And that's what this is all about. It. It's basically saying that at
some point in time, even if you're conducting a business that generates nice profits
for you, everything's going to come to an end, either naturally or you're
gonna want to get out. You're gonna want to retire, You're gonna want
to do something else. You're listening to Carrie Let's Financial Survival Network, where
you get valuable information you just can't find anywhere else to thrive in today's trying
times. You need the Financial Survival Network now more than ever. Go to
Financial Survival Network dot com and get your free newsletter and gift. Financial Survival
Network now more than ever. Welcome you are listening to watching the Financial Survival
Network. Have you ever been involved started a business, It succeeds and things
are going really well, but you're ready to move on. Well, I'll
tell you what that's happened to me. And I started a company. Well,
I took over a family business many years ago. Should have had a
succession plan from day one because I was working with the relatives who I preferred
not to work with. But later on I kind of created my own exit
plan sold it to my largest competitor and never looked back. But Wayne Zell
is with us. Now, Wayne, you are a CPA and a fellow
attorney. You've written a book, your multimillion dollar exit the entrepreneur is a
business succession success planner, and we really appreciate you coming on Amazon bestseller.
We might also add, so succession, when is the ideal time to create
your success succession plan? Well, nice to be on the podcast with you,
and it's it's great to meet you, Kerry. Yeah, the best
time is at the beginning, at the beginning of your entrepreneurial journey. And
if you don't do it at the beginning and you're way along, way far
along on your entrepreneur entrepreneurial journey, then do it later on. But don't
don't delay because you never know when something might happen unexpected disability or death that
causes you to leave your family, your employees, your customers, your business
in a state of turmoil without having to find what happens in those events.
So start out with thinking about the unexpected and then of course plan for the
expectant, and then you never know what's going to happen in the future.
So doing business succession planning is an ongoing process, and it always starts at
the beginning. But in the beginning, you're like setting up systems, you're
finishing off your space, you're opening up your store, whatever it is.
You've got like a million things. And I know for myself, when I've
started businesses, I tend to put something like that on the back burner,
saying I'll get to it because I got so many things to do. Them
up to my elbows and alligators. You know, it's hard to get to
get you to realize that this is really crucial to the success and eventual sale
exit from your business, isn't it. Yeah. I mean the entrepreneurs focused,
soul focused, and you deal with entrepreneurs. I deal with them all
day long. Their focus is on the business getting it started. Yeah,
the the initial startup phase. Okay, you don't have to have your business
succession plan in place when you're you know, setting up the premises or you
know, bringing on employees at the very beginning, but you should start thinking
about it and then doing your planning once things start moving along is really critical.
It's selfish, I believe, to not consider the fact that you've got
other people relying on you if you're setting up a business, if you have
a family, if you have a spouse, you have kids, if you
have employees working for you, if you've got customers that you're servicing, how
do you make sure that they're being taken care of as well as yourself?
I mean, if what happens, if something happens to you, you become
disabled, you're in an automobile accident, and you started up this business.
Let me tell you a quick story. I had a guy who was starting
up a government contracting business and he was doing very well. He was all
the way up at seventeen million in revenue and doing very very well. But
he had a long way to go to where he wanted to be in terms
of selling the business. And one day I get a call out of the
blue. It's right around New Year's and his son calls me and he says,
hey, look, my dad passed away. What do you mean.
He was fifty three years old. We were just starting in the business succession
process. He passed away, and he was frantic. What do we do?
How do we deal with the business. So we got together investors that
he had brought into the business. Fortunately, they were very sophisticated people.
We brought them into the business. I helped basically build a board of directors,
and we were able to bring in a management team to run the business.
And it worked out so that we grew the business by three times and
sold it for thirty million dollars too. So it was you and I needed
you. Lucky. We were lucky. I think we were lucky. And
I think the biggest thing that he did that most people don't do is he
surrounded himself with two people who were very sophisticated and very familiar with the industry,
and they were minority investors in his business, so they had an incentive
to help out the family and as well, you know, they wanted to
help out, and so it worked out beautifully in the end for the family,
not so well for the founder. But you never know what's going to
happen. And that's it's planning for the future. So you know, like
if you're bothering to do a business plan, and normally you should do that.
It doesn't necessarily have to be a multi level presentation to bring in multi
billion dollar investors, but you should always be doing a plan barebones at the
least. Right had a section there for succession slash exit plan. You should
always have an exit strategy in anything you get involved in. You buy a
house, right, you buy a car, whatever it is, you always
need an exit strategy exactly. And that's what this is all about. It's
it's basically saying that at some point in time, even if you're conducting a
business that generates nice profits for you, everything's gonna going to come to an
end, either naturally or you're gonna want to get out, You're gonna want
to retire, you're gonna want to do something else. And so I had
a client come into me last week and he said, I've got this business
and it was on his balance sheet, and his balance sheet was nice,
yet twenty five million dollars net worth ten million was allocated to the business.
I said, how did you come up with that number? He said,
well, you know, I've had offers and I think I think that's what
the business is worth. I said, okay, let's assume that it is.
What's your exit plane? And he said, I don't really have one.
I probably just wind the business down. I said, so you're basically
taking ten million dollars away from your family off your balance sheet because he has
kids, he's got a wife, and you don't care what happens, So
that doesn't make sense to you want to plan to at least transition the business
to your existing employees, sell it to a third party. There are lots
of different alternatives, lots of different strategies, and we talk about all that
in the book, and I think you need to spend that time because,
yeah, you're tired. In the end, you may want to just get
out and wind it down, but there may be a better alternative to preserve
some value or enhance the value for the benefit of your family, your customers,
your employees, and yourself. Hey, and let's not forget you're involved
in a business. Day to day small business, it's extremely emotionally taxing.
It's intense. You have challenges every day and it's easy to get burned out.
Or you accomplish your goals, you're successful, and you want to move
on to the next thing. So rather than having to think about it when
you get to that point, if you've got that land in place, even
if it's bare bones, hey you're that much further ahead. One thing you
mentioned in the book is using a revocable trust and why it's important or an
exit plan. How does that work? So what we've often seen is somebody
dies owning their business, shares of stock in the business or an LLC or
however it's structured when you pass away. In every jurisdiction in the United States,
including the District of Columbia, there's a process called probate that people have
to go through. So if you die owning your business in your own name,
your a state, your executor is going to have to go through probate,
which can involve not only disclosing the nature of the fact that you own
this business, but the value of it has to be inventory and filed with
a court, which is a matter of public record. So everybody's going to
know what the value of the business was or is at the time of your
death. And then you have an obligation, not you, your executor or
whoever's your legal representative, has an obligation to take this through the probate process,
which can take years and costs anywhere from two to five to eight percent
of the value of the assets. Is it worth it to go through that?
So what we do, and you know our firm does both the state
planning and business planning, and so we combine the estate planning and the business
planning and tell our clients at a minimum, set up a revocable trust,
which means that you are the trustee, you are the beneficiary of the trust.
You control everything. You don't have to ask anyone for permission. Just
put the stock or the LLC interest into the trust. And then if you
god forbidden, you pass away, or you become disabled, there's a successor
trustee that can handle everything without going through living probate, which would happen if
you were incapacitated, or death probate, which happens on your death, and
save the money, save the time, and avoid public disclosure of all of
this stuff. And it just makes handling the business at a minimum a lot
easier than if you didn't have that trust in place. And put your business
into the trust right away, so you're in control of it. Nobody else
is in control of it. You don't have to ask for permission to do
anything with the business. You as the trustee, will vote the shares of
the stock or the LLC entrant to control. Got it, got it?
Yea. It makes a state planning succession all those things far more easier.
And you know, one thing I find, having been an entrepreneur myself or
you know, fourth generation entrepreneur, and you know, you get involved in
the business, you never really bother to think of who's going to run it
after you besides succession, but management succession. Like I was in a family
business. My father started it with my uncle. It was my brother and
I, so the succession plan was already in place. We've been working in
the business since we were like children. But for many of you entrepreneurs out
there, you don't think about these things. Well, you know that's funny.
Even if you and your brother were deemed to be the successors for your
uncle and your father, who's in control of the business. How will the
day to day operations work? So that's why we as part of the book,
we talk about using a management succession plan, actually defining who is in
charge of day to day operations, who reports to whom, and then setting
up a mechanism that sort of oversees the day to day operators. So if
you and your brother are operating at day to day, who's going to oversee
the two of you to make sure that again, the ultimate beneficiaries the family
are being taken care of in the long run. And in many cases it
may not be necessary, maybe overkill, but I find that, for example,
if there's a sole owner, somebody owns one hundred percent of the business,
this becomes absolutely critical. And we just did one for a client last
week where he hadn't even thought about it, and he's in his late sixties
and he likes to jump out of helicopters for fun. So I'm just like,
we better do this plan, and we better link it to the revocable
trust that we draft in form as well. So the succession plan is something
that the company adopts. The board of directors is named, the officers are
named, their salaries are set out. We know exactly what they're going to
get paid, so that they don't up and leave. In a family owned
business, it may not be quite as difficult, or it may be even
more difficult depending on the facts. And so you just want to make sure
that you have all that documented and that the revocable trust which owns the business
and whoever the successor trustee is, is bound by that, and that we
have exit plans within the management success plans, So if you become disabled or
die, we outline what happens over some period of time three months, six
months, twelve months, and then what happens after that, and who controls
those decisions and leaving it in the hands of one person who might be a
trustee, who might be a spouse may not necessarily be the best for the
business, the employees, or the customers. Yeah, yeah, can be
very troubling and very emotionally unsettling, all those things for sure. So how
would you define a successful exit plan for your business? What's the addition to
that? Yeah, I think the a successful business succession plan incorporates, uh,
your personal issues. So you've got to You've got to understand what your
personal goals are and whether or not the business itself is going to generate the
cash flows for you and your family to survive. So there there's a personal
financial planning component to it. So you shouldn't be bringing in a financial planner
to help you. You want to ensure family harmony. If it's a family
owned business, what legacy do you want to leave are you dealing with all
these issues? Is there a culture that you maintain in the business that you
want to maintain for your employees and for your customers. If something happens to
you, How does the community benefit from your business today, and how will
it benefit tomorrow. These are all things, you know, minimizing taxes.
I'm a tax lawyer by training, and you know, everybody's always focused on
income taxes, but we also need to focus on a state taxes death tax
that you know can be imposed on very large estates, but the exemptions from
the estate tax fluctuate and they are scheduled to drop by half at the end
of twenty twenty five. You know, all of these things factor into a
successful business plan and then planning for what happens after you ex at the business.
So the book, there's a chapter in the book that deals on what
happens next after you successfully exited your business, because your life shouldn't end and
doesn't end there, and so it's life is all about planning ahead. And
so a successful business succession plan, in my opinion, is planning for the
unexpected, having a good business plan that plans for an expected exit whatever that
may be, retirement, sale, whatever, and then planning for the future
after the exited business. Yeah, so that's a good question. So many
of you out there, entrepreneurs, you can't even picture yourself, not going
to the office day and day spending this twelve hour days. So what advice
do you have for them? I think having an interest in life that you
are passionate about is what you should pursue. So I am an entrepreneur too,
and my passion is business succession planning for entrepreneurs. So I do spend
ten to twelve hours a day, seven days a week, focusing on this
because that's what inspired me to write the book, and so I'll probably keep
doing this. But I do have interests outside of work. I have,
you know, a future grandchild on the way. I've got four kids that
I spend time with. I've got, you know, I've got a passion
for music. I was a musician younger, at a younger point in my
life, and so all of these things. And my spouse and I love
to garden, and we love to go out on our lake. Create time
for that. The other thing I do a lot of time is spending time
on charity, devoting time volunteering for charitable endeavors. Everybody can't do everything.
I also teach at the college level at George Mason University. So I think
there, if you have passions, make time for your passions and create a
schedule that allows you to do that while pursuing your passion for business. So
do it while you're while you're building your business, because you may end up
getting so focused on your business that you may forget other things that give me
pleasure and passion as well. I've been there, done that, got the
teacher, Wayne. Really a lot of wisdom here again. The book is
You Are Multimillion Dollar Exit, the Entrepreneur's Business Succession Planner, and it's by
Wayne Zell, Attorney, CPA. We appreciate you coming on Wayne. I
you've got a question for Wayne or myself, shoot me an email Kyl at
kryltz dot com. We'll get you a quick answer. While you're at the
site Financial Survival Network dot com. You can click through right to wayne site,
order the book, and hey, while you're there, sign up for
your free newsletter. Just sent one out today. Wayne. Great luck with
the book and we will definitely talk to you again. Thanks Carry, thanks
for having me on the show. I appreciate it greatly. Thanks for listening
to Carrie Letz's Financial Survival Network. Your solution to today's trying times. For
the latest, go to Financial Survival Network dot com Financial Survival Network now more
than ever,