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Stu’s View: Succession Planning for Those Who Want to be Wealthy Afterwards

Posted Tuesday, December 17, 2013 by Jules VanSant.

By PPI Partners: Stuart W. Margolis, CPA, MT and Paul Reilly, New Direction Partners

For most owners, the day will come when you’re ready for a change and want to consider options to “get out”. Popular options float through your mind like:

SellMergeGive it away to charityDissolveGift it to familySell it to familySell it to key employee(s)Sell it to all of your employees (ESOP)Any combination of the above.

In any scenario the message is clear, the company needs to be positioned it in the best possible light possible with:

Higher EBITDAEasy to Understand Products / ServicesStrong Financial PositionBusiness / Marketing Plan in PlaceThe Good, Bad and Ugly Explained Honestly

If theses items are achieved, you stand a better chance to make a deal, avoid spending wasted time on a deal that doesn’t go to closing, and the most money possible from the fruits of your hard work. Others have done it. But how?

Get Started.

Typically, when an owner decides to leave a company, the business plan is written to that end. On average, plans to roll out your business to sell could take from 6 months to 4 years to achieve.


Preparing for the succession should include action such as these:

“Clean up” Real Estate – Consider timing of lease renewal. Is it in your corp? Can it be spun out. Get to a fair market value and pay/accrue every month.

“Clean up” Multi-Employer Union Plans – Be prepared to discuss fluidly how the prospective buyer can handle any pension liabilities or the merits of having a union.

Appoint a Successor/Replacement –Get a management team working. Prepare a flow chart. If the current flow chart leads from you to a zillion areas, make plans to change who reports to who. Loosen up your control.

“Manage” Large Investments in Equipment and Technology– Any new debt reduces the Equity Value, be wary. Buyers want companies who embrace technology.

Fix Problems and Finish Projects– Don’t leave unfinished projects for the next owner. Finish installing that MIS system you purchased 5 years ago. When a prospective buyer says, can you quote 5 jobs for me, don’t let it be on a handwritten sheet or excel mock up. Don’t leave yourself open to having to tell them your estimator does it the “old fashion way” or “we do our estimates off line”.

“Clean up” Voting Control – Be mindful of any and all varying objectives among shareholders. Shareholding and voting rights do not need to go hand-in-hand. Make sure the voting shareholders are all on board.

Have Financial Statements that are Clean and Easy to Understand– Audited financials are very helpful. Keep an annual analytical review. Write down why things turned out the way they did. Hire a good CPA to make your financial snapshot sparkling clean, easy to understand and error-free.

Keep a List of your Perks, or EBITDA Adjustments that can Help you Increase your EBITDA— These are one time discretionary expenditures that have nothing to do with business per se. ( EG golf club membership, conferences to very nice vacation areas, etc.). The more you can adjust your EBITDA upwards with provable items, the more your company is worth.

Untwine– If you have intertwined multiple companies in your business, either untangle them or prepare financial information so it’s easy for a third party to understand them. Make it so the successor has no work to do, except make a decision to buy or not to buy. Remember, no one is going to buy or pay top dollar for something thats difficult to understand.

Strengthen your Customer Base– How secure are you? You have time to reinforce that relationship. Now is the time to fix.

Value your business every year. Don’t wait till your in negotiation to find out the real value of your business, value it occasionally.

Proceed with a Knowledgeable Team

When you feel ready and feel that potential has been maximized:

Hire an advisorReward key managers for the extra help in attaining the new goals ! Only get key managers involvedEnjoy the ride!

About Margolis Partners

Margolis Partners has long been recognized as the financial expert for family-owned businesses with a specialty in the printing, packaging and allied graphic communications industries, assisting thousands of companies with strategic and financial management, valuation, mergers/acquisitions, accounting, audit and tax services. The firm is noted for its expertise in enabling companies to optimize profits. Proudly, it is the purveyor of the industry’s Value-Added Principles of Management, and compiles the annual Printing Industries of America Ratios, the printing industry’s premier financial benchmarking tool.

About New Direction Partners

The team at New Direction Partners LLC has guided over 200 printing company owners through the sales and merger process. The advisory services reflect a full set of skills to help you sell or expand your business: valuation, management consulting, financial advisory and investment banking. The deep experience and industry expertise at New Direction makes it uniquely suited to serve printing, packaging and allied graphic arts businesses.- See more at: