Investment selection, monitoring and control

Exit Insight: What's an exit plan got to do with it?After you and your financial planner have decided on the most appropriate asset classes to include in your investment portfolio, and also have decided on the allocation of assets within the asset classes, the next step is to select the actual investments that are most likely to help your portfolio achieve the desired results.

Here are some excellent criteria you and your financial manager should consider when making investment selections:

  1. Past performance compared to other investments having the same investment objective. Consideration shall be given to both performance rankings over various time frames and consistency of performance.
  2. Costs relative to other funds with similar objectives and investment styles
  3. Size of the fund
  4. Length of time the fund has been in existence, and length of time it has been under the direction of the current manager(s). Also, consider whether or not there have been meaningful changes in the manager’s organization and personnel.
  5. The historical volatility and downside risk of each proposed investment
  6. How well each proposed investment complements other assets in the portfolio
  7. The current economic environment
  8. The likelihood of future investment success, relative to other opportunities

Excerpt from “Exit Insight: Getting to ‘Sold!’” by author Joseph M. Maas, pp. 251-252. For more info. like this, buy the book online now.

 

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It’s time for a mid-year financial review

It's time for a mid-year financial review.As we enter the second half of 2014, this is a good time to look back at the first six months of the year to see how you are faring financially. We recommend that clients conduct a mid-year financial review to check in on their investments, budgets, savings and tax planning to see if adjustments need to be made. Here are a few key items to look at during your financial review:

Investments: How did your investments perform? Better than expected, worse than expected or about the same? Talk to your investment advisor to see if you want to make adjustments, including rebalancing your portfolio if your risk profile has changed.

Savings: Have you reached your savings goals year-to-date, or do you need to step it up a bit? Consider making an automatic transfer each month from checking to savings to ensure that you are saving consistently. This applies to retirement savings as well as traditional savings.

401(k) plan: If you are contributing to an employer-sponsored 401(k) plan, look at your investments to see how they’re performing. Are new funds available that better suit your needs? Can you afford to increase your contributions to get the maximum match from your employer? Discuss your 401(k)’s performance with your financial advisor to see if it is beneficial to make changes.

Tax withholding: Now that you’ve made it through half the year, you probably have a good idea whether or not your tax withholding is adequate. Do you need to adjust your withholding to ensure that you don’t underpay your taxes, or perhaps you’ve had a child and are eligible for an additional exemption? Use the IRS’s tax withholding calculator to see if you need to make adjustments.

Other areas to consider for your review: insurance, medical spending, quarterly tax payments and budget adjustments.

If you’d like help completing your mid-year financial review, please contact us. We’d be happy to answer your questions and to help you assess and adjust your finances as needed.

To your success,

Author Joseph M. Maas

 

 

 

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergetic Finance

 

 

 

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What’s your exit strategy? Part 2

(continued from our last blog post)

Good choices

Mark Girouard asks "what's your exit strategy?"A good option for many entrepreneurs includes exiting by being acquired, while continuing to offer help via a consulting contract. This choice may put an investor’s mind at ease, as it’s plausible to envision this while still being at an early stage in your company’s history. The acquirer needs time to get up to speed and offer the same level of service to your existing customers while operating the company. Some owners grow the company to a certain point within a desired sales or profitability range, and then proceed to sell operations to a logical acquirer – someone in your market space with a high level of interest. Strategic buyers like these usually offer the highest price.

As mentioned before, it may make sense to hold on to certain parts of intellectual property including patents on technology, and offer to license the technology to the acquiring company. While the finer points of this type of plan usually require negotiation, having upfront discussions with your investors regarding benefits and risks of your exit will help in raising the initial capital until stability is established.

Once you’ve raised capital and have consistent revenue over a period of time, then your exit plan may change as new realities emerge and the business changes. It is important to understand how these initial options will benefit the company in case you are not to remain there. Through this discussion process, you will carefully express the likelihood of potential events to investors, all while managing your existing stakeholders, and building operational efficiencies that successfully move the company out of the starting gate.

Making an exit statement

A good way to express an exit statement would be “My exit strategy is to be acquired in 3 to 5 years based on a targeted sales # of X or profitability of Y. I’d like to continue to be involved and would like to consult on the continued operations to the acquirer.” This explanation offers a reasonable exit for you and for the investors at this point in time. Being able to clearly state what you and your stakeholders want in all negotiation phases is helpful to complete the transaction in a realistic amount of time that benefits all parties. Communication is essential to the process no matter what the numbers look like.

If you would like to further explore how to prepare for an M&A transaction, or have a formal Business Valuation, please call Synergetic Finance at 206-386-5455.

Also, please check out founder Joseph M. Maas’ new book Exit Insight: Getting to ‘Sold!’ that explains the process in detail of planning and executing a successful company exit.

To your success,

Mark Girouard
 

 

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

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What’s your exit strategy? Part 1

what's your exit strategy?As part of working with business owners to help grow and sell their companies, Synergetic Finance is often asked by clients to assist in answering an important fundamental question: “What’s your Exit Strategy?” This is not a simple question, however. It depends on who is asking it. Are you being asked by friends and family, or are you asking yourself what you plan to do once you exit the business? Or are you being asked by someone else that is a key stakeholder, such as a potential investor?

There is usually a long term exit strategy (yours) and a short term exit strategy (the investor’s.) The investor group you are raising capital from wants the enterprise to grow according to plan, and is often looking for great returns paid out as quickly as possible – or longer if they are more patient.

Moving beyond friends and family to raise money from professional investors requires developing a new perspective on your capital partners. Your viewpoint may differ slightly in terms of time frame, so it is important to meet and understand your audience appropriately. To successfully raise capital from investors, it is important to craft an answer that keeps them happy, yet positions and builds your business for the long term.

Exit strategy for investors

A proper exit strategy illustrates a realistic outcome for both your and your stakeholders. While your strategy may change over time, exit statements are made from the perspective of the current time, like your company’s value. A financial advisor like Synergetic Finance can help you manage the path from this point in time to a future successful exit.

To illustrate a realistic exit for investors now and to drive liquidity in the near term, there are a number of options to consider and communicate that sound reasonable. Some acceptable options investors like to see include the following: going public, merging, being acquired, and selling operations. Most exit strategies are some combination of these choices.

Selling the company’s operations may include selling parts of the company while holding on to other parts: keeping certain patents, signing licensing agreements, franchising the concept, or offering consulting services until new management is in place. Investors like to explore these potential exit strategies in advance along with the likelihood of achieving their returns in a realistic time frame.

In part 2 of this post, we’ll talk about good choices and making an exit statement. Until then, please let us know if you have any questions, or check out founder Joseph M. Maas’ book Exit Insight: Getting to “Sold!” available online now from Merrell Publishing.

To your success,

Mark Girouard

 

 

 

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

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Estate Planning Checklist

estate planning checklistConsidering your own mortality is never a pleasant task, but it is necessary to assist both your family and your business to transition after you’re gone. One way to plan ahead is to work with an experienced estate planner. He or she will provide a list of the information you’ll need to gather so the paperwork necessary to effectuate your wishes can be developed. Your advisor will request many documents some of which are:

  • Wills of both spouses
  • Power of Attorney
  • Directive to Physician
  • Community property agreement
  • Transfer to minor account information
  • Trusts
  • Tax returns
  • Birth and marriage certificates
  • Divorce decrees with settlement information
  • Employee benefits statements
  • Loans information
  • Vehicle registrations
  • Bank and brokerage statements
  • Insurance policies

Excerpt from Exit Insight: Getting to “Sold,” pp. 163

Copyright © 2014 by Joseph M. Maas. All rights reserved.

There are many more steps needed to prepare an appropriate estate plan, but this checklist will get you started. Have questions about estate planning? The financial planning experts at Synergetic Finance can help. Call us today at 206-275-5455 for a complimentary consultation.

 

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Why Do I Need A Business Valuation?

Why do I need a business valuation?Whether you own a start-up business or a seasoned enterprise, your business must be evaluated to determine its value today as represented by its future economic benefits.

You can see that the valuation of your business can quickly become complicated, and is even further compounded by the multitude of lenses through which the valuation can be measured.

Should your business valuation be conducted using the income method, or the market or asset methods? Which one of these methods is the best choice for your circumstances? How do such influences as economic trends, industry factors, regulations, competition, and intangibles affect the value of your business?

This is why you will need the advice of a person professionally trained in business valuation, such as a Certified Valuation Analyst (CVA). While certainly not an easy task to complete, trained professionals who know how to work closely with you to identify the financial strength of your business will expertly guide the valuation process to the best conclusion for your purposes.

What is your purpose?

What is the reason for your business valuation? We call this ‘defining the engagement’, and like most first steps, it sets up the subsequent pathway of our work together… this is the first important detail.

Among the more common reasons for conducting a business valuation:

  • Selling or acquiring a business
  • Establishing or updating a buy/sell agreement
  • Bringing in a new partner or new investor
  • Establishing an estate tax planning or gifting tax planning strategy
  • Settling a divorce
  • Liquidating a business
  • Considering providing stock options
  • Preparing for buying new or more insurance
  • Buying out a partner
  • Seeking business financing
  • Establishing an Employee Stock Ownership Plan (ESOP)
  • Considering making a sizable gift or supporting a charity
  • Converting from a C corporation to an S corporation

Excerpt from Exit Insight: Getting to “Sold,” pp. 77-78

Copyright © 2014 by Joseph M. Maas. All rights reserved.

Maas and the Synergetic Finance team are business valuation experts. For more information on business valuations or exit planning, refer to author Joseph M. Maas’ new book Exit Insight: Getting to “Sold!” in which he explains how business owners can determine their firms’ worth and prepare for a successful exit.

To order your copy of the book, visit Merrell Publishing online or Amazon.com. Have questions about Exit Insight or Exit Planning? Want to schedule a call or plan an exit planning workshop with author Joseph M. Maas? Call Joe at 206-275-5455 or send him an email.

 

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What’s An Exit Plan Got To Do With It? Part 2

(continued from June 4, 2014)

Exit Insight: Getting to Sold!It is widely agreed by Baby Boomer business owners that a clearly written and current exit plan is important, but only one in 10 owners have one!

On top of that, most businesses aren’t even ready for sale because they are flawed in ways that make them unattractive to the market. It’s much like trying to sell your home. You have to fix the leak under the sink, repair the fence in the backyard, prune the apple tree, and replace the tile on the kitchen counter before a buyer will consider a purchase. It’s the same with your business; only then can you expect to achieve your sale, and hopefully your retirement security.

Most business owners who sell their business soon regret their decision; they believe they did not receive the full value of their business, or their timing was poor, or they didn’t realize they had more options, or did not receive good advice. They suffer seller’s remorse and wish they could go back in time and sell their company again, and they would prepare more thoroughly and be better rewarded for the years of hard work they invested.

Can you imagine the disappointment of these owners? Years of labor with only a portion of their dream fulfilled? Watching their business die, or selling for only part of what is needed? This is a heart breaking situation and is fast becoming an unavoidable reality for the tens of thousands of business owners who will soon be offering their company to an unresponsive marketplace in the next five to 10 years. Time is a commodity, and for many owners there will be no second chance, and no margin for an error of this magnitude.

Exit planning is an essential activity for every business owner, and must be regarded as a business best practice. By establishing a comprehensive exit plan with the guidance of a certified professional, you will benefit by not only having put your house in order, but also by possessing more control over the timing of your sale, have access to increased options and opportunities, and create more capacity for the financial and personal outcomes that serve you most.

Of course, the sooner you write your exit plan, the better. Not only can good intentions get shelved, but the longer you wait, the less capable you will be with taking advantage of opportunities that will come…and then will go.

Excerpt from Exit Insight: Getting to “Sold,” pp. 17-19

Copyright © 2014 by Joseph M. Maas. All rights reserved.

For more information on the exit planning process, refer to author Joseph M. Maas’ new book Exit Insight: Getting to “Sold!” in which he explains how business owners can determine their firms’ worth and prepare for a successful exit.

To order your copy of the book, visit Merrell Publishing online or Amazon.com. Have questions about Exit Insight or Exit Planning? Want to schedule a call or plan an exit planning workshop with author Joseph M. Maas? Call Joe at 206-275-5455 or send him an email.

 

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What’s An Exit Plan Got To Do With It? Part 1

Exit Insight: What's an exit plan got to do with it?Have you planned an exit date? Have you planned a successor? Some quick research on the Internet will quickly reveal the odds are about 9:1 you have not yet done these two essential tasks for accelerating and securing your financial success.

You’re in for a tumultuous experience if you’re thinking about selling your business in the next five to ten years. The Baby Boomers, and you may be one of them, will soon be trying to sell their businesses as they approach retirement. The first of these Boomers are now in their early to mid-60s, and will soon want to cash out and enjoy the next 20 years or so. The situation is, however, there will be a glut of businesses for sale resulting in the likelihood of more supply than demand.

It is very probable that most business people seeking retirement will be unable to sell their business at a price equaling the cash flow they are now able to draw from their business, which means they are stuck and have to continue working to maintain their current lifestyle, maybe for the rest of their lives.

An added complication is that there are likely to be even more businesses for sale than would normally be anticipated for a Baby Boomer retirement wave. Because of the economic setbacks due to the recent lengthy recession, retirement timing for many was delayed, and these businesses, that should have already been placed for sale, have been in abeyance and may be added to the already extraordinary number of businesses soon coming to the block. This circumstance will unquestionably have a deleterious effect on tens of thousands of families when there are no buyers to purchase the business at the price needed to assure a comfortable life in later years.

For those business people who can’t sell at the price they need, it will mean more years of ownership in an increasingly competitive environment. We don’t want this to happen to you!

More on this topic in our next blog post. Come back next week!

Excerpt from Exit Insight: Getting to “Sold,” pp. 17-19

Copyright © 2014 by Joseph M. Maas. All rights reserved.

For more information on the exit planning process, refer to author Joseph M. Maas’ new book Exit Insight: Getting to “Sold!” in which he explains how business owners can determine their firms’ worth and prepare for a successful exit.

To order your copy of the book, visit Merrell Publishing online or Amazon.com. Have questions about Exit Insight or Exit Planning? Want to schedule a call or plan an exit planning workshop with author Joseph M. Maas? Call Joe at 206-275-5455 or send him an email.

 

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Life insurance & risk management

Life insurance and risk managementThe following is an excerpt (pp. 195-196) from Exit Insight: Getting to “Sold!” written by financial and investment expert and author Joseph M. Maas of Synergetic Finance.

The purpose of risk management

There is a great variety of risk in our lives, and mitigating these risks is an intelligent response to achieve financial self-preservation.

Personal risk

When considering insurance as a means for financial protection, two main issues must be considered and resolved:

  • Your ability to accept the financial risk inherent in insurance policy protection, and
  • Your willingness to weather the volatility that sometimes accompanies insurance policies’ value development

There are two main reasons for purchasing insurance policies:

  • To protect your financial well-being
  • To accumulate cash
  • Or a combination of the two

Insurance as a source of financial support for dependents

Insurance can be an excellent tool for providing financial support to the surviving family members. Funds from insurance policies can be used for the typical household expenses of paying bills, maintaining mortgage payments, purchasing food, clothing and health care, and can also be applied to education, day care, legal fees, or business costs.

Insurance to service debt

Insurance is also an effective means for providing resources to pay off a mortgage, vehicle loans, credit card debt, and debts such as college or business loans. Death does not terminate the estate’s obligation to pay back these debts, and an insurance policy could be very useful for preserving your survivors’ finances.

Insurance for personal uses

Insurance policies can also be a great resource during your lifetime. Cash value life insurance policies can potentially accumulate cash you can use for any purpose through a policy loan, or policy termination if circumstances warrant. If you terminate your policy, you would pay taxes on the funds you receive, possibly at a favorable rate.

Copyright © 2014 by Joseph M. Maas. All rights reserved.

To order a copy of the book for yourself, a colleague or a loved one, visit Merrell Publishing online or Amazon.com. Have questions about Exit Insight or Exit Planning? Want to schedule a complimentary call with author Joseph M. Maas? Call Joe at 206-275-5455 or send him an email.

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Exit planning: 5 steps

In the simplest of terms, exit planning can be broken down into five steps. Along with the help of a trusted, experienced financial and investment advisor, any business owner can create an exit plan to fit his or her long-term financial goals.

Exit Plan 5 steps

Excerpt from Exit Insight: Getting to “Sold,” p. 22

Copyright © 2014 by Joseph M. Maas. All rights reserved.

For more information on the exit planning process, refer to author Joseph M. Maas’ new book Exit Insight: Getting to “Sold!” in which he explains how business owners can determine their firms’ worth and prepare for a successful exit.

To order your copy of the book, visit Merrell Publishing online or Amazon.com. Have questions about Exit Insight or Exit Planning? Want to schedule a complimentary call with author Joseph M. Maas? Call Joe at 206-275-5455 or send him an email.

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