Exit Planning with Aaron Puttroff

In this episode we are joined by Exit Planner and financial advisor Aaron Putroff to discuss Exit Planning, the holistic approach to designing a business-exit strategy that provides the owner maximum value for their life’s work. It encompasses setting Exit Objectives: When do you want to leave? How much money do you need from your business exit? To whom will you sell the business? Then, building an Advisor Team comprised of trusted, professional advisors (CPA, attorney, financial advisor, valuation expert), and planning each aspect of the transition sequence. 
Many business owners delay exiting the business because they’re concerned whether they’ll be able to maintain their lifestyle, whether they’ll have enough after-tax income from the proceeds of selling the business. It’s critical that the plan coordinates the owner’s personal finances with her or her business finances. While they are legally separate and distinct, from a planning perspective they are absolutely integrated. Decisions in one affect the other, and vice versa. Therefore, it’s necessary to devise a plan that succeeds in both domains. 
Aaron served in the US Marine Corps for 10 years, and provides the same level of protection and loyalty for his clients today.

Selling a business is the American dream, the pot of gold at the end of the rainbow, the reward for years of hard work. Successful entrepreneurs make countless sacrifices in hopes that they would someday reap the benefits of their labor and live a new life of vacations, recreation, and prosperity.

You only exit your business once, so you should feel confident passing this milestone. A successful business exit reflects the preparation done beforehand. Failing to plan is planning to fail.

The owner of a privately held company has several alternatives on how to exit their business. In the absence of an exit strategy, events will inexorably dictate the final exit plan. A costly involuntary exit may be caused by death, disability, divorce, disagreement, or distress.

Selling Your Business with David King will help you take control of the sale process and make it positive one.

Transcript

Speaker 1:

Welcome back to selling your business with David King. I'm David King. I'm the author of selling your business begin with the end in mind, which is available on Amazon to today. We're joined by my good friend, Aaron Petro, who works as an exit planner. Aaron. Welcome.

Speaker 2:

Hey, good morning. Thank you for having us

Speaker 1:

Aaron, tell the audience a little bit about your background, uh, how you got here today and your career, what kind of services you provide?

Speaker 2:

Okay. Uh, so for me, I developed a, an interest in finance when I was in high school and college. And so I just, I came from a very blue collar family that didn't know a lot about how money worked or operated in their lives. Uh, you know, my parents had just didn't make a lot of good financial decisions. And so what happened is at a very young age, when my dad, when his was in his early thirties, he got injured at work and that injury prevented him from ever working again. So financially we were devastated. I mean, we were wiped out, we lost our house and, uh, parents went bankrupt and, uh, I've got divorced ultimately. And I just remember being in high school, thinking that, you know, a lot of it had to do around the issues of money. And if I could only figure out how this money stuff worked.

Speaker 2:

And so that's when I developed this, uh, real passion for personal finance and, uh, economics and personal planning. And I just, you know, made it my mission to learn about it. Now, when I was in college, I, I was in Naval ROTC. I ultimately went on to serve 10 years in the Marine Corps. Uh, but I always knew thank you. I always knew that when I got out of the Marine Corps, I was going to be in this profession. And I really view that what I do now is very similar to my Marine Corps experience in that as a Marine, it was about protecting our country, protecting our way of life. I really view that what I do now is I protect my clients. And so for me, my stand is that my clients aren't going to fail financially that their financial lives are going to work out for them. And so I can't stop life from happening. Can't stop people from getting injured or the economy from having a recession or the stock market from going up or down or down specifically. But I do feel like that with proper planning, we can avoid the failure that would result from untimely things occurring. And so that's just really what I'm out to accomplish with my clients.

Speaker 1:

Wonderful Erin and, and I can attest I've, I've worked with Aaron and I've known Aaron now probably about 10 years. And, um, and our sons even go to school together. They're classmates, and it's easy to remember. My, my son is Harrison and his is Ford. We, we didn't coordinate that thing. That would be a little bit odd if we had, but Aaron is a true Marine. He is, uh, one of the few good men and, uh, his clients are lucky to have him serving their interests. So let's, you're to start in on exit planning here, what exactly is exit planning?

Speaker 2:

Yeah. So exit planning is just a holistic approach to designing a business exit strategy that ultimately supports the owners long term financial goals. And so what I've discovered over the years is that we all want the same thing, whether you're an employee or a business owner, or in other words, a W2 person who earns your salary by working for our business or the owner of the business, we all wanna exit the workforce someday, or we at least wanna have the option of exiting the workforce. And what exit planning is about is putting the planning steps, the strategies, the techniques in place, so that that owner can eventually exit and maintain his or her lifestyle after leaving the business.

Speaker 1:

Uh, this is kind of a, just an anecdotal rough estimate. And I I've never seen the data to back it up, but representing business owners. I, I think it's probably pretty close. I understand that the owners of small businesses have approximately 85% of their net worth wrapped up in their business. Does that sound correct to you? I mean, I guess, you know, sure. There's some that have put aside more for retirement, but a lot of them just keep plowing that money every year back into the business, they scrape by, with out taking out a whole lot, year to year, they just put everything into the company. Is that, is that a fair?

Speaker 2:

Yeah, I, you know, like you, I haven't seen any hard data to support that, but my anecdotal observation is that's absolutely true in my experience, working with clients, uh, that most business owners, the majority of their assets is the business. So if you look at their personal balance sheet and everything, that's in the asset column, most of that, and maybe it is 85%, but definitely most is the business. Yeah. And to your point, you know, they should be saving money along the way. They should be building resources outside the business because we don't know how things are gonna go. I mean, we don't know if there's gonna be technological changes or legal or regulatory changes. It could diminish the value of that business or just have it, you know, not be worth as much as we think it might be years down the road. So we should be building wealth outside the business. And for, for whatever reason, uh, a lot of times business owners don't do that or they don't do it until they're late in the late in life. And maybe facing and looking at the exit when they really start to build some wealth outside the value of the business.

Speaker 1:

Yeah, yeah, yeah. True. So along those lines and seeing how important it is to plan for the exit from a business, what, what are the alternatives that a business owner can pursue?

Speaker 2:

There's <inaudible> at this? And so from a, an exit planning perspective, there are really only a handful of ways that anyone can exit a business. And so fundamentally if you're an owner, you're either going to sell the business to a third party, to an outsider, or you're going to sell it to an insider key employees, family members, or maybe even all of the employees.

Speaker 1:

Okay. And if, when you're talking with a business owner about their exit planning process, do, do you, do you break it down into steps on, on how to start planning, implement a plan, choose which way to go with that? Are you gonna do an internal transition or an external sale?

Speaker 2:

Yeah, it's a really good point. So yeah, absolutely. The first thing we've gotta do. And, and in fact, uh, your book says it perfectly, which is we gotta start with the end in mind. And so really the end is how much retirement income do I, as a business owner need after I leave my business on an after tax basis. And so if I know that my lifestyle is needs a certain amount of income, then I have to have a plan that will produce that income. And I, I don't know about you, David, but something I've observed over the years is you ask a business owner what the business is worth. And oftentimes there's no grounding to that number. There's not been a, uh, valuation performed, but oftentimes the number is very close to what that owner thinks he or she needs to produce the retirement income they desire.

Speaker 2:

And so first we've gotta start with the desired amount of income in retirement. And then the next step is to do a valuation or at least get a statement of value on the business. And once we know where we stand or where the business understands now that really opens up, uh, some planning, some planning opportunities. Now with respect to the, the way that they're gonna exit the business. You know, I find that oftentimes that's just gonna be determined by the circumstances. So you may ask a business owner, I, you know, how do you envision leaving this business? Are you gonna sell it to a third party, you know, through some type of mergers and acquisitions activity, or have you promised it to key employees? Do you have the type of business that is even gonna be attractive to a third party? Or is it more of a service business that, you know, your employees, or at least some family member or key group of employees might take over?

Speaker 2:

And so we can through questions, we can really discern what are at least the potential exit paths, or we can do it by reverse and do a process of elimination and say, okay, these particular exit paths are not applicable to my situation. So let's just rule those out altogether. You know, for example, the business owner may say, ah, I don't have a business. That's gonna go public. So therefore an IPO is not even an option for me. And let's just cross that one off the list. And we might get down to two or three or four exit paths that pass that are ultimately options for the owner and will work to refine those over time.

Speaker 1:

Yeah. And business owners are in rational economic beings. They're gonna want to do what's in their best interests in, in put the most money in their pockets are in the pockets of their heirs. And like so many of us, we may be able to retire today if we wanted to. And we wouldn't retire in a lap of luxury, but we keep working largely to provide something for our successes, for our children. We want them so that they not way behind in this game, uh, and that they can have something. So they, they, you know, the business owners wanna get the best deal that they possibly can. And when you're looking at those alternatives for most business owners, a sale to a third party is gonna generate the most net proceeds. But some businesses like a service provider, an attorney like himself, um, if you're gonna be, you know, have a succession plan in a law firm, you it's gonna be internal.

Speaker 1:

Other people are gonna come in. You need, you're not gonna be able to sell it to some other lawyer who takes over your shingle. And then think that the same clients are gonna stick around. It's a different lawyer. Um, some professional services can generally though, and then some people who have a family business, the business may need some more time for growth that the best thing to do for your children, who we're working for every day of our lives. The best thing to do is to let your, your kids come along, you know, take it over if they've worked at the business and it's gonna thrive in their hands when you're walking through the situations with business owners, do, does that generally mind, you know, gross simplification of it? Does that generally hold true? Or do you see variations on that?

Speaker 2:

Yeah, I mean, mean it's absolutely true and, and there's no, there's no prescribed path. Uh, you know, there are a number of ways to structure one's retirement from the business or exit plan. And it's really gonna come down to unique circumstances about you want about what it is you want to accomplish and what's available to you in the marketplace. And so it, it takes asking a lot of these questions, truly understanding what's important to the business owner and then crafting a plan that accomplishes that. And to your point, you're right. It may be that there's enough money to provide retirement income at this point. Maybe it's more about, uh, maybe the current planning is more about long term legacy planning, but, um, you know, it also brings to point an, an interest or brings to mind an interesting point around selling the business and getting maximum value.

Speaker 2:

So a lot of times third party transaction might produce the most value or the highest price, but we also have to look at that from an after tax basis. And so that's may or may not be the case. Oftentimes an internal sale can be structured in such a way to provide more after tax, but it might also have some other risk where it keeps the owner waiting longer to receive their money. Right. Maybe there's some type of period of time that the business has to continue to thrive and they get paid out over a longer period of time. So just, it's all about identifying what's important to the owner and structuring the right path. Mm-hmm

Speaker 1:

<affirmative>. So if a business has been around and, and owned by the same owner or owners for say five years, and they feel like they've got another 10 year runway before it's really gonna have peak value. So they don't have immediate plans to, to start planning for an exit. Is there, are there benefits to go ahead and start planning for an exit?

Speaker 2:

Yeah. So ideally just like, uh, just like you mentioned a runway before takeoff, ideally you plan the exit on day one of the business, because the longer you go or the closer you get to the exit, the fewer opportunities you have, you might have closed off planning solutions or planning opportunities that would've otherwise been available to you. And so in an ideal world, you would do the exit planning on day one. When you start the business now in a practical world that, uh, I mean, that rarely happens. So certainly a five to seven year window is ideal. And the reason being is you may, you may not be exiting for five to seven years, but it gives you time to put programs in place that will facilitate the exit. It could be, um, that you've gotta retain key people, right? I mean, even if you're gonna do a third party sell, it might be that that new buyer needs to keep some of your key people, because they're gonna know how to operate the business and your absence. And so you might have to put programs in place to, to keep them tied to the business. You might also, as we spoke earlier, wanna build some value and save money outside the business. And so having a five to seven year period of time where you can put one of these tax advantaged plans into place where you build value outside the business is, um, is critical. So the sooner, the better and five to seven years is, is a really good time to do that. Assuming you didn't do it, you know, on day one

Speaker 1:

Mm-hmm <affirmative>. I always ask people when there are business owners, I say, you know, H how would you sell your business? And they often, you know, look at me with a blank look, and it's not cross their mind. I say, you know, if you've got a business, uh, and you don't conceive of how you could possibly sell it, you've, you don't have a business, you've got a job, uh, you can go in every day of your life and it'll be there for you. But if no one else would take it overview and pay you for it, is, is that truly a business now that's, it's maybe just pushing them towards the, the idea of looking at this issue, but there's mistakes that people can make. On the first day, they form a company that will forever, you know, hinder their ability to sell it. And then there's bad habits that people develop early on that when they start working, you know, on their exit plans, all of these bad habits, they're gonna have to shake them out. Things like cutting corners on their accounting and, and stuff like that. More, little bit closer to the operational details than probably the areas that you're working on are, you know, closer to the owner and the owner's financial situation. But what do you do if an owner hasn't decided, you know, whether or how, and when they wanna exit and, and how, how do you help them identify a specific exit strategy? How do you start breaking down this? You, you know, pretty heavy decision for a business owner.

Speaker 2:

Yeah, that's a, it's a good point. So there, I mean, we, we certainly have a series of questions or interviews or questionnaires we use to, to help guide us down the path. And so we we'll employ those. And again, it could be very simple through a process of elimination. You know, for example, if the owner doesn't have any family members in the business or anybody that he, or she really views as key, then, I mean, right then and there, that might mean that an internal sale is not even possible. I mean, that's, you know, if they don't have people. So now we're, we know we're looking at third party, but, um, you know, we've got just a lot of different ways of asking the questions and, and really sorting through what the owner wants or doesn't want to, to at least give us some options to run with and business planning or exit succession planning.

Speaker 2:

I mean, it's done in stages typically. It's typically not done all at one time. And so, uh, the specific exit itself, the planning around that may not occur now, but there's certainly things that need to be done to shore up the other planning. So, you know, for example, I mentioned earlier, one of my missions or my mission as it relates to my profession is that my clients don't fail financially. Part of that is doing a risk analysis or a threat analysis and identifying what are the things financially that could take you outta the game that could have your finances not work? You know, and the example I gave was my father, my father had a plan that he was going to work for the rest of his life and collect a pension. And it wasn't a bad plan except for he didn't end up working the rest of his life.

Speaker 2:

In fact, he worked a very short period of time. And then at that point, he was never able to work again. So with business owners, the threats may like that, or they may be different, but it's really around doing an assessment of what are the threats. It could prevent any future planning from even occurring. And we'll start with that. And then of course, because we're coordinating the personal and the business, now, it may not just be the business stuff, but we're looking at the personal planning as well, and identifying things that could threaten their finances over there and, or just techniques that could be implemented that may ultimately facilitate the entire plan.

Speaker 1:

I see. I see. Now, do, do you have elements of exit planning that you take, uh, your clients through?

Speaker 2:

So when we think about exit planning, we're thinking about the, the, uh, strategic we're thinking about the strategic, uh, plans or opportunities in advance of exit that might that harkens back to the, uh, things that you could put in place to retain key people or reduce taxes and save money along the way. So those are more strategic things in advance of exit that can be done. There's also the, the, um, threat analysis and the mitigation of those threats. So that's a separate, um, you know, separate segment, if you will. And then we're also looking at the specific exit strategy. And then we're also looking at the, the wealth preservation and generational planning. So the estate planning aspect of it, and it's not that we're doing all these things. There's a team of advisors who are participating. So I'm not an estate planner. Um, I'm not an estate planning attorney, but will recognize and facilitate the estate planning as a segment of overall exit planning.

Speaker 1:

And how, how often do you have to help the business owner assemble a team of qualified professionals to help them through this process and who, who do you bring on

Speaker 2:

Have to help assemble a team? So oftentimes they have planners or people that they've been working with for a number of years that they're not doing a bad job, but they may not have the experience or wherewithal to, to cross the finish line. And at a minimum, the team needs to include some financial planner who has expertise in exit planning like myself. You need to have a corporate attorney, you need to have an estate planning attorney, and you need to have an accountant. I mean, those are at a minimum, the four people who need to be on the team, and then you may need people who can help with the, you know, the operational stuff or the marketing stuff, or things that might add value to the business in advance of, uh, or in anticipation of a future exit.

Speaker 1:

Uh, I encounter the same thing myself, and sometimes there's some reluctance and sometimes you feel like you're stepping on people's toes to say that your, your accounting's been perfectly fine for you to prepare your tax returns for all these years. But what you need to do now is plan for an, an exit transaction and this, if they don't do this routinely, they're not up to speed on these things. And they're, they're gonna miss alternatives that can potentially save you a lot of money. And there's, you know, the loyalty to the existing accountant they've used. You don't necessarily need to, you know, run them off into the woods and say, you're never gonna use them again, it's that you need the right help with the M and a planning. Is that right? A good approach that you take.

Speaker 2:

Yeah. And I find that if you have, or who's been with somebody for a long time, they want what's best for the client, and they know if they don't have that expertise. So if you can have a, just a, an authentic conversation around, here's what we're trying to accomplish, it's not necessarily to your point that you're running them off. They may still be there as a safety blanket for the client, somebody they're comfortable with, but now you're bringing in someone else to, to provide expertise or guidance on the exit planning portion. Or you may just find too that somebody bows out and says, look, this is beyond my skillset. I want what's best for you. You should definitely, you know, you should definitely bring somebody in who has experience with this,

Speaker 1:

Who refers you the most business owners that, that are in the market to sell or should start planning to sell their business

Speaker 2:

CPAs.

Speaker 1:

Exactly. I was thinking the same thing because the CPA is most is the most trusted advisor for, for most individuals and, and for business owners, they don't need to start talking loosely with anyone that they else, that they know about. The fact that they're, they're planning to sell their business that's as, uh, that has fed as much wisdom as telling everybody you're planning your divorce. Before you talk to a divorce attorney, that's not a good move to make <laugh>. So you talk to your CPA, how's the business going. And then a business owner, uh, will bring it up to their CPA, and then they often refer them out to an attorney. And then I'm glad that they, you know, refer them to someone like you, who can take a more holistic approach with their, their broader financial picture and see where the rubber meets the road and what sort of financial resources they have to, to plan for the rest of their life.

Speaker 2:

And what I find too is I'm typically not even brought in, not typically, oftentimes I'm not brought in for exit planning, per se. The CPA recognizes that the, um, that the business owner paying a lot of taxes, business owner definitely recognizes that he or she's paying a lot of taxes. And so usually it's something around how can we reduce taxes? What are some strategic ways in which we can, the business owner can save money for the future and get some tax benefits out of it. So oftentimes I'm called in at least initially to solve that problem. And then it parlays into a conversation around future exit planning.

Speaker 1:

It's a, it's a darn good thing that they do speak with you about tax planning, because often it's a last minute thing that people will bring up, oh, by the way, I, how, how much is my tax bill gonna be? And what do I do about it? Well, it's not what you do about it now. It's what could you have done several years ago? How often do you see that situation where there's a number of alternatives, but all of them are, it's a little bit late to start pursuing.

Speaker 2:

Yeah. That does come up pretty frequently. And a big part of my, my contribution to the planning is around tax mitigation. And as I, as I shared, I'm not a CPA, I'm not in the state planning attorney, but it's about recognizing where various strategies or techniques are going to be applicable. And again, coordinating the team of advisors to implement something, implement a strategy, but with respect to taxes in the strategic options, while the in advance of exit often have to do around reducing income taxes, but then the exit planning and the future, uh, estate planning is oftentimes around reducing capital gains taxes and then estate taxes. So if we can come up with ways to help mitigate all three levels of taxes, I mean, that's when you add substantial value and now it's really around, okay, did we accomplish the goal of, uh, having a sufficient amount of after tax income for retirement and, and being able to pass a substantial amount of wealth to our families or charities of choice down the road.

Speaker 1:

It's so true, uh, taxes rear their ugly head and, and drive so many decisions that people make. And you always have to have them on your radar as you're making every single type of business decision out there. I, I worked as a CPA for, for a couple of years before going to law school and made a conscious choice not to be a tax attorney, but not a day goes by that. I don't have to consider a tax issue because there everywhere and they're everywhere. And every sort of decision that business owners make, and they are especially crucial at the time when someone's going to make an exit from their business. Um, now there's multiple different types of successors who could take over a type of business. Who are they? And, and does the taxation enter into the equation when you're looking at who the successors might be?

Speaker 2:

So by successors, are you thinking along the lines of whether it's a third party or internal type sale,

Speaker 1:

You, if you were a lawyer, you could object and say, that's a compound question. <laugh> just, we'll, we'll break it down. Why don't we start, uh, with a simpler question and what, what are the different types of successors that are out there for someone, if I'm want a business who might possibly, I need to consider who it might be. Um, and a lot of these people haven't given it a whole lot of thought. Sure. And so you need to kind of break it down into categories of potential owners. Once they've moved on to greener pastures,

Speaker 2:

The categories are third party, meaning you sell your business to somebody through an M and a transaction that is unknown to you, or at least uninvolved with the business prior to the transaction. So just a third party. And that's more the type of situation where you get your money, or at least you get most of your money up front, and then you sail, sail off into the sunset. And then from an internal perspective, you could transfer to a family member. So if you've groomed a family member to take over, eventually it could be a child is a typical scenario, or you could have a key employee or key employee group. So maybe you've, uh, built a really deep bench of, of, um, managers or people within your business. And there's one or a few of those that could take over and purchase the business from you. And so key employees then would ultimately, you know, carry the business on after you've left. And then the third option is maybe you do something like an ESOP where now you're selling the business to all the employees. And there would be a management group in there made up of more senior people. Uh, but it wasn't the senior people who just bought it by themselves. It was all the employees

Speaker 1:

Mm-hmm, <affirmative> now at ESOP. And something like that, that, that does have some financial sophistication and extra level of bells and whistles and, and heavy lifting that needs to go into a transaction like that. If, if somebody owns a smaller business, you know, say several hundred thousand up to a few million, um, that might be a little small for an ESOP. What would you say is the a sufficiently sized business where they could realistically consider that as a transaction?

Speaker 2:

Oh, so I've had, I've had a couple clients do ESOPs and what I've had the, you know, the experts in the ESOP planning. So again, this is thinking of that team approach. If we think we're gonna go down the ESOP path, we've gotta bring in ESOP experts because there's people that it's all they do. They don't do anything else, but ESOPs. And to your point, it is, uh, complicated, which can be a turnoff. But, um, from what, you know, the common, the common guidance I've heard is that at a minimum, you know, your business needs to be doing about 10 million in revenue to think about an ESOP. And, um, you need to have a large, even equally important. You need to have a large enough employee base to make the ESOP worthwhile. And so I've heard varying numbers there, but, you know, at a minimum, maybe 30 to 40 employees, okay. To, um, to even make an ESOP be feasible.

Speaker 1:

Okay. So it let's talk about the value of businesses and you're looking at, at what you're gonna sell. Okay. And you think, okay, well, people may have a price tag in their head that if I ever sell this company, I'm gonna get X. It's often pretty arbitrary. If you've just got a single owner and they think this is what I could tell my business for, based on what, whoever told you that your business would command that sort of price. When you work with someone, do you work with them to develop expectations and, and what, what sort of professionals do you get them to consult with to develop realistic expectations about what their business is worth?

Speaker 2:

Yeah, absolutely. I mean, one of the key things is they've gotta do evaluation. So, I mean, and that's gotta be done early in the process because whether you're exiting in the, the near future or at some period of time down the road, we gotta know where we're starting, because we are concurrently. We're identifying what your objective is, how much retirement income you need, or how much money you need to get from the sale of the business. So we need to know where you are in relation to that Voie and the only way to do that is evaluation. So speaking of the team of experts, you bring evaluation expert in. So now that's a formal valuation. They gotta pay, you know, the client's gonna pay to have that performed. And you're gonna use that as part of your formal planning and also that's any type of advanced estate planning or advanced tax strategies that valuation's gonna be critical. But if, um, you know, if exit is several years down the road, and we're just doing, uh, more of an intermediate step, then maybe just a statement of value, not a formal valuation is, is fine, where we just have use some criteria, whether it be the, the accountant or some type of service, it could even be a valuation professional who doesn't do, you know, formal valuation, but just can give an idea of the value of the business right now. And that might be fine for the, uh, the interim step.

Speaker 1:

And it, it, it's helpful to develop expectations and to get, you know, plans for the future. And they've gotta understand that at the end of the day, if it's gonna be a sale to a third party, it's gonna come down to a negotiated price. The same thing is selling a car. You're gonna talk Turkey. They're gonna offer you something less than you want to give. You're gonna ask more than what they want to pay. And at the end of the day, you get a price and your job between now and that magic day coming is to do everything you can to try to build that price up and boost your revenues. Don't leave an empty cupboard, continue to invest in your sales growth and, and building your team so that the company can run without you. So there's a lot of things that people can do from an operational standpoint, to continue to build the value of the company, even as they're looking to sell, they don't want to like bring it in outta gas, um, when people's

Speaker 2:

Good point there. Yeah. So with a third party, the idea is to maximize the value, right? So you're trying to get the maximum value that you can and that's, as you said, negotiated. And so you've got another party, that's doing their due diligence. And so they want to get the lowest price. They can mm-hmm <affirmative> and you're gonna arrive somewhere. But if, you know, in advance, what your bogie is, that gives you some flexibility. Mm-hmm <affirmative> right, because now, you know, I mean, you might think your business is worth a number, but yet the market isn't valuing, valuing it the same way you're valuing it yet. If you have identified what your number is, and you can get the number that supports your retirement plan or your legacy objectives, then that gives you the freedom to, to accept the deal. If you want.

Speaker 1:

Right. It's you know, you look at the chips you got on the table. Can I quit playing right now? This is a good time to pick up and go, or I, my stack is not enough yet. I gotta keep playing a couple more hands here and see if I can win, you know, a little bit more. So in, in terms of everybody's worst nightmare, they retire, they think they've worked hard, or they have worked hard, their whole lives. There's nothing that's harder than building a business. Um, it, it really is, you know, just a, a calling and the longer they do it, the harder they work at it. Um, so they build up their business. They, they sell their business or they do an internal succession. And then the worst nightmare is they run outta money during their retirement. You help people plan for that and understand how much cash they're gonna need to continue their lifestyle. Is that part of the planning you do with them.

Speaker 2:

So in addition to being an exit planner, I'm a financial planner. And what I found is in financial planning, when it comes to personal planning, there's a lot of, there are a lot of, uh, strategies or plans. I mean, it, a lot of people can do that, but not many people have the expertise or the ability to blend the personal in the business planning. And so, as we spoke about at the beginning of today's podcast, if your business is the largest asset on your personal balance sheet, then really your personal and your business lives are intertwined. They're not, they are legally separate or should be legally separate, but from a practical perspective, they're a decision. One absolutely has an impact or a ripple effect on the other mm-hmm <affirmative>. And so for me, it's, it's really comes down to is what's, what's the amount, uh, what's the effect on the personal life going to be in the exit, right?

Speaker 2:

Because it wouldn't make sense to exit if you're not gonna have the money to live the rest of your life and the way you wanna live it. And in fact, I, my anecdotal observation is a lot of owners hang on and don't leave their business because they're unsure that they can live the life they want for the rest of their lives, if they do. And so it's, it's gotta be this coordination between the personal and the business aspect of their lives to make sure that they're gonna have uninterrupted cash flow forever. Once they do exit

Speaker 1:

Look, you've been working with business owners on this crucial moment, uh, that, that they should be planning for. And, uh, I hearken back to, you know, a family get together. One time we were sitting around a fire, me and my two brothers and all, all of our kids and trying, you know, to conjure up our best wisdom, to share with them about their futures and ha you know, how to lead the straighten narrow. And frankly, the best thing that I could offer to the kids was avoid the mistakes. You, if we can't tell you today exactly what to do, but the best thing you can do is don't set yourself back by going and screwing something up royally here. You've worked with business owners here, and it's probably hard to tell every one of them what they should do, but, but based on what you've seen, what sort of mistakes should people avoid?

Speaker 2:

I mean, there's, there's really so many that we could talk about. Yeah. You know, thinking that well. So with respect to professional advice, if you think professional advice is expensive, try getting amateur advice.

Speaker 1:

Mm-hmm <affirmative>,

Speaker 2:

You know, so be willing to, to embrace, bring in a team of professionals and recognize that you're not at the bootstrap level anymore, that it's worthwhile, and you will get value for paying these professionals, these attorneys, accountants, financial professionals, let them do their thing, because for you, I mean, it's probably your first exit. Now, maybe you've a serial entrepreneur and you've done two or three or four or whatever, but for most business owners, they're going to do it once. And the benefit of working with a team of professionals like us is that it's on our first rodeo. We've seen it many times and we've seen the hidden trap doors, the hidden pitfalls that, that, um, can really wreck things. And so use the professionals and pay for 'em and take their advice. That's that's one thing. And so that's, uh, along the lines of the advice and wisdom you shared with your children and your nephews and nieces, same thing, just get professionals and, and listen to them.

Speaker 2:

And then, uh, you know, the other thing I'm working with a, on a situation right now where a gentleman has a very successful business. He actually sold the business 15 years ago and he thought he had enough turned out. He didn't have enough cuz he, he didn't work with an advisor and it was, sounded like a large sum of money, but ultimately it was not nearly enough money to, to, uh, fund him for the rest of his life. So he essentially rebuilt the exact same business, but in a different state. And so he is back at round two, he's having a lot of success and this time he's working with a team of professionals to make sure it's done. Right. So that if, and when he exits again, he's gonna have the income and he doesn't run the risk of running outta money.

Speaker 1:

Yes. Right, right, right. Um, and I, I can attest to that as an attorney when I work with people and, and I, they say, you know, well, I didn't, they, they come years up the road when they should have gotten help sooner. And they often say, well, I didn't have enough money for a better CPA, or I didn't have enough money for an attorney. Of course, this is one of the moments you have to just bite your tongue and, and not tell them what they don't want to hear. But if you don't have enough money for an, an attorney to give some support at the beginning of a business, and if you don't have enough money for a qualified accountant from the beginning of a company, you don't have enough money to go into business. You should stay at a job. You, it takes that investment.

Speaker 1:

It's part of the infrastructure of a company to do it properly. But so it, it is a cataclysmic mistake to just try to wing it on these issues that are really gonna come back and, and bite you in the future. Aaron, I, I really appreciate your time and all the wisdom you've shared with everybody. And, and again, I can vouch Aaron personally. He's a great man, does great work for his clients. Claire cares deeply about their success and, and gives them a lot of tender love and care. Um, it, I understand Aaron, uh, and, and thank you everybody for joining us here on selling you business with David King, Aaron's got some, uh, some legal disclaimers he's gotta share with the crowd.

Speaker 2:

Yeah. I've got, uh, we live in it. It's a good thing. I suppose we live in a very compliance oriented world and profession. So I've got two paragraphs of stuff I gotta read. And so I'm gonna do that right now. And, and of course, if anybody's not interested in hearing a bunch of, uh, compliance stuff, they can tune out, I suppose. And

Speaker 1:

Your attorney can bill by the hour for what they're for your reading this off here.

Speaker 2:

That's right. There you go. There you go. All right. So here I go. Aaron Petro is a registered representative and financial advisor of park avenue, secur securities, LLC, otherwise known as PAs. Uh, my OSJ is 52 80 Carol canyon road, suite 300 San Diego, California, ninety two, one twenty nine. My phone number (619) 684-6400 securities products and advisory services offered through PAs member fin. I'm a financial representative of the guardian life insurance company of America. New York, New York Paaz is a whole young subsidiary of guardian living legacy financial and insurance services is not an affiliate or subsidiary of PAs or guardian insurance products offered through Westpac wealth partners and insurance services, L LLC, a DBA of Westpac wealth partners, LLC insurance license number zero F 6 4 3 9 AR insurance license number 92 3 3 3 9 0. And from a compliance perspective, this was done on, uh, in 2022, uh, January, March 20. This podcast is for informational purposes only and is not construed as tax legal or investment advice. Although the information has been gathered from sources believed to be reliable. Please note that individual situations can vary. Therefore the information should be relied upon only when coordinated with individual professional advice, guest speakers and their firms are not affiliated with or endorsed by PAs guardian or Westpac wealth partners and opinions stated are their own guardian and subsidiaries agents and employees do not provide tax legal or accounting advice consult your tax legal or accounting professional regarding your individual situation. All investments and invest strategies contain risk and may lose value.

Speaker 1:

Whew, we go <laugh> don't worry, man. Nobody likes hearing lawyers talk either. It's no fun. <laugh> so anyway, thank you, Aaron. And thank you all for joining us on selling your business with David King. Join us next time.