Money Talk: Succession Planning to Secure Wealth

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

• Sell

• Merge

• Give it away to charity

• Dissolve

• Give it to family

• Sell it to family

• Sell 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 light possible with:

• Higher EBITDA

• Lower debt

• Good management team

• Easy to understand products/services

• Strong financial position

• Business/marketing plan in place

• The good, bad and ugly explained honestly

If these 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 get the most money possible from the fruits of your hard work. Others have done it. But how?

Typically, when an owner decides to leave a company, the business plan is written to that end. On average, a plan to roll out your business to sell could take from six months to four 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 corporation? 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 whom. Loosen up your control.

Manage large investments in equipment and technology: Any new debt reduces the equity value, so be wary. Buyers want companies that embrace technology.

Fix problems and finish projects: Don’t leave unfinished projects for the next owner. Finish installing that MIS system you purchased five years ago. When a prospective buyer says, can you quote five 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. (e.g.: 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 to make a decision to buy or not to buy. Remember, no one is going to buy or pay top dollar for something that’s 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 until you’re in negotiations 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 advisor

• Reward key managers for the extra help in attaining the new goals

• Only get key managers involved

• Enjoy the ride!

Stuart Margolis, CPA and partner at MargolisBecker LLC, provides information that helps firms operate profitably. The company is the purveyor of the industry’s “Cash is King” and “Value-Added Principles of Management”, and compiles the annual Printing Industries of America Ratios, the industry’s premier financial benchmarking tool.

Paul Rielly is a partner at New Direction Partners LLC, which has guided more than 200 printing company owners through the sales and merger process. More information at