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Your Multi-Million Dollar Exit Plan -- Wayne Zell #5823 · Financial Survival Network

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  And that's what this is all about. It. It's basically saying that at
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  some point in time, even if you're conducting a business that generates nice profits
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  for you, everything's going to come to an end, either naturally or you're
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  gonna want to get out. You're gonna want to retire, You're gonna want
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  to do something else. You're listening to Carrie Let's Financial Survival Network, where
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  you get valuable information you just can't find anywhere else to thrive in today's trying
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  times. You need the Financial Survival Network now more than ever. Go to
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  Financial Survival Network dot com and get your free newsletter and gift. Financial Survival
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  Network now more than ever. Welcome you are listening to watching the Financial Survival
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  Network. Have you ever been involved started a business, It succeeds and things
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  are going really well, but you're ready to move on. Well, I'll
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  tell you what that's happened to me. And I started a company. Well,
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  I took over a family business many years ago. Should have had a
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  succession plan from day one because I was working with the relatives who I preferred
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  not to work with. But later on I kind of created my own exit
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  plan sold it to my largest competitor and never looked back. But Wayne Zell
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  is with us. Now, Wayne, you are a CPA and a fellow
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  attorney. You've written a book, your multimillion dollar exit the entrepreneur is a
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  business succession success planner, and we really appreciate you coming on Amazon bestseller.
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  We might also add, so succession, when is the ideal time to create
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  your success succession plan? Well, nice to be on the podcast with you,
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  and it's it's great to meet you, Kerry. Yeah, the best
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  time is at the beginning, at the beginning of your entrepreneurial journey. And
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  if you don't do it at the beginning and you're way along, way far
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  along on your entrepreneur entrepreneurial journey, then do it later on. But don't
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  don't delay because you never know when something might happen unexpected disability or death that
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  causes you to leave your family, your employees, your customers, your business
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  in a state of turmoil without having to find what happens in those events.
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  So start out with thinking about the unexpected and then of course plan for the
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  expectant, and then you never know what's going to happen in the future.
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  So doing business succession planning is an ongoing process, and it always starts at
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  the beginning. But in the beginning, you're like setting up systems, you're
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  finishing off your space, you're opening up your store, whatever it is.
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  You've got like a million things. And I know for myself, when I've
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  started businesses, I tend to put something like that on the back burner,
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  saying I'll get to it because I got so many things to do. Them
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  up to my elbows and alligators. You know, it's hard to get to
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  get you to realize that this is really crucial to the success and eventual sale
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  exit from your business, isn't it. Yeah. I mean the entrepreneurs focused,
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  soul focused, and you deal with entrepreneurs. I deal with them all
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  day long. Their focus is on the business getting it started. Yeah,
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  the the initial startup phase. Okay, you don't have to have your business
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  succession plan in place when you're you know, setting up the premises or you
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  know, bringing on employees at the very beginning, but you should start thinking
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  about it and then doing your planning once things start moving along is really critical.
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  It's selfish, I believe, to not consider the fact that you've got
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  other people relying on you if you're setting up a business, if you have
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  a family, if you have a spouse, you have kids, if you
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  have employees working for you, if you've got customers that you're servicing, how
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  do you make sure that they're being taken care of as well as yourself?
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  I mean, if what happens, if something happens to you, you become
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  disabled, you're in an automobile accident, and you started up this business.
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  Let me tell you a quick story. I had a guy who was starting
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  up a government contracting business and he was doing very well. He was all
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  the way up at seventeen million in revenue and doing very very well. But
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  he had a long way to go to where he wanted to be in terms
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  of selling the business. And one day I get a call out of the
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  blue. It's right around New Year's and his son calls me and he says,
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  hey, look, my dad passed away. What do you mean.
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  He was fifty three years old. We were just starting in the business succession
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  process. He passed away, and he was frantic. What do we do?
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  How do we deal with the business. So we got together investors that
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  he had brought into the business. Fortunately, they were very sophisticated people.
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  We brought them into the business. I helped basically build a board of directors,
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  and we were able to bring in a management team to run the business.
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  And it worked out so that we grew the business by three times and
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  sold it for thirty million dollars too. So it was you and I needed
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  you. Lucky. We were lucky. I think we were lucky. And
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  I think the biggest thing that he did that most people don't do is he
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  surrounded himself with two people who were very sophisticated and very familiar with the industry,
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  and they were minority investors in his business, so they had an incentive
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  to help out the family and as well, you know, they wanted to
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  help out, and so it worked out beautifully in the end for the family,
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  not so well for the founder. But you never know what's going to
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  happen. And that's it's planning for the future. So you know, like
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  if you're bothering to do a business plan, and normally you should do that.
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  It doesn't necessarily have to be a multi level presentation to bring in multi
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  billion dollar investors, but you should always be doing a plan barebones at the
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  least. Right had a section there for succession slash exit plan. You should
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  always have an exit strategy in anything you get involved in. You buy a
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  house, right, you buy a car, whatever it is, you always
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  need an exit strategy exactly. And that's what this is all about. It's
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  it's basically saying that at some point in time, even if you're conducting a
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  business that generates nice profits for you, everything's gonna going to come to an
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  end, either naturally or you're gonna want to get out, You're gonna want
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  to retire, you're gonna want to do something else. And so I had
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  a client come into me last week and he said, I've got this business
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  and it was on his balance sheet, and his balance sheet was nice,
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  yet twenty five million dollars net worth ten million was allocated to the business.
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  I said, how did you come up with that number? He said,
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  well, you know, I've had offers and I think I think that's what
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  the business is worth. I said, okay, let's assume that it is.
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  What's your exit plane? And he said, I don't really have one.
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  I probably just wind the business down. I said, so you're basically
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  taking ten million dollars away from your family off your balance sheet because he has
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  kids, he's got a wife, and you don't care what happens, So
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  that doesn't make sense to you want to plan to at least transition the business
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  to your existing employees, sell it to a third party. There are lots
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  of different alternatives, lots of different strategies, and we talk about all that
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  in the book, and I think you need to spend that time because,
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  yeah, you're tired. In the end, you may want to just get
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  out and wind it down, but there may be a better alternative to preserve
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  some value or enhance the value for the benefit of your family, your customers,
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  your employees, and yourself. Hey, and let's not forget you're involved
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  in a business. Day to day small business, it's extremely emotionally taxing.
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  It's intense. You have challenges every day and it's easy to get burned out.
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  Or you accomplish your goals, you're successful, and you want to move
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  on to the next thing. So rather than having to think about it when
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  you get to that point, if you've got that land in place, even
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  if it's bare bones, hey you're that much further ahead. One thing you
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  mentioned in the book is using a revocable trust and why it's important or an
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  exit plan. How does that work? So what we've often seen is somebody
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  dies owning their business, shares of stock in the business or an LLC or
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  however it's structured when you pass away. In every jurisdiction in the United States,
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  including the District of Columbia, there's a process called probate that people have
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  to go through. So if you die owning your business in your own name,
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  your a state, your executor is going to have to go through probate,
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  which can involve not only disclosing the nature of the fact that you own
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  this business, but the value of it has to be inventory and filed with
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  a court, which is a matter of public record. So everybody's going to
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  know what the value of the business was or is at the time of your
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  death. And then you have an obligation, not you, your executor or
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  whoever's your legal representative, has an obligation to take this through the probate process,
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  which can take years and costs anywhere from two to five to eight percent
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  of the value of the assets. Is it worth it to go through that?
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  So what we do, and you know our firm does both the state
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  planning and business planning, and so we combine the estate planning and the business
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  planning and tell our clients at a minimum, set up a revocable trust,
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  which means that you are the trustee, you are the beneficiary of the trust.
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  You control everything. You don't have to ask anyone for permission. Just
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  put the stock or the LLC interest into the trust. And then if you
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  god forbidden, you pass away, or you become disabled, there's a successor
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  trustee that can handle everything without going through living probate, which would happen if
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  you were incapacitated, or death probate, which happens on your death, and
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  save the money, save the time, and avoid public disclosure of all of
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  this stuff. And it just makes handling the business at a minimum a lot
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  easier than if you didn't have that trust in place. And put your business
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  into the trust right away, so you're in control of it. Nobody else
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  is in control of it. You don't have to ask for permission to do
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  anything with the business. You as the trustee, will vote the shares of
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  the stock or the LLC entrant to control. Got it, got it?
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  Yea. It makes a state planning succession all those things far more easier.
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  And you know, one thing I find, having been an entrepreneur myself or
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  you know, fourth generation entrepreneur, and you know, you get involved in
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  the business, you never really bother to think of who's going to run it
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  after you besides succession, but management succession. Like I was in a family
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  business. My father started it with my uncle. It was my brother and
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  I, so the succession plan was already in place. We've been working in
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  the business since we were like children. But for many of you entrepreneurs out
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  there, you don't think about these things. Well, you know that's funny.
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  Even if you and your brother were deemed to be the successors for your
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  uncle and your father, who's in control of the business. How will the
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  day to day operations work? So that's why we as part of the book,
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  we talk about using a management succession plan, actually defining who is in
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  charge of day to day operations, who reports to whom, and then setting
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  up a mechanism that sort of oversees the day to day operators. So if
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  you and your brother are operating at day to day, who's going to oversee
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  the two of you to make sure that again, the ultimate beneficiaries the family
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  are being taken care of in the long run. And in many cases it
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  may not be necessary, maybe overkill, but I find that, for example,
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  if there's a sole owner, somebody owns one hundred percent of the business,
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  this becomes absolutely critical. And we just did one for a client last
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  week where he hadn't even thought about it, and he's in his late sixties
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  and he likes to jump out of helicopters for fun. So I'm just like,
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  we better do this plan, and we better link it to the revocable
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  trust that we draft in form as well. So the succession plan is something
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  that the company adopts. The board of directors is named, the officers are
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  named, their salaries are set out. We know exactly what they're going to
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  get paid, so that they don't up and leave. In a family owned
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  business, it may not be quite as difficult, or it may be even
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  more difficult depending on the facts. And so you just want to make sure
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  that you have all that documented and that the revocable trust which owns the business
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  and whoever the successor trustee is, is bound by that, and that we
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  have exit plans within the management success plans, So if you become disabled or
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  die, we outline what happens over some period of time three months, six
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  months, twelve months, and then what happens after that, and who controls
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  those decisions and leaving it in the hands of one person who might be a
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  trustee, who might be a spouse may not necessarily be the best for the
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  business, the employees, or the customers. Yeah, yeah, can be
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  very troubling and very emotionally unsettling, all those things for sure. So how
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  would you define a successful exit plan for your business? What's the addition to
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  that? Yeah, I think the a successful business succession plan incorporates, uh,
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  your personal issues. So you've got to You've got to understand what your
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  personal goals are and whether or not the business itself is going to generate the
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  cash flows for you and your family to survive. So there there's a personal
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  financial planning component to it. So you shouldn't be bringing in a financial planner
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  to help you. You want to ensure family harmony. If it's a family
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  owned business, what legacy do you want to leave are you dealing with all
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  these issues? Is there a culture that you maintain in the business that you
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  want to maintain for your employees and for your customers. If something happens to
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  you, How does the community benefit from your business today, and how will
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  it benefit tomorrow. These are all things, you know, minimizing taxes.
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  I'm a tax lawyer by training, and you know, everybody's always focused on
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  income taxes, but we also need to focus on a state taxes death tax
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  that you know can be imposed on very large estates, but the exemptions from
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  the estate tax fluctuate and they are scheduled to drop by half at the end
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  of twenty twenty five. You know, all of these things factor into a
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  successful business plan and then planning for what happens after you ex at the business.
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  So the book, there's a chapter in the book that deals on what
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  happens next after you successfully exited your business, because your life shouldn't end and
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  doesn't end there, and so it's life is all about planning ahead. And
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  so a successful business succession plan, in my opinion, is planning for the
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  unexpected, having a good business plan that plans for an expected exit whatever that
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  may be, retirement, sale, whatever, and then planning for the future
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  after the exited business. Yeah, so that's a good question. So many
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  of you out there, entrepreneurs, you can't even picture yourself, not going
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  to the office day and day spending this twelve hour days. So what advice
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  do you have for them? I think having an interest in life that you
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  are passionate about is what you should pursue. So I am an entrepreneur too,
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  and my passion is business succession planning for entrepreneurs. So I do spend
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  ten to twelve hours a day, seven days a week, focusing on this
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  because that's what inspired me to write the book, and so I'll probably keep
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  doing this. But I do have interests outside of work. I have,
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  you know, a future grandchild on the way. I've got four kids that
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  I spend time with. I've got, you know, I've got a passion
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  for music. I was a musician younger, at a younger point in my
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  life, and so all of these things. And my spouse and I love
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  to garden, and we love to go out on our lake. Create time
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  for that. The other thing I do a lot of time is spending time
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  on charity, devoting time volunteering for charitable endeavors. Everybody can't do everything.
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  I also teach at the college level at George Mason University. So I think
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  there, if you have passions, make time for your passions and create a
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  schedule that allows you to do that while pursuing your passion for business. So
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  do it while you're while you're building your business, because you may end up
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  getting so focused on your business that you may forget other things that give me
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  pleasure and passion as well. I've been there, done that, got the
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  teacher, Wayne. Really a lot of wisdom here again. The book is
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  You Are Multimillion Dollar Exit, the Entrepreneur's Business Succession Planner, and it's by
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  Wayne Zell, Attorney, CPA. We appreciate you coming on Wayne. I
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  you've got a question for Wayne or myself, shoot me an email Kyl at
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  kryltz dot com. We'll get you a quick answer. While you're at the
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  site Financial Survival Network dot com. You can click through right to wayne site,
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  order the book, and hey, while you're there, sign up for
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  your free newsletter. Just sent one out today. Wayne. Great luck with
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  the book and we will definitely talk to you again. Thanks Carry, thanks
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  for having me on the show. I appreciate it greatly. Thanks for listening
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  to Carrie Letz's Financial Survival Network. Your solution to today's trying times. For
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  the latest, go to Financial Survival Network dot com Financial Survival Network now more
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  than ever,