ALL STAR SATURDAY

And now the Exit Coach radio show proudly presents the all-star review, a compilation of one minute highlights from past guests. Hear more one minute highlights and full interviews from these guests at exitcoachradio.com. I find that a lot of businessmen love processes and they love to know that there's a plan, there's a beginning, and there's an end. It's always about process improvement, right? Typically because these guys are a lot of times the folks or ladies are more of an engineering. An analytical background, so that really resonates with them. Then we come back to that plan for business continuity. What happens if Mr. and Mrs. business owner were to pass away prematurely? What would happen if one of their partners passes away prematurely if there was a disability, if there was discord or dispute? How does that impact their exit? In other words, if you're my key guy and you left my employment 3 years from now and my exit is 8 years out from today, is that throwing me another? 5 years down the road because I now have to replace you, build trust in the next individual in your chair. What does it mean if I were to lose key accounts, etc. So we really focus on developing a strategic plan to help them solidify a plan for continuity within their business. Upstart Group thinks about marketing in 3 pieces, and I know most newer CEOs think of marketing as the tactics. It's advertising. It's social media. It's an email marketing campaign. I'm going to send a newsletter out, but for marketing strategy, there's three pieces research, foundation, and men tactics in campaigns and those marketing tactics are what I just talked about advertising, PR, etc. and they should come laugh after you've done the other work. So taking a firm's strategic plan for the next 3 to 5 years with the strategy defined and then looking at the business plan for the upcoming year, what goals and objectives do they have outlined for the business in order to achieve their strategic plans? We're going to develop a strategic marketing plan to help meet those goals and objectives, and the first step in that is research. Well, I think the first thing I would tell everybody is to understand what the different components of your planning process are. And when you start to look at all of the different elements asset protection and trusts and taxes and tax returns and employee benefits and all of this stuff, it becomes overwhelming and get your arms around all of the different moving pieces or hire somebody to get their arms around all of the moving pieces and understand exactly how all of these pieces interrelate because if one doesn't work properly, it could be detrimental to you and your family's financial success. Great tip. You got anything? Else for us. Understand asset protection, and I'm not talking about complicated asset protection. I'm talking about just the basics umbrella policy if nothing else. Somebody comes over to your house and you're having wine with dinner and somebody slips and falls, you know, what is your liability? Do you have liability? Are you protected? Just the basics. And what I have seen with many of my clients, is they're not always protected. So how does reaching age 65 have an impact on a divorce settlement? Well, 65 at the current time anyway, the laws in California state that it's 65 a person is allowed to retire. OK, so somebody can retire and that of course will impact child support and spousal support, and it's, it also comes into the planning of exiting a business if somebody is going to retire. Prior to that age, the law says you're really not allowed to retire, so you still can be held with the responsibility for a certain amount of earnings even though you're not working. So 65 is the magic age when you can retire under the law, which then will have a drastic impact on the support obligations and what you do with the business. When you find yourself getting excited, you know, just slow down and listen. It's amazing how just listening to your partner and and stop, you know, stop trying to control the situation, how much that really helps reduce the amount of tension that happens between people and then just accepting the fact that and I get in these situations too, uh, where I simply have to accept my responsibility. For the fact that I've contributed to this problem, I'm not necessarily, it's not about blame, but the fact that you and I are different than you and another person. And so that special chemistry between us is both good and bad and it, but is unique and sort of look at it that way and say, what is it I need to do to create that space between us so that we can be successful. And then lastly, really focus on the future because I find the one common thing that all my clients do is they focus on the past, which is nothing you can't do anything about it, and we're always gonna argue about the past because who remembers anything accurately. If you get people to focus on the future, then you can see whether you should be together or not. So there's a few essential questions you need to answer, and these are really existential questions. OK, what's next for me? Number 2 is what should I be doing with my business? Number 3 is what should I be doing with my life? And when you have a very straightforward process. To those questions you end up creating new ideas, new opportunities, and then from there you can start making decisions about which of these great new ideas are really good and which of them maybe aren't so great after all, so you make better decisions, more thoughtful decisions, or what we call more balanced decisions. And whenever you do that, you are more likely to come out with a better outcome, and more satisfactory transition from being a business owner to whatever this new life it is you've decided on. And simplest format, I provide CFO services for those firms that have yet to justify the cost of a full-time CFO and I like to take the position that every firm should have a CFO, but the reality is in in a business somewhere between 3 million and 50 million, they really can't afford. That individual because it appears to be an overhead function. That's where we come in and we fulfill that void that's there. So I don't need to work there 40 hours a week. Maybe it's only 8, maybe it's 12, maybe it's 4. It depends upon every client. It doesn't matter whether you're in construction, distribution, internet, manufacturing, you know, nonprofit, paper industry. We can, we can address all of those based upon the as needed basis, you know, with doctors, we, we'd like to have a doctor. Handy any time we need them. Well, what is it? It's on an as needed basis. Most companies don't have attorneys on staff. What is it on an as needed basis? So the CFO is really in that same league as the attorneys and the doctors, and when you need them, you need that professional with the formally educated background and the experience. So, so that's what we fulfill and that's how we make it happen. I mean, I think even a domestic transaction, you know, when you kind of see the money, maybe even working a long time to find a good buyer. Um, so people want to, you know, strike while the iron's hot. So, you know, a lot of what we do sometimes is saying, well, let's let's slow down a little bit and make sure we do this right. But with international, as you're saying, there's, uh, it's that much more risky. Yeah, they could be trying to get your intellectual property. That's very common. We protect you from that. And the other thing is if you're manufacturing or you have some. Technology that might be sensitive, but it's not necessarily obvious, not necessarily a missile. It could be there's magnets, there's, you know, lasers, sensors, um, all kinds of things you might not think of as being military sensitive. There's a whole other area of the law that that covers that, so that could be an issue. And there's also something called the Foreign Corrupt Practices Act which when you're dealing internationally, you have to be very careful because in some cultures, you know, they might not look like bribes, but gifts or so on, um, are common. Um, and you have to be really careful to stay on the right side of, of the law, especially US law. When we get into the discussion with clients, we show them there really are only 4 places where your money can go taxes, retirement, family, or charity, and we just ask clients how much they want to put in those 4 buckets. Usually they want zero taxes, and so they want the balance of the money to go to retirement, family, and charity, and very often they see that there is a big charitable element. So after that discussion, it's quite easy to explain that we're simply going to take what was going to taxes. And redirect it to charity or at least trust for the benefits of family, retirement, and charity. Now the reality is when you get down to the practical application, you're absolutely right. There are many people selling appreciated assets who are faced with bigger capital gains taxes than they ever expected. In fact, it's worse in California than any other state. You've got a 20% federal tax rate plus in most cases a 10 to 14% state tax rate, plus you have the Obama surtax, which is 3.8%. You've got a phase out deduction. Of 1.2%, which can put you in a 38% capital gains bracket. And in fact, if you add in the FICA costs that are often going to be greater, you can be above a 38% capital gains tax. But like I said earlier, you can zero off those taxes. Those taxes are optional. You can disinherit the IRS. You can take what would have gone to taxes and put it into trust for retirement, family and charity and really be better off in several different ways. What I've seen in strategic purchases for profitable firms is that You really need the mentality in that acquiring company. They need a part of their business plan. They're going to grow now. We'll outreach to a lot of these companies when we've got a seller packaged. Some of them are interested and some of them are not. We occasionally get to ring the bell and and get something that is beyond. On market value, we might take that $4 million company and end up with 5 in some cases, but it's not, it's the exception, not the. When we take a look at the market of the 50-60 year olds, most people are interested in winding down, but they're not interested in winding down their lives. And so they're looking for something else to do, something that might be different or even similar, oftentimes on a smaller scale than what they've already done. And so the key is if they are interested in keeping their hands in the business world, finding something that's appropriate for where they are in their lives at this particular point in time, moving forward, then another 357, or maybe 10 years.