure the owner knows where they're going, what they're doing with their time, talent and energies when they leave. So what's your plan? Are you going to sell the business or are you going to transition it to the next generation? If you sell it, just know that there's no guarantees because 90% of businesses listed for sale don't sell. Main reason why, lack of preparation by the owner. Reason why they don't sell for what they should have, lack of preparation by the owner. So shall we keep it in the family then? Well, I like this, but you still have to plan for it. And if you do the planning for it, it can be a wonderful thing. But poor planning can destroy, frankly, the family, like litigation and everything else. Listen, in our business, we work with families to build sellable businesses and legacy families, really, that's what our prayer for you is that you'll get this done and you'll have this kind of thing. Ben Franklin says, again, by failing to prepare, you are preparing to fail. I implore you to prepare. So my number one piece of advice is to start early. There are things that we do and one of the keys to saving big money in exits and in estate planning especially, there's a combination here. You need to start early, and some of the things we need to do need to be done a couple years prior to your decision to sell the company, prior to the decision to sell. So I also think you need a coach. You need somebody that has a broad planning background. That's important. They have experience in education and exit planning. And here's my background. Business planning, financial planning, estate planning, succession planning, retirement planning, exit planning. I only I show that to you because I want you to understand you need somebody that has a broad overview of planning and they have some exit planning experience and education. Yours doesn't have to match my background. I just want them to be broad. Now, this process is intended to be transformational for you and the business and the family. And the family really is important to me in this whole planning thing. So if you choose to make it transformational, it can really be a blessing to you and your family for generations. And it can also help us make sure that no matter what happens in the future, we can make sure that your family realizes the full value of your company, your hard work over your lifetime. I hate seeing companies just close because no one was prepared. So we want to do this, do it right. Let's be good to ourselves, good to our families, and have something to give back by doing this.

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