1. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) A Succession Plan is Critical You will Exit your business. Who will be in control? March 17, 2011

2. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

3. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

4. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

5. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

6. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

7. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

8. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

9. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) Corporate Partners

10. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) A Succession Plan is Critical You will Exit your business. Who will be in control? Speaker: Roy Messing, MBA, CEPA Program Coordinator

11. Roy Messing Program Coordinator Ohio Employee Ownership Center Kent State University

12. Program Overview  Brief Overview of Succession Planning  Background  Implications of not planning  Succession Planning Basics  Helpful Tools  Resources

13. 4.6 million family-owned/closely-held businesses Some Statistics...

14. Employ 76% of U.S. workforce Some Statistics...

15. Small and medium-sized businesses create 65% of net jobs in U.S.

16. Some Statistics - (the wave)  During the next 20 years close to 80 million baby boomers will be retiring.  More than 70 percent of privately owned businesses will be changing hands within the next two decades.

17. Some Statistics –(the wave)  The largest intergenerational transfer of wealth in history … a staggering $10 trillion A "business transfer tsunami”

18. Some Statistics... 20 years ago 30% of small businesses made it to 2nd generation & 15% made it to the 3 rd generation

19. Now 15% of small businesses make it to 2nd generation & 5% Make it to the 3 rd generation Some Statistics...

20. COSE study found that about 80% Do NOT have a succession plan COSE = Council for Smaller Enterprises in Cleveland, Ohio

21. Recipe for Disaster…….  Fewer companies transitioning to “next” generation  Aging Ownership Population  Few Owners have plans in place  What can go wrong………….

22. Worst Case Family loses business investment Business Ceases Operations Employees Lose Jobs Communities Lose Tax Base Quality of Life and Services Suffer Domino Effect

23. Elements of a Succession Plan Transactional Economic Personal/Emotional

24. Sale or Transfer to Insiders Sale or Transfer to Outsiders Or do nothing

25. Potential Inside Buyers  Family Members  Partners  Management  Employees  Combination of the Above

26. Potential Outside Buyers  Strategic Buyer Within Industry  Strategic Buyer in Aligned Industry  Financial Buyer

27. Do Nothing Transfer  Only two things are certain in life Death & Taxes

28. If the Owner does nothing  The Courts decide,  Uncle Sam gets his share, and  All others left to pick up the pieces

29. Given all that can go wrong and the impact of that inaction….. Why don’t owner’s start a succession plan?

30. Difficulties  Death  Taxes  Risk  Control  Life Changes  Relationships  Options  Value

31. Succession Planning Steps Start Identify Owner’s Needs and Goals Research/Identify Professionals Draft/Communicate Plan Revisit & Adjust Plan

32. The Best Time to Start a Plan Now!!!

33. Key Questions for the Business Owner Do I need the sale and/or transfer proceeds to finance my retirement? Can the business support that?

34. Key Questions for the Business Owner Do I have family members in the business? Do they rely on the business for their income?

35. Key Questions for the Business Owner Would I like to see the business continue as a viable entity after I leave?

36. Key Questions for the Business Owner Can I let go of the business?

37. Why Don’t They Do It?  What will motivate a typical small business owner to begin and actually execute a succession plan?

38. Family Issues Owner(s) Spouse(s) (or spice) Parents/siblings/in-laws Children & Grandchildren

39. Family Issues Communication Competency Fairness or Equality

40. Management Succession Often Overlooked Extremely Important Creates and Maintains Value Who’s Taking Over Seller’s Duties?

41. Selecting Advisors  Find experienced professionals  Interview several before selection  Get and check references  Have a “Team” of trusted advisors  Define roles amongst team

42. Team of Advisors  Estate and Trust Professionals  Financial Planner/Insurance Agent  Business Attorney  Business Valuation Expert/Accountant  Exit Planning Advisor

43. Drafting the Plan  Focuses on the goals and needs of the owner  Includes input from advisors, owner and other appropriate parties  Outlines the projected outcome and the path to reach that outcome  Specifics better than generalities

44. Time Frame 3 Months -20 Years 1-2 Years OK 5 + Years Ideal

45. Implement, Track and Adjust the “Plan”  Plans that “collect dust” are worthless  Routinely monitor implemented plan  Note uncontrollable changes that impact plan (good or bad)  Adjust plan to fit “new reality”

46. SPP Tools  Buy/Sell Agreements  Life Insurance  Trusts  Gifting of Shares

47. Valuation

48. Every ownership transaction should include a valuation Independent, third-party Think of it as an insurance policy against future litigation

49. Valuation Methods  Asset Approach  Market Approach  Income Approach

50. Different Levels of Value Strategic outside buyer Financial outside buyer Fair market value – ESOP Small group internal buyer (maybe) Family internal buyer

51. Project Exit Outcome  Financial outcome of exit per goals  Anticipated outcome per evaluation  Calculate the “Exit Gap”

52. Closing the Gap?  Adjust exit time horizon  Develop plan to increase value  Adjust exit expectations

53. Our Resources  Seminars  Conferences  Webinars  Web Site  Exit Planning Publications  Technical assistance  Referrals for Service Providers

54. Website & Contact Information www.oeockent.org Roy Messing 330.672.0333 rmessin2@kent.edu

55. March 17, 2011

56. www.BOSSworkshops.com B.O.S.S. Workshops (Business Owner Strategy Sessions) A Succession Plan is Critical Q & A