The Entrepreneurs Advocate

Archive for the ‘Estate Planning’ Category

In these tough economic times, it is more important than ever to plan ahead.

That is why it gives me great pleasure to invite you and your clients to a seminar on Planning Your Exit from Business Ownership. This seminar is presented by the Stetson University Family Enterprise Center in partnership with Holland & Knight, LarsonAllen and my company, Bankers Advocate.

It will be held at the Stetson University Center at Celebration, Florida on Thursday, November 5, 2009.

Whether the exit from ownership is in six months or six years, this factual and hard-hitting seven hours will provide you with the information that you or your clients need for a successful Ownership Exit and/or Transfer.

Learn from Seasoned Professionals how to:

• STRUCTURE YOUR BUSINESS for a Successful Exit
• IMPROVE THE BOTTOM LINE Profits until you Sell
• DEAL with CONFIDENTIALITY ISSUES
• RECEIVE MAXIMUM VALUE for your Business
• KNOW the Types of Buyers and their Value Drivers
• HOW to Sell or Transfer to FAMILY/KEY EMPLOYEES
• AVOID TAX & LEGAL PITFALLS in the Process

This is an opportunity to participate in a valuable interactive seminar and a great networking event.

Can you afford not to attend?

You can view the brochure and register online by clicking on the links below.

To view a detailed seminar brochure : CLICK HERE

To register for the conference on line: CLICK HERE

We hope that you will join us. Please pass this on to anyone who you think would benefit.

Sincerely,

Chris Curtin
COO, Bankers Advocate
(561) 882-1331

PS: Reply to this blog and receive a special friends of Bankers Advocate deep discount.

Topic: “Planning Your Exit from Business Ownership”
Presenters: Frank Mock, Lowndes, Drosdick & Chris Curtin, Bankers Advocate 

Sponsor: The Law firm of Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
Location: Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando
Date: December 4, 2008 8:30-12:00 AM

In AccuVal’s (a global leader in valuation, advisory and asset management services) most recent newsletter, the above question was asked. Here is their answer:

A: In addition to the appraisal approach, business risk, financial risk, and liquidity risk should also be considered.

Business risk is defined as the degree of uncertainty of realizing expected future returns of the business resulting from factor other than financial leverage. Business risk is applied to all factors that can have an effect on forecasted earnings, including any issue that may impact administrative and operating expenses, cost of sales, and sales. An appraiser takes into consideration the competition, industry, management focus, and working capital of that specific company.

Similar to the definition of business risk, financial risk is defined as the degree of uncertainty of realizing expected future returns of the business resulting from financial leverage. Financial risk pertains to interest expense. Interest expense can impact the pre-income tax earnings that were forecasted. Financial risk is company specific and is assessed on the asset base of the business. The level of financial risk varies. It can be considered minimal if business is primarily financed by equity. If financed by debt, however, the financial risk would most likely be considered medium to high.

Liquidity risk is industry specific, whereas business risk and financial risk are company specific. It is also not relative to the realization of some level of income. Liquidity risk relates to the uncertainty associated with the disposal of a closely-held business at fair market value. The uncertainty stems from the length of the disposition period as it relates to the time value of money.

Everyone wants to help their children succeed. Many believe the best path for them is the same path they chose-Entrepreneurship. Before you help your children buy or start a business let’s look at some caveats:

Can you afford it? The $100,000 that you are loaning to your kids (make it a formal loan, with loan docs, interest rate, amortization schedule, UCC filing, etc.), can you afford the loss if none of it ever comes back? The odds are pretty high that their and anybody else’s start-up will fail. If the loss of the money will jeopardize your retirement or lifestyle-Don’t do it. Also, there are tax ramifications that need addressed before making the loan.

Do they have what it takes? As an Entrepreneur, you probably started out on a shoe string, clawed your way up, lived frugally and deferred a great deal of personal gratification. How about your kid’s? Have they only know an easier life and take your sacrifices for granted? Not everyone is cut out to be a business owner and make payroll with a Visa advance.

What is their skill set? What do they know about the restaurant, car wash or cleaning business? What is their educational and working background? Can they read a Balance Sheet or Income Statement? Can they close the sale with a critical, must have prospect? You love your kids, but a greater love is not setting them up to fail.

Is it the right business or the right business for them? Why will banks lend to almost anyone to buy a reputable franchise, even if the buyer/borrower has no industry experience? A franchise gives them a proven system and business model as a security blanket. On the other hand, for someone to get an SBA insured loan to purchase an independent, non-franchise business, the lender will weigh experience in the industry heavier than the borrower’s personal credit.

In addition, a wonderful franchise in a lousy location makes for a failing business. Many name retail franchisee locations are struggling mightily in this tough economic environment. Prepare yourself  and your child to spend considerable time and monies on due diligence above and beyond the initial investment.

Your children may do wonderful things with the money you lend them, but forewarned is forearmed and much family grief can be eliminated with some good planning and review.