This is the Year to Sell Your Business

Posted on May 31, 2012 by in Blog

Here is a great article by my colleague, George Walden and was originally posted on the CFA-Houston website HERE.

A couple of days ago, I was at a seminar on M&A advisory put on by two of Houston’s more prestigious firms; Barclays and Fulbright and Jaworski, LLP. With a room full of advisors- accountants, investment bankers, attorneys, commercial lenders and a few business owners I was struck by the slides presented on the tax ramifications of what is happening at the end of the year. I found myself asking the question,

“What are business owners waiting for?”

They started the session by asking the question, “How many of you believe taxes are going up next year?” Almost without exception everyone raised their hands. The panel then referred to a table on the tax breaks that were expiring at the end of the year.

Do you know that assuming the 2010 tax act is not extended by Congress at the end of 2012:

  1. Capital Gains Tax of 15% expires at the end of the year. Under current law, tax on the capital gain from the sale of a business will increase to 23.4%.
  2. Gift Taxes goes from $5,120,000 exemption with a top marginal tax rate of 35% to $1,000,000 exemption with a top marginal tax rate of 55%
  3. Estate Taxes goes from $5,120,000 exemption with a top marginal tax rate of 35% to $1,000,000 exemption with a top marginal tax rate of 55%

There was also an investment banking group that talked about multiples on EBITDA used in valuations. The average even during the downturn of 2008 and 2009 hadn’t changed. The average was 5.3X EBITDA for companies below 50MM. The premium company transactions were 7-8X EBITDA for companies usually closer to 250 Million. The only vehicle for greater valuations was going public and they thought in today’s current market 250 Million of enterprise value was a minimum for going public.

They also said that the marketing process for them to sell a company beginning to end is approximately 6 months.

So what does this mean to you the business owner?

I have seen a number of articles saying, “Now is the time to sell your business.” All are focused on the tax consequences of the repeal of lower capital gains. They all say “The government has tremendous debt and at least one party wants to tax wealthy Americans (often business owners) more than those who are less fortunate.”
Few have focused on what you can currently gift to your children. None have worried about your estate and the charitable goals I find most business owners wish to leave as a legacy to your good work.

Is it time to sell your business? I will remind you, “It is not what you make before taxes that counts but it is what you will keep after taxes that has the greatest impact on your life.”

Buyers of companies have to get a return on their investment and there are few stupid buyers willing to pay more then something is actually worth. So ask yourself, “How much more do I have to make next year if taxes go up to have the same net result as the favorable conditions of the current tax year? How much will I have to net to leave a legacy to my children next year that is equivalent to this year? Will I be able to protect their inheritance? Will I even have enough to give to the charity or cause of my choice? Who are you working for? The government or your family?”

Thinking Long-Term

Posted on May 30, 2012 by in Blog

This article (circa 1980 from the Reagan Administration) states that to truly plan, one must focus on the long term.  In this same vein, business owners must also have a plan in place to ensure long-term goals are met. 


Getty Images/Time Life Pictures

Ronald Reagan (center) meets with advisers, including George Shultz and Milton Friedman to his left, Sept. 1, 1981.

Guiding Principles

The essence of good policy is good strategy. Some strategic principles can guide your new administration as it charts its course.

• Timing and preparation are critical aspects of strategy. The fertile moment may come suddenly and evaporate as quickly. The administration that is well prepared is ready to act when the time is ripe. The transition period and the early months of the new administration are a particularly fertile period. The opportunity to set the tone for your Administration must be seized by putting the fundamental policies into place immediately and decisively.

• The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success. This long-term view is as important for day-to-day problem solving as for the making of large policy decisions. Most decisions in government are made in the process of responding to problems of the moment. The danger is that this daily fire fighting can lead the policy-maker farther and farther from his goals. A clear sense of guiding strategy makes it possible to move in the desired direction in the unending process of contending with issues of the day. Many failures of government can be traced to an attempt to solve problems piecemeal. The resulting patchwork of ad hoc solutions often makes such fundamental goals as military strength, price stability, and economic growth more difficult to achieve.


Stuck in Your Business?

Posted on May 28, 2012 by in Blog

Stuck in Your Business – Can a Birkman® Help You Find Your Path?

As you power down your former life of work, there will be a transition period to navigate before you, in essence, reboot and start the second half of your life anew. It’s a time full of exciting possibilities with the opportunity to reassess and redefine where you’re going and what you’re going to do.

Ready, Set, Retire

Well, maybe not so fast. You know you’ve secured the financial side of your retirement, but are you internally prepared for the change? We all react differently, and sometimes surprisingly, to change and the unknown even if it is good. Not having a plan for how to spend your days can leave you feeling bored, frustrated and listless. If you are unsure about what your new future will look like, there are many resources that can help you find your inner compass and navigate the new path that lies ahead.  

What the Heck is a Birkman? 

The use of the Birkman® profile has become a popular tool in the business and coaching world to facilitate team building and leadership development, in addition to pinpointing career interests.  Now it is also being used as a resource to help individuals find direction in planning what retirement lifestyle is best for them.

The Birkman® assessment is a profile based on an extensive questionnaire that captures the respondent’s interests and provides unique insights into how personality influences actions. It’s not a psychological profile, but one that focuses on behavior and underlying motivations, primary needs and how one reacts to stressors.

 Now, you might be thinking, “I’m old enough to know myself pretty well,” but the Birkman® can provide you with additional clarity and point out the kinds of activities that will give you the most satisfaction as well as identify interests that you may not have pursued in your career. It can be a useful tool to uncover purpose and help you discover a whole new path.

In the book, Your Retirement, Your Way – Why it takes more than money to live your dream by Alan Bernstein, LCSW and John Trauth, M.B.A., the authors provide helpful ideas for using the Birkman® as a retirement planning tool. You can also take their Retirement Readiness Quiz online at – For more information about the Birkman®, visit their website at

Bestselling books to help with the non-financial side of retirement:

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor, Ernie J. Zelinski

Don’t Retire, REWIRE!, Jeri Sedlar, Rick Miners

Too Young to Retire: An Off-The Road Map to the Rest of Your Life, Marika Stone, Howard Stone

Supercharged Retirement: Ditch the Rocking Chair, Trash the Remote, and Do What You Love, Mary Lloyd.

How to Love Your Retirement: Advice from Hundreds of Retirees (Hundreds of Heads Survival Guides), Hundreds of Heads, Barbara Waxman and Bob Mendelson

Changing Course: Navigating Life after Fifty, William A. Sadler Ph.D. and James H. Krefft Ph.D.

What Should I Do with the Rest of My Life?, Bruce Frankel

Recent Seminar

Posted on May 25, 2012 by in Blog

This week I attended a seminar put on by Barclays and Fulbright and Jaworski, LLP.  It was a wealth event on May 22nd, 2012 at the Houstonian Hotel.  The major points brought out are as follows:

  1. In a transaction, 50% equity is now a norm regarding consideration paid for the target.
  2. EBITDA for a small business can be as high as five times, which is a 20% capitalization rate.
  3. Currently, there is approximately $500 billion in cash sitting on the side lines waiting to fund mid-market transactions.
  4. IPOs are up in 2012 compared to previous years.
  5. A key term that was used was “fix the balance sheet”.  It is important for companies that intend to go through an exit strategy to have clean financial statements. The balance sheet defines the financial position of a company at a defined end of period.  It is always good to have a financial audit.
  6. Becoming a high quality company is critical in attracting debt capital from traditional financing sources.
  7.  A much higher multiplier or capitalization rate will be offered to a quality company in a buy sell transaction.
  8. Most companies’ primary problem is they failed to plan and to diversify to increase their value.  They should consider their strategies, new product lines, and regional expansion to enhance value.  They indicated that making sure the advisors are not departmentalized and that they have a global understanding of the company is critical.  All business disciplines should be addressed when establishing your succession plan.  It is important to select the right advisors.
  9.  Finally, creative solutions for what the seller should do with their exit funds were discussed. There should also be a strategy for wealth transfer and how much is necessary to sustain the seller’s existing lifestyle.

The members of Forward Results, LLC are focused on all of the above. Our goal and objective is to have a collaborative team of professionals and advisors to direct sellers in order to have a successful exit strategy.  We also help buyers with well-tailored acquisition plans.

Customer Retention

Posted on May 24, 2012 by in Blog

The other day I stumbled across this great article based on research by John Fleming and Jim Asplund.  I hope you enjoy this excerpt.

Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its products or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.

Customer retention is more than giving the customer what they expect, it’s about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center of business strategy’.[1] The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service.

Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.

Demographics and the Law of Supply and Demand

Posted on May 22, 2012 by in Blog

I have recently been reading a book called Cash Out Move On by John H. Brown and Kevin M. Short.  I found this excerpt particularly interesting, since I myself am a Baby Boomer.

In summary, there are 78 million members of the demographic group born between 1946 and 1964. This group is larger than any other before or after it. Group size alone has huge implications for Boomer owners, as they think about selling or transferring their companies.

The generation following the Boomers is known as Generation X, or Baby Busters. This generation is defined by the US Census Bureau as those between 1968 and 1979. In 2002, the Census Bureau estimated that there were 59M people between the ages 20 and 34. The direct effect of far fewer potential buyers in the next generation gives additional importance to the law of supply and demand.

Various commentators and researchers believe there are more than 4 million owners of established businesses who are at least 50 years old, and the average age of sellers is about 56. According to a 2005 PricewaterhouseCoopers survey of 364 CEOs of privately held fast-growing companies, nearly 2/3 plan to move on within a decade or less. 42% within five years and 23% in five to ten years. This kind of movement could result in a glut of companies on the market driving down valuations and giving new leverage to buyers.

Interestingly, the largest numbers of Boomers are not yet 50 years old. As these youngsters reach age 50 and 55, they, too, will be looking to sell their businesses, adding fuel to the fire for the glut of businesses being sold by Baby Boomers. Avoiding this added supply means considering the sale of your business sooner rather than later, provided of course, that it is ready for sale, (intrinsic value is there), the sale cycle is appropriate, and it is large enough to be sold using the best sale process.

The basic law of supply and demand dictates that a glut of sellers will drive down prices. When, and if it does happen, a limited number of dollars will be spent on only those businesses that provide the least risk and greatest potential to the buyer.

This book talks about ways to decrease a buyer’s risk and increase your company’s potential for future growth. This process is our focus at Forward Results, LLC. We are a collaborated group of professionals, whose goals and objectives are to assist business owners in making their companies more efficient and effective, and therefore more attractive to a potential buyer.

Contact us at

What Will You Need to Sell Your Lifelong Investment?

Posted on May 18, 2012 by in Blog

You go to school many years to learn your profession.  Typically you work for several years to obtain your skills and technique.  Then the big plunge: you borrow money and go out on a limb to purchase a business or build one from the handle.  Like most mechanics in a professional function, there is a right way, and there is a wrong way.  You learn from your mistakes; some are critical.

The members of Forward Results LLC will address how to plan, operate, and exit your business.  Each step taken should ensure exceptional customer care with bottom line results.  There are explicit steps and information that are necessary to transact a buy/sell transaction. 

The following information is necessary to build a package for presentation to a buyer:

1)   Sound historical financial information.

2)   A business assessment or full valuation.

3)   The tax ramifications of your transaction defined.

4)   An operational profile of your business.

5)   Audited financial statements.

6)   Clean facility.

7)   Long-term employees dedicated to the business.

Having the right professionals involved is critical.  You should consider engaging the following types of professional assistance:

1)   An investment banker who understands how to place a value on your practice.

2)   A certified public accountant.

3)   Legal counsel to produce simple and concise buy/sell agreements.

4)   A banker or private lender.

5)   Strategic coach and advisor.

6)   HR Consultant.

7)   Risk Management advisor.

8)   Financial advisor.

Let us help you tie up your plan.  We have the advisors to assist with prompt and effective execution of your plan and associated processes.

Contact us at or 713-261-2411.


Posted on May 10, 2012 by in Blog

I recently read this interesting article entitled “How Open Innovation Can Help You Cope in Lean Times”.  The article illustrates how innovation offers a different perspective as well as creative solutions to problems:

By breaking down traditional corporate boundaries, open innovation allows intellectual property, ideas, and people to flow freely both into and out of an organization….in lean economic times, it is the often overlooked “inside-out” aspect of open innovation that can best serve a company.  Inside-out open innovation refers to processes whereby a business places some of its assets or projects outside its own walls.  That not only saves much of the time and money being invested in those projects, but also can nurture new supplier and partner relationships, promote innovative ecosystems, and generate high-margin licensing income.

The article also outlines five open-innovation moves that can help sustain business during tough economic times:

Move 1:  Become a customer or a supplier of your former internal projects.

Move 2:  Let others develop your nonstrategic initiatives.

Move 3:  Make your intellectual property work harder for you and others.  

Move 4:  Grow your ecosystem, even when you are not growing.

Move 5:  Create open domains to reduce costs and expand participation. 

Perhaps desperate times call for creative measures.  Innovation may provide the perfect solution to your problems and offer an idea you would not have considered.