ExitMap® empowers advisors to develop trust-based collaborative relationships, built around a structured coaching discovery process that helps clients envision life after their businesses.
Just over 3,000,000 businesses will change hands in the next 15 years. Those companies represent some $10,000,000,000 in potential liquidity.
If you or your team work with business owners, complete the
Complimentary Test Drive to help us determine whether you are likely to benefit from using ExitMap® AND if you fit our profile of successful advisors.
The Exit Planning Coach™John F. Dini, CExP, CEPA
John is one of America’s most accomplished business coaches, with over 25,000 hours of face-to-face consulting exclusively for CEOs, Owners and Managing Partners. He is the Founder and Creator of the ExitMap® coaching tools, a ten hour process for structured client discovery.
The ExitMap® discovery process takes owners step-by-step through their exit options. It tests their assumptions to identify which path best meets their needs and allows you to prioritize planning activities to help them meet their goals. The process starts with three keystone reports you can see for yourself by taking an ExitMap® Test Drive.
Coaching About Value
The Pepperdine Private Capital Markets Survey canvasses intermediaries who sell privately held Main Street and mid-market companies. When they ask about the obstacles that prevent the sale of a business, the number one response is, “The owner’s unreasonable expectations of value.”
Valuation is a sensitive subject. Some owners feel that because they worked in the business for 30 or 40 years it would only be fair that it fund their next 20 years in retirement. Their target price is set only by their desired lifestyle after the business.
Unfortunately, a significant number of owners hold views regarding the worth of their businesses that rely on multiples derived from public companies or on informal discussions with peers, sales representatives, and articles in industry publications.
Fair Market Value
Even those who have professional appraisals of their business may not understand that the purpose for getting your valuation may skew the results. Valuations done for estate planning or internal transfers of equity often have little resemblance to a company’s fair market value.
Various people, including H.L. Hunt and Ted Turner, have said that “Money is just a way of keeping score.” For many owners the emotional tie between the perceived value of their company and their self-image of success are closely connected. Advisors should tread carefully when dealing with a subject so close to the client’s heart.
Some advisors skirt this issue by recommending that their client get a professional opinion of the fair market value of the business. While this is certainly a safe approach, it can take substantial time and requires considerable assembly of the underlying data for the appraiser. This can slow down any consulting project considerably, and may derail it entirely.
Lendable Value
The coaching approach helps the owner understand the practical boundaries surrounding the value of the company without either dictating to him or taking the project in a tangential direction. We do that by helping the client model “lendable value.”
We start by explaining that most businesses are valued by their cash flow. There are certainly many areas where a value can be enhanced such as intellectual property, exclusive rights to a product, protected sales territory or long term contracts. Owner Centricity™ or customer concentration can reduce the fair market pricing of a business. In the final analysis, however, cash flow to pay an acquisition loan is of principle concern to a lender.
Sellers Sanity Check
Our tool is a spreadsheet that enables us to input values for cash flow, price, down payment, and financing terms. It supports multiple financing sources, providing sellers with the flexibility to explore subordinated financing or an installment sale.
The spreadsheet then calculates the SBA minimums for a cash to debt service ratio (1.25 to 1) and owner compensation – usually $75,000 a year for acquisitions under $500,000 and twice that for larger deals. It also shows the Return on Investment (cash-on-cash) for the down payment.
This helps remove the onus for a value below the client’s expectations away from the advisor. The company may well be worth what the owner thinks it is, but finding a lender to finance it could be a problem. It also allows the owner to experiment with the impact of increased cash flow or alternative financing.
The role of the coach is not only to bring expertise to the process. It’s also to help owners find their own solutions.
ExitMap® coaching tools are designed to help advisors guide clients through their options. They require no special professional credentials, and subscriptions come with complete, personal training. In 5 meetings over 90 days you can help your clients clearly define their available resources, set their objectives, and understand how to accomplish them.
Complete our Advisor Test Drive and we will contact you to schedule a complimentary demonstration or you can simply request one here.
