How to Plan a Successful Ownership Transition (20m) Jane Johnson

Hey friend, I know how it feels, waking up exhausted after multiple trips to the bathroom and feeling embarrassed by sudden leaks. I used to be constantly on edge, searching for a restroom whenever I was out. Then I discovered better woman. I was skeptical at first, but two months in. Everything changed. I experienced improved bladder control. No more heart-stopping moments when I laugh or sneeze, less urge to go, deeper and more restful sleep. I finally felt like myself again, confident and in control. Better Woman is natural, effective, and trusted by women for over 25 years. Ready to take back your control? Head over to Bebetternow.com to order your supply today. That's Bebetternow.com. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease. Users directed individual results may vary. Welcome to the Exit Coach Radio show, the show for baby boomer business owners who are looking for cutting edge information as they plan their 3 to 10 year business succession and exit. Every week we interview top professional advisors for their best tips, strategies, and precautions so you can be well planned. And don't miss our one minute exit coach tip of the day on Exit. Radio.com and now here's your host, the exit coach Bill Black. This segment of the show is brought to you by Hall and Company CPAs and features Jane Johnson, who's joining us from Business Transition Academy, and we're going to talk about, uh, what can you do to prepare for a successful ownership transition. Jane, welcome to the show. Thanks very much, Bill. Jane, it's a pleasure to have you on today. We're I'm excited about our topic, and before we get started, we always like to get to know a little bit about our guests. Could you share a little about your background and how you got into this particular line of work? Sure, I spent 4 years going through the GE financial management program and then spent 4 years in public accounting bill to become a CPA. And I decided at the ripe old age of 30 to start my own business. I did so with a couple of partners and we ended up growing that business and selling it 14 years later. And the reason I'm in this business today advising other owners is because there was such a lack of advice from advisers in the marketplace when I was selling that I found it difficult to get independent and objective advice. So after selling my business and spending 3 years with the buyer. I left in 2007 to devote my advisory practice to helping other owners through this transition. Well, you know, necessity is a mother of invention, and like, like you say, I mean. Uh, when you're a business owner and it's your time to start getting ready and you look around and you just don't see any resources available, that tells you something, and I think it's changed a bit now, don't you? I do. I do believe that with so many baby boomers that need to figure, figure this out that there are more. Advisors in the marketplace today, although not a lot of them that actually spend full time doing transition planning. Yeah, I think you're right about that, and I think a lot of them think that they really can't make a living just doing that because it's it's so hard to find business owners who want to talk about this topic. It's so private. And uh uh a lot of people do want to talk about it, don't get me wrong, it's just that you, you almost have to have a um uh a method of, of reaching out to a client base to say, hey, let's talk about this, it's time to talk about it as opposed to doing a. A seminar. How, how do you get your new clientele? Yeah, you know, a lot of our work, the majority of our work bill comes through referrals from other advisors, you know, CPAs, financial advisors, and attorneys. We also have a wonderful website now that's an educational portal for owners, so more of our business is coming through that way. But, but, um, but I think you're right, Bill, there's this. They don't understand or or owners don't realize that there are people out there that um that do this now for a living, so it is hard to get the word out to some degree, but as soon as something happens in their, in the world to get them going, um, we have the first chapter of our book is called What's Rocking Your World, and unfortunately it's usually these life events that get people moving, which is, which is too bad, right, right, and I like the name of your company, Business Transition Academy. I think that. That um that paints a better picture than thinking about exit like it's over or that it's uh a succession that I'm just worried about if I die, um, that it's more about this is a transition of your life from being maybe um an overtime president of a business to maybe maybe you're gonna sell and start. New business, maybe you're going to retire. Maybe you're just going to go from overtime to part time. What are some of the things that you were, you thought about when you set up the business transition academy? Yes, actually that's that's very insightful of you. We did use the transition word because both Kathy and myself, we, we had both been through these transitions and And our lives are far from over. We're having an absolute ball working with other owners to help them through the transition. So as you said, very few owners will actually retire. You know, there are some that are at that age that want to do that, but most of the folks we work with, this is just their next. phase of life that's beginning and if we can help them get enough money out of the company so they can live that life, they can decide how much work needs to play a part in it as opposed to philanthropic, you know, activities and other things that they enjoy in life. Maybe you'll sign my petition. I want to change the word retire to rewire. Oh, I like it. I like it. So, uh, Jane, why is it necessary for owners to plan so far in advance for business owners transitioning out of a business? Why is it so difficult? The simple answer, Bill, is that you can affect the outcome, you know, if you have 3 to 5 years, you can plan a transition that will be much more tax efficient and will be. More likely to achieve your goals. So, we always tell owners, you know, everybody has that 5 year plan. I'm going to transition out in 5 years and next year they say 5 years. And but get started with the planning because once you've got the plan in place, you can determine what the time frame is, but you, you'll have time to affect the outcome. Yeah, I had a phrase for that too. We call that perma 5. That's exactly right. You're just stuck and nobody's starting the clock for you. And so what you come in as you help business owners to, to start the clock on the planning, right? That's exactly right. And, and again, you know, there's some really tax efficient ways to do this, especially if you're, if you're selling internally, if you've got 5 years or more. So it's a, it's, it really will pay the owner, they'll they'll. They'll be very glad they did plan an event. It's one of the best descriptions I've heard yet, so time gives you options. And options, the options that you exercise can save. Potentially tons of money, ah, heartache, problems down the road. So time is your ally in, in all situations. So you think 5 years, 5 years is optimal, 5 years is optimal, um, you know, but, you know, as, as soon as they can, you know, the other big reason, Bill, that that timing is of the essence is there's a lot of owners that are getting approached on a daily basis. By potential buyers and if they're prepared with a plan, they will know how to react to those potential buyers and they'll be able to figure out which ones are real and which ones aren't and they'll certainly understand how much money they need from this transition, so it behooves them to be, you know, educated and have a plan. So there's a lot to think about and, and, uh, what we're gonna do is uh take a quick break, Jane, we're gonna come back and ask you for some client stories and tips and ideas and precautions for our listeners. So hang in there with us, we'll be right back after this message. You're listening to Exitoachradio.com, the show for age 50 plus business owners. We're interviewing over 250 professional advisors for their tips, ideas, and precautions so you can be well planned. We upload new 20 minute interviews and 1 minute highlights every day at exitcoachradio.com. Come listen for a minute. Are you one of the millions of baby boomer business owners who needs to transition the ownership of their companies to others, but you're not sure how it can be done? A business ownership transition plan is a comprehensive written document that outlines how and when the ownership of business will be transferred to others, either internally or externally, in order to achieve. The owner's goals. Our new book Cashing Out of Your Business written especially for business owners, introduces the concept of business ownership transition planning and outlines a framework that may be used by all owners to analyze their current situation. For more information, go to www.businesstransitionacademy.com. Hey friend, I know how this feels. Waking up exhausted after multiple trips to the bathroom and feeling embarrassed by sudden leaks. I used to be constantly on edge, searching for a restroom whenever I was out. Then I discovered better woman. I was skeptical at first, but two months in, everything changed. I experienced improved bladder control. No more heart-stopping moments when I laugh or sneeze. Less urged to go, deeper and more restful sleep. I finally felt like myself again, confident and in control. Better Woman is natural, effective, clinically tested, and trusted by women for over 25 years. Ready to take back your control? Head over to Bebetternow.com to order your supply today. That's Bebetternow.com. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease. Users directed individual results may vary. You're listening to Exit Coachradio.com, the show for age 50 plus business owners. We're interviewing over 250 professional advisors for their tips, ideas, and precautions so you can be well planned. We upload new 20 minute interviews and 1 minute highlights every day at exitcoachradio.com. Come listen for a minute. Welcome back friends. Just a reminder that we've interviewed dozens of advisors on a wide variety of topics, and you'll find all of their interviews and highlights online at exitoachradio.com or on iTunes at iTunes.exitoachradio.com. And I'm speaking with Jane Johnson, and before the break, Jane, we talked about your business transition academy and how you really recommend that people start 5 years beforehand. And I think one of the problems that people have with that timeline is they think, well, What's the big deal? I'm just going to sell it to an outsider. It's it's if I was selling my house, I wouldn't start 5 years in advance. So what should they do if they start with you? What are some of the first tasks and things that you look at for that 5 year timeline? Well, there's a couple of really big ones that come to mind, Bill. One is preparing the business for the sale or for the transition. Even if it's an internal sale, there's a lot that needs to be done to shore up the business. And if there'll be more owners in the 2nd generation than there were in the 1st generation, they may even have to grow the business to be able to ensure their buyout as well as enough profits for the future generation if it's going to the kids. If you're selling to an outsider, even more attention will need to be given to the business to make sure that everything is in order. As you know, buyers don't, they don't leave any stone unturned, as I like to say, Bill, and they will look under every rock and in every closet for skeletons about the business. So preparing the business is critical. There was just one other thing I wanted to mention, and that is that never underestimate what it takes to groom a successor bill. So if you are going to have an internal transition, it can take years to groom the management team or the kids to be able to actually run the business. That's a very good point. I, I was going to touch on that because I was, ah, what you said earlier just a few seconds ago was that your business may not be able to support. New management who of course expects a pay raise, who has to continue to grow the business, and you, the exiting owner now who's who wants to take money out of the business in installments over a period of time, so you really have to get into a late stage growth, um. Ah, mode to to push up the value and the cash flow of the business to to finance this whole transaction. That's exactly right, Bill. You know, it's important to have, you're going to need cash flow whether it's an internal or an external sale, and in some cases you may need even more cash flow if again there's going to be multiple owners in that next generation. Now what about situations where people are saying, I think, uh, I think my, my son or daughter can take over the business. I'm just not sure, uh, should they have some kind of a backup plan? Well, here's, here's what we recommend, Bill, um, there's, because grooming takes time, um, they need to begin that process of working with the kids well in advance in order to determine whether or not the kids have what it takes to run the business. If they don't, it doesn't mean they can't own or run the business, but it means that you may have to supplement their skill set with some strong managers. You know, I've got a situation where the kids told me it took 3 people to replace their father. It took the two of them, and one other person to replace the skills that their father had. Well, could they afford all of that talent? Well, they could, you know, it's a growing business. They're very, very excited. One of the kids is the CEO, one is the CFO, and they hired a really, really strong technical person because their father was the inventor of the products in the company. So yeah, they're doing fine. They're growing, um, you know, you have to make sure you've got a business that has growth potential. Do you, do a lot of owners that come your way, do you find that they haven't done very much as far as, uh, feathering their own nests and they're relying too heavily on the sale of the business to finance their retirement? Oh, absolutely, Bill, um. Most owners have put, as you know, their heart and soul into the company and almost every dollar they've ever made. So it's not at all unusual for us to see owners that have 80% or 90% of their net worth tied up inside the business. So it's very, very important. Our second, the second step in our process we call counting beans, and that's all about taking stock of what you've saved outside the business and determining exactly. How much money you need from the transition. Here's their chance to get their money out and live the rest of their lives. How many steps are there in your process? We actually have 6 steps in our process, and, and that's folks can see that on the website, the Business Transition academy.com. I'd be happy to review those now if we have time, but folks can visit the website as well. If you could just tell, because I think the titles tell a lot, the counting beans. I mean, I get that one. What's, what's the title of the first chapter or the first, uh, the first step is called Get yourself prepared, and that's, you know, the owner mentally and personally preparing for the transition, which can be huge for them. So important. What's the second one's counting beans. So that's getting the counting beans, that's getting the financial house in order and understanding your financials, right? Exactly, understanding what they personally financially need from the transition. The third step we call building a better box, and it's all about how to maximize the value of the business. So that would be processes and systems and and. Uh, creating a job description the owner. All those things that are the system that is the business that's gonna make it easy for someone else to come in and run it in the future. Exactly. OK. Uh, what's next is called Follow the yellow brick Road, and that's all about internal and external transition options. Understanding the pros and cons of each so that they can make a decision as to which one fit their goals. Oh, that's critical because there's, there are, there are not that many paths, but there are a lot of side routes for each path, right? A lot, a lot of steps along the way to minimize taxes, maximize the value, and ease that transition. And what else is, what, what's next? The 5th step is called Art of the deal Bill, and that's all about taxes and advisory fees so that owners fully understand how these transactions are taxed and what kind of fees they're going to have to pay to advisors to get it done. That's great information to have. And the final 6th and final step we call paint by numbers. And that's pulling together all that we've done in those prior steps into a custom plan for the owner. It's their own custom masterpiece, their transition masterpiece we like to call it. Well, I like the way you've put that together, so it's, it's not so much information in any one particular step that it's going to overwhelm. I think a lot of people think this is just going to be overwhelming. There's so much to deal with, but you've got it laid out in a logical order. First things first, and then let's move. To the next step, how about how long do you think it takes on average to go from step one to step 2, for instance? You know what we find that's comfortable for the owner, Bill is normally about 6 to 8 weeks. OK. Um, there are owners that take longer and there are people that want it done much faster, and we're certainly able to accommodate that, but for most folks, that's what's comfortable, 6 to 8 weeks. Well, we're dealing with busy, busy business owners that don't really. Have a set schedule. Any, any given day there could be a number of fires to put out and that type of thing, right? Absolutely. We have to make sure they can still devote time to running and growing the business. I like it very much. So tell me, we only have about a minute left, Jane, but tell me about your book, Cashing Out of your Business Your Last Great Deal. Yes, it's a short read, Bill. It's less than 100 pages. Owners tell me it's 90 minutes and what we were trying to do, Kathy and I, we were trying to outline. the 6 steps in the process and what we did is we sprinkled in case studies so that owners can understand each step of the way what mistakes other folks have made and what they can do, what the planning will do for them in advance. So we've got real life case studies in there and then at the end we've got a wonderful case study about an owner that we worked with who had a tremendous transition last year and all the benefits of planning in advance. That's great. Well, we're gonna put your book on our website. We have a little Amazon store there, so, uh, listeners can look at Xaoachradio.com to find it and look for it cashing out of your business, your last great deal. Jane, I'm afraid that's all the time we have for today, but I've really enjoyed it. I would love to have you back on the show and go deeper into some of the subject matter because there's a lot to learn. From the Business Transition Academy and you, so thanks for coming on the show today. Thanks very much, Bill. I appreciate it. Oh, by the way, we mentioned it, but business transition academy.com is your website. What's the best phone number for people to call you at, Jane? Um, yes, it's 888-214-0748. Jane Johnson, Business Transition Academy, thank you very much. We're going to take a short break and we'll be right back. So stay tuned. You're listening to Exit Coachradio.com, the information station for age 50 plus business owners, where we're interviewing over 250 top advisors for their best tips, ideas, and precautions so you can be well planned. We upload new one minute tips every day. Exitcoachradio.com. Come listen for a minute. Thank you for listening to Exit Coach Radio. This podcast is sponsored by TalkSpace. May is Mental Health Awareness Month, and TalkSpace, the leading virtual therapy provider is telling everyone, let's face it, in therapy, by talking or texting with a supportive licensed therapist at TalkSpace, you can face whatever is holding you back, whether it's mental health symptoms, relationship drama, past trauma, bad habits, or another challenge that you need support to work through. It's easy to sign up. Just go to Talkspace.com and you'll be paired with a provider typically within 48 hours. And because you'll meet. Your therapist online, you don't have to take time off work or arrange childcare. You'll meet on your schedule. Plus, TalkSpace is in-network with most major insurers, and most insured members have a $0 co-pay. Make your mental health a priority and start today. If you're not covered by insurance, get $80 off your first month with TalkSpace when you go to Talkspace.com and enter promo code S 80. That's SPA CE 80. To match with a licensed therapist today, go to Talkspace.com and enter promo code S80.