Category Archives: Exit Strategy

Stuff Happens, Be Prepared

by Kelly Deis of SoundPoint Consulting

If you are a co-owner of a business, let’s hope that you have a buy-sell agreement in place.

Why, you ask? Well, “stuff” happens. The kind of “stuff” that triggers a buy-sell agreement generally falls into five categories, otherwise known as the four D’s and an R:

Death, Disability, Divorce, Disagreement and Retirement.

And when that “stuff” happens, something else also occurs: interests of you and your partner(s) diverge. Inevitably one (or more) owners will be buying – and one will be selling shares of the company.

The problem is that as of today, you do not know which side of the fence you will be on. Wouldn’t it be nice to have a plan in place that both parties understand, deem fair and equitable, and agree on – before either becomes the buyer or the seller?

Don’t think that “stuff” will happen to you or your partner(s)?  Read on and consider the risk if you happen to be wrong.

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When the time is right, how will you exit your business?

by Kelly Deis of SoundPoint Consulting

Retiring from your own business isn’t as simple as calling HR and telling them you are ready to go. How exactly does one leave their own business for the good life? Here are a few options.

You started your business 10, 20 or even 30 years ago. It has been good to you. You’ve built it from infancy, fed it, grew it and, in turn it has provided you a comfortable lifestyle.

But, you’re done, or you want to be done. You are ready for the good life that retirement promises. But there is only one catch – there is no playbook for retiring from your own business.

As a business owner, there are several options available to exit your business. Here are a few…

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The 3 Pillars of Business Value

by Kelly Deis of SoundPoint Consulting

Most business owners focus on increasing profit margins as the primary means of improving the value of their business. Profitability is absolutely important, but it is not the only factor to consider.

In fact, there are three components which can increase – or decrease, the value of a business: risk, profitability and growth.

Take for example a recent client. We determined the valuation of the business to be about $1 million.

We then illustrated that if they were able to incrementally decrease risk, improve profitability and accelerate growth, they would be able to realize as much as $300,000, or 30% of additional value.
  • Decrease risk (discount rate) 2 pts: +$80,000
  • Increase profitability 10%: +$100,000
  • Increase annual growth 2 pts per year: +$120,000

Now, will this client be able to realize the full $300,000 in incremental value? It really depends on the timeframe and level of effort that they want to put into improvements. It is a good idea to identify the range of opportunities and then prioritize activities.

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Selling your business? Timing is everything.

by Kelly Deis of SoundPoint Consulting

Owners want to sell their businesses for for a variety of reasons – some want to retire and others are ready to move on to something else. Most owners ask – “is now a good time to sell?” Not surprisingly, the answer is, “it depends”.

Here are three factors to consider when timing the sale of your business. Of course, it is best when all three are optimally aligned, but that is not always possible.

The State of the Owner

The owner is critical to the success and ultimate value of a business. Typically, once the owner is beyond his or her prime, the business value will begin to falter.

It is best to sell when the owner is engaged, still excited about the business and perhaps wiling to stay on after the sale. Likewise, the more youthful and healthy the owner the less they will appear eager to sell.

You want to be the owner that wants to sell, not one that has to sell.  Continue reading

How to retire from your own business.

by Kelly Deis of SoundPoint Consulting

You started your business 10, 20 or even 30 years ago. It has been good to you. You’ve built it from infancy, fed it, grew it and, in turn it has provided you a comfortable lifestyle.

But, you’re done, or you want to be done. You are ready for the good life that retirement promises. But there is only one catch – there is no playbook for retiring from your own business.  Continue reading

Thinking about buying or selling a business?

Make sure you understand buy-sell agreements.

by Kelly Deis of SoundPoint Consulting

Buy-Sell Agreements are legal documents that govern how ownership will change hands in privately owned companies if and when something significant happens to one of the owners.

These agreements are intended to ensure the remaining owner(s) control the outcome during critical transitions, while making sure the transitioning owner (or their estate) are treated fairly and equitably.

Although owners may have the same interests while both are in the company and all is going well, these same owners may have wildly divergent desires and needs after a triggering event occurs.

It is not too hard to imagine a scenario where one wants operational stability while the other needs liquidity. For instance, if a partner dies, the remaining owner wants business as usual, while the deceased’s estate wants to cash-out.

The interesting thing about Buy-Sell Agreements is that you do not know which side of the transaction you will be on when the agreement is drafted. Because of this, it is in both party’s interest to make them as fair and equitable as possible.

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Some day you will want to sell your business.

Asset or Stock Sale How do they Differ?

by Kelly Deis of SoundPoint Consulting

So, you want to sell your business. For most of us, it is a once in a lifetime event. There is no reason to expect that you should know the intricacies of a transaction.

That is why it is oh so important to have good advisers help walk you through the process.

One of the fundamental decisions you will need to make is whether the transaction will be an asset or stock sale. It will depend upon your individual circumstances as well as your business structure.

If you are an LLC, then a stock sale is not an option as there is no stock to sell (although owners may sell their membership interests).

S-Corps have the option of the 338 election which treats the transaction as a stock sale for legal purposes and an asset sale for tax purposes, but that is WAY beyond the scope of this newsletter.  Continue reading

It’s a great time to buy or sell a business.


The economy is solid for both business buyers and sellers.

Do you want to own a business but don’t like the idea of starting one from scratch? Maybe buying one is a better option. Or do you want to sell your small business to pursue other endeavors? Download our infographic to learn more on small business transactions.

The sales of small businesses jumped from 2012 and have been stable since 2013.

  • In 2012, 4,730 businesses were sold
  • In 2013, 7,056 businesses were sold
  • In 2014, 7,494 businesses were sold
  • In 2015, 7,222 businesses were sold

The prices of small businesses are also increasing.

  • In 2012, the median asking price was $187,000 with a sales price of $164,000
  • In 2013, the median asking price was $195,000 with a sales price of $180,000
  • In 2014, the median asking price was $200,000 with a sales price of $185,000
  • In 2015, the average asking price was $225,000 with a sales price of $199,000

Average prices by industry.

  • Internet B2B small business = $364,400
  • Gas station = $320,000
  • Business/Medical Services = $272,400
  • Restaurants/Bars = $155,000
  • Internet B2C small business = $154,000

Restaurants accounted for 22% of all business sales in 2015, the highest of any industry.

Tips on buying a small business.

If you are planning on buying a business, brokers suggest investing less than 15% of your net worth. They recommend keeping at least 10% of liquid assets free. Expect to pay around 20% to 40% of business costs out-of-pocket.

Tips on selling a small business.

Start planning two to five years in advance, and learn the due diligence process. Consider seller financing which may increase your price by more than 15%. But maintain realistic expectations by researching business prices in your industry.

For more data and suggestions on buying or selling a business, download our infographic. Remember to consult an experienced, trusted SCORE mentor for help with your individual situation.

What is your exit strategy? #smallbiz

by Kelly Deis of SoundPoint Consulting

Most business owners transition out of a business only once in their lifetime. Few have been so lucky (and talented) to have built and exited from more than one company. And, for the majority of owners 80% or more of their net worth is tied up in the business.

It makes sense that a business transition should be one of the more thoughtful and deliberate decisions of a business owners’ working life. After a transition is complete, an owner does not want to be saying, “I wish I knew then what I know now.”!

The best way to accomplish a successful transition is to develop an exit strategy based on the owner’s personal and business goals and to commit the action items required to achieve the objectives to paper. This is known as an Exit Plan. And without it, the owner may not know what to expect, much less what is possible in a business transition.  Continue reading

Self-employment tax helps you get ready for the future.

Going from “employee” to being your own boss brings some significant changes professionally and personally. One of the most significant to become accustomed to is no longer having certain taxes neatly taken from your paycheck from your employer.

As a self-employed individual, not only are you responsible for directly submitting the income tax you owe to the federal, state, and local governments, you’re also responsible for paying self-employment tax.

According to, “Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.”  Continue reading