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Derek: welcome to leave my business well podcast are you a business owner who plans to leave your business in the next 10 years or perhaps you're a business owner looking to protect your business in case of emergencies maybe you're a key employee looking to Poise yourself as a future owner join Derek Moffett in the leave my business well team as we tackle the exit strategy challenges facing more than 33 million small businesses in America business Builder you've built something great let us help you leave it

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Derek: well my name is Derrik Moffet I'm a certified financial planner and certified exit planner and I'm with my lovely wife of 28 years Jennifer and we own a company called leave my business well uh Jennifer why don't you tell everybody a little bit about you and about us who we are

Jennifer: hey business Builders we're so glad you're here with us today you guys are the Risk Takers and your job creators you're the heroes in our community and we're glad to have you with us today Derek and I work together to uh he's the certified exit planner I'm just his uh rightand person

Derek: everything else she's the CEO

Jennifer: So today we're going to um give you some information what are we gonna do today

Derek: yeah well we're GNA talk about uh what it means to exit what an exit plan is and why you need it and why you want to think about it if you own a business but let me tell you a little bit about our business we started our business uh mofet Financial strategies 10 years ago that's our other Financial Planning and asset management firm and we started it with three kids we had little kids and um I got into one of those companies where you had to go door knocking and so I door knocked for like eight hours a day in the Texas heat in a suit and tie about 20 years ago

Jennifer: yeah about 20 years ago that yeah but then our business started about 10 years ago after that and and so now we have five kids and our oldest is about to graduate from law school our second oldest is is graduating soon she's going to England to study so we've lived the life of owning a business and having a family and and talk about our own exit strategy at some point so that's a little bit about us and and who we are but we have five kids so we may never exit our business

Derek: that's right that's right yes we will we will uh you know become passive on continue to need income to pay for all of our grandkids one day that's the plan right so let's talk about kind of what we're going to talk about today uh first of all let's define what we mean by business Builder you know a business Builder is an owner of a business maybe a co-owner of a business uh that business provides for themselves and their families it provides for employees and their families and it serves a group of customers and clients and it serves a community and for most of us as business Builders our business will represent somewhere between between 60 to maybe even 90% of our net worth and then we have this problem how do we monetize that business in a way that we can retire or transfer it to the next generation or sell it to a third party how do we exit because as we talked about earlier we all exit exiting is not a choice you know it's either by disaster uh I remember hearing you know friend of ours who they had a business together and they got a divorce and so all of a sudden she's exiting the business because he's going to keep it and and what did that look like for her it was a tragic situation it was an exit by disaster um one of the the people that we know that did our estate planning for us called me one time and and she said hey there's this financial advisor client of mine he just passed away he 40 years old and would you be interested in buying his business and I said well ye yes and we'll tell you a little bit more about that story later in the podcast but it didn't work out for him he exited by death or you could be the business owner that exit by by Design where you have a plan a thoughtful carry out plan and you transition that business and you leave it well to who you decide to leave it to

Jennifer: now as you mentioned before if your business is 60 to 80% of your net worth making sure that you protect it and that you plan for disaster and death as well as just leaving you know when you retire or later on all of those are important when you're talking about such a big piece of your net worth

Derek: yeah it is and it's it's it's good stewardship to make sure that you do that type of planning for your family first of all you want to protect your family who you you've created is like us you know 20-year journey of creating a business you want to make sure that you take care of your family I want to know that if something happens to me you're going to be okay and our kids are going to be okay and they're going to be able to get College educations and get a jump start to life and and be successful I want to have that confidence and so we did planning early on to make sure that that would be the case if something happened to me God forbid

Jennifer: and spouses is everywhere really appreciate that kind of planning I appreciate the security of knowing that you've made that plan for us

Derek: yeah yeah yeah in fact we have a book that we call the you know there's hidden in our closet that the book outlines everything where everything is and who to call and all that stuff so it's important to have yeah you know the other thing that what we question is so what is exit planning what does it mean and what's the process and so that's what really we're going to go into today why it's important then we'll also talk about about what do you do with your business

Jennifer: oh yes that would be good what do you do with it you know the problem how do you get out of it

Derek: yep it's right

Jennifer: so at the end of the podcast after we've discussed all of these things then we'll also share a personal planning tip and some other resources for you so Derek why don't you share just what exactly is exit planning

Derek: well exit planning is the process of identifying how you the business Builder wants to transition out of your business and again we by that we mean design it's it's it's like creating a a blueprint if you want to think about buying a house or deciding to build a house one of the first things you do is you hire an architect and you sit down with that architect and you say this is what our dream house looks like well that's really the process of exit planning We're The Architects in this in this example here and we sit down with clients or you have to sit down with your chosen professional and outline this is what we want it to look like this is our idea plan so it involved really working through four what we call Universal objectives these are objectives that every business owner has and then it also deals with identifying what other goals and objectives are important for business owners

Jennifer: and just like building a custom home uh I don't know if you've ever seen this on home design shows but they always make changes halfway through yeah and I think that's part of having an exit planner um who can walk with you through that process is there are changes that happen halfway through we we see that with our clients all the time all the time Derek calls me and he says well I'm going to be a little late I've got to stay up here and change so and so's plan I just got a lot of changes and so it's important that you you understand what you're doing along the way but you understand that things change and as you go along you might need some help changing the plan

Derek: yeah I think that's a great point one of our principles that we operate with is is that we build flexibility in our planning because life does change and and we do have to be able to Pivot we do have to be able to make adjustments along the way and so we've lots of stories and examples of of how that can happen and we'll share those with you as we go through this journey you know we want to build a relationship with you as friends we our goal is to teach and share as much as we can so that you walk away with some valuable help and insight on how to take care of your most important asset and that's your business so let's talk about the four Universal goals first of all we've got to Define what does leaving mean to you the business holder because that word leaving means something different to everybody

Jennifer: okay then we'll probably also want to discuss when are we going to leave

Derek: that's right when do you leave so what does it mean to you when do you want to leave um when I think about leaving I think it could mean you know selling your business I think that's what most people think about leaving I'm going to sell my business to a third party and they're going to take over and I'm going to ride off to into the sunset with my wife and we're going to go to uh Hawaii and live there forever on the beach that's what you think about right but I think it's also important to think about untimely leaving or unintended leaving you know we had a very we've had a number of dear friends who um the spouse has passed away and the spouse was the main partner or main driver in the business and so when the spouse left that business through death there wasn't a plan right and we watched a business that had been multigenerational shrivel away and get sold off pieces and parts because there was no plan when that person left the business so I think leaving can mean selling it can mean retiring but it could also mean dying or becoming disabled or having to move to take care of a loved one or you know there are a lot of ways that you leave your business

Jennifer: yeah it it can also mean staying financially engaged with your business you know some owners what they want to do is become passive owners and so so they retain ownership but not operational involvement and so it could mean leaving means you exit operationally but you can continue to reap the financial benefits you know of owning the business what is leaving what does it mean to you and then the second thing that you mentioned when when does it happen does it happen a year you know most the the joke in our industry is when you ask a business owner Jennifer when do you want to leave your business they typically say in five years yeah in five years and then two years later you ask that same question when do you want to leave your business in five years in five years it's kind of this rolling fiveyear thing uh some people say I want to leave yesterday you know depending on how challenging it is but that is something too is is when do you want to leave what does it look like and then when do you want to leave and then we want to talk about what next to whom do I want to transfer the business right I think I said earlier that people often think of selling their business as the only exit path but that's not true you can transfer it to Children uh maybe you have family not children not children not children Offspring your off children can't run your business sometimes your adult Offspring can't run your you know uh so yeah you could transfer to family you know maybe you've got family that work in the business and they've got the competency and the character and you want to give that to them and have them carry on that family business Legacy you can also transfer it to Key employees we're working through a couple of those plans right now where we've got either employees that really are not ready to own the business now but they show great potential for it and so part of the exit plan will be preparing them to be ready to own the business there are others where they're ready to buy the business and own it today and so we we can make a plan for that right

Derek: right that's what the point of planning is Right determining you know what you want to do and and how do you get there and so you could give it to to key employees you could sell it by the way uh to your employees and in terms of you know esops or or what they call employee types of trust out there we're going to talk about all these in details in episodes to come up so who do you want to give your business to could be a third party um as well so lots of options there for business business owners and then the final thing that we deal with is probably one of the most critical things and that is how much after tax money do you need from the sell of your business or the transition of your business to live without worry to be financially independent to be able to flourish throughout the remainder of your life to accomplish the goals that you want to do so again we focus not on selling price we focus on after tax money because that's what you have to work with and so we want to understand how much do you need to be financially independent

Jennifer: are there any other goals and objectives outside of these four things that we need to consider with business owners

Derek: yeah absolutely and I think this is important too you know some business owners they most of us as owners have spent decades building our business and we we put our stamp on it our identities uh our personalities are in that business our values are in that business and so we may want to protect that company culture we may want to protect that company value so the idea of selling to a third party for example could be really you know challenging I had a business owner who had sold twice to private equity and he and I were talking about it uh he was not a client this was kind of interviewing him after after the fact and he said you know Derek he said if you sell to private Equity you've got to be prepared for your 20-year-old employee to call call you or 20- year employee to call you and say she just got laid off and that was his experience and so you know sometimes owners don't want that they would take less money in order to protect that company and to protect that company values that's one of the things a couple of the others are

Jennifer: well and I know before we move on that that's really important to us in our business that that our employees are like family you know they're people we spend time with every day and I think it's probably the same in your business that that your employees have helped you build what you have today and your clients are important to you they have they've paid the bills and they're people that you serve and you spend time with and so you it's important to you to maintain that you know that it's not just um it's not just selling the business and getting out of it but it's making sure that those people those employees that you've spent time with and the culture that you've built with them maybe you've built a lot of flexibility in there that that you want people to be able to take off when they need to maybe you've built a family comes first culture and you want them to be able to do things with their family when they need to or maybe you've built a we do the best work in town culture and you want to make sure that that that stays in place and so that becomes an important part of your plan is how do we maintain this when we leave

Derek: yeah I remember you and I had the honor of being invited to one of our clients Christmas parties and I remember sitting there at the table they did not know who we were they brought us in to do some exit planning and and so we were sitting there at the table and the family atmosphere was a great time they were it was a lot of fun and I just was like man this this is really an extended family and and this is and you know the the owners told me that in in in our meetings and our Discovery process but to see that in place was really amazing and I think that a lot of the owners that we deal with want to protect and provide for their employees

Jennifer: that sort of leads us into that that next point which really is making sure that the employees are well provided for that it's not just the culture but if you if you've expected to compensate your employees in a certain way or to provide certain benefits you want to maintain those um in the in the transition then you have to plan for that

Derek: yeah yeah and sometimes we do some planning techniques like you know we'll do a stay bonus part of the deal might be if the employee stays for a year after the transition they get an extra bonus and there's all kind of ways we can do that but the idea is how do you take care of your employees that one of the first people I talked to about exit planning uh said you know Derek I want to give 10% of my proceeds to my top two employees and I mean we're talking a multi-million dollar business and I was like oh my goodness you know and his heart was these people have helped build my business for years and and I am where I'm at today because of what they've done and what they've given to me and I want to want to reward that and I think a lot of our clients a lot of our business Builder clients really feel that way they want to make sure they're taking care of their employees

Jennifer: well most people have not become successful business owners by being greedy or mean right they've gotten there by being generous to their employees and by being good people to work for and they've built this strong employee base because they've been good employers and they want to continue to be good employers even in their transition out of their business

Derek: yeah that's a really important goal you know some owners though have this vision of being able to take the business to the next level you know a lot of times we see this when people want to sell to private Equity maybe the exit is a phased exit they sell part of their business out to a third party who brings in some capital some resources that they may not have and that helps him go to the next level uh there's a story of a guy that that did this with his he thought his son was going to take over the business and his son comes to him and says Dad I really don't want to take over the business and so the dad's like well shoot what do I do now so he had a pretty good siiz business and he ended up selling uh 20% of it to a private Equity Firm and the the Equity Firm came in injected some Capital they took it to the next level and then he exited finally in a full sale when the private Equity Firm helped negotiate a sale to another you know uh larger uh company in their industry and he made a ton of money on that second second exit and so sometimes the the exit is is a phase step but they want to take that business to the next level and that's a key thing for them

Jennifer: yeah then of course we've got philanthropy and charitable giving that's really important to some people um we just got to have dinner with some clients recently and it was amazing to sit with them they're they're close to their exit and to sit with them and to hear them talk about they're passionate about Bible translation so when I ask so tell me about this charitable giving what are you excited about they just came alive and started telling us about countries where there are no Bibles translated in those native languages and how important it was to them that every person could pick up a Bible and read it in their own language and so their money is going to go to fund that because that's really important to them and it was so exciting to us to get to be a part of creating Derek creating a plan for them that allowed them to do what was important to them and what was a passion project for them

Derek: yeah you know with a lot of our clients the challenge you know in addition to exit planning we do personal planning for some of our business owners as well and and investment management and and some of our clients the challenge is not having him spend too much money in retirement it's not giving it too much money away too fast you know help them to manage that tension between their their charitable and generous hearts and their resources so that takes care of them but yet can fulfill this really desire to be generous and to give yeah

Jennifer: right because as we said earlier most business owners don't get Successful by being mean and greedy they're typically really um charitable generous people

Derek: yeah absolutely absolutely yeah and you just think of all the foundations we know of the big foundations came from people that really were successful there's often family goals Associated that are important maybe they want to take care of their family maybe they've got children or family members in the business that they want to ensure have a a job or have a role in the future of the business uh you know there's there's lots of family related goals and sometimes family challenges that that a business owner may be wanting to make sure their plan addresses um sometimes the family name is attached to the business you know in our case right now our financial planning business is mafit financial strategies it has the family name in it you know so if we were to sell that to a third party we'd certainly want to make sure that they maintained it in a way that protected our family in our name

Jennifer: yeah yeah lots of the businesses that that you know we think of big businesses today have owners or Founders in their in their names and uh you know Proctor and Gamble actually was a proctor and a gamble that started the business you know and and so that you do want to protect your names

Derek: yeah then we also met a a young man when we were on the way in to record today whose main goal in the sale of a business was to make sure that his father was well taken care of after doing so much work in the business that was the number one goal is to take care of my family

Jennifer: yeah yeah so family goals that's an important if it's a family business or a business that your family has been on this journey with you in sometimes for decades you know it's it's important to take care of those things or maybe maybe it hasn't and it's cost a lot of family time your family has sacrificed a lot for you to build the business um we hear that a lot too you know I spent all the years that my kids were little I missed so much because I was building the business and you want to make sure that all of the sacrifices that you've made that your family's made are worth it in the in the sale or transition out of the business

Derek: yeah yeah it requires a really a lot of thoughtful thoughtful planning you know in in that situation uh some of our clients have retirement goals they really do want to stop you know working you know most people don't want to stop and just like sit like our grandparents you know who would have sat on the front porch in a rocking chair and and and you know or read the dictionary te yeah yeah retirement looks different for people today they they typically want to stay involved but they do want to exit the working phase of their business so maybe they have some retirement goals that are really important and then the last thing that I think is important is uh a lot of goals lot of times owners want to minimize taxes in fact I've never met an owner who's told me Derek one of my goals is to pay the government as much as I can in this trans transition you know so they want to exit in a way that minimizes taxes in a way that's honest and in with Integrity uh but you know doesn't pay the government more than they have to so there are ways to plan for that that you can that you can make your taxes appropriate for what they should be and not overpay when you are transitioning out of your business

Jennifer: yeah absolutely there are and and this is a key thing of course A lot of it depends on how and who you're transitioning to uh when you're transitioning to key employees or family there's some discounts that the IRS will let you do it's really important to understand how those work and and I would say you know part of the exit planning process is getting a team of people together together you know we want we are professionals and understanding the planning side but we're not tax professionals we're not attorneys and so uh we will bring if you have people that work with you know we sometimes work with the clients existing professionals but we can also bring a team of people together that understand each of those components so we can help you know achieve whatever those whatever those goals are yeah so let's have a moment uh from our sponsor and then when we come back we'll do some personal planning tips

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Jennifer: okay Derek so you promised you'd come back with a personal financial planning topic what have you got

Derek: yeah well this is this one I think is somewhat obvious but let me let me start by telling you a true story we were sitting at uh my grandmother's table she had this big long table and uh she has all these piles she brings me in this stack of statements from all of her Investments I had just got it started into business and and uh so we I organize all these piles and there are 16 16 different accounts institutions you know all this stuff piled up and she looks at me in the way my grandmother could be frantic and say TK I'm 76 years old and I can't keep track of all this and I looked and I said granny I'm 32 years old and I couldn't keep track of all this so the first tip is get organized you know a lot of times in our our process the very first thing we do with clients on the personal side is we help them get organized uh and and and that's an important thing whether that's doing it you know in an in a binder or an online organization tool there's lots of great tools get organized get a tool that helps you see everything know where it is know why you own it uh know what you're going to do with it and that's not in terms of just Investments and accounts that that means where your life insurance policies are where your estate where your estate planning documents are um we use the tool that that helps people keep create an online filing cabinet and and so and I did this for you right you know where I put all this online and said in addition to the book

Jennifer: yes there is the book there is the book

Derek: yeah we also have the Vault The Vault yeah yeah it has all the heart you know all the copies and so so that's a that's a big deal and I think the big benefit of getting organized is you just feel peace of mind you know you just know okay I know where everything everything is if something happens to my spouse I know where to go find the life insurance policy um in fact you know when we did our book um I went with our oldest two kids and said mom's not going to be thinking clearly if something happens to me here's the book here's got all the details that you need to know so I think that's that's really important as well to to get organized get some peace get some confidence it's really the first step in the planning process

Jennifer: well and one of the benefits to that may be I don't I think granny was aware that she had 16 different accounts

Derek: no she wasn't she because she didn't have it organized we love Granny we're not bashing her um but because because she didn't have all of that in front of her in a in a organized way she just kept adding accounts and I think when you get organized your your financial professional may help you consolidate some of those things you know so that you don't have more complications in your life than you need

Jennifer: yeah yeah organize and simplify I think that's I think that's really good good advice well business Builders can we just thank you for what you do you are the backbone of our community you provide goods and services that we need and that we can't live without and we are so appreciative of you for being with us today so just to recap we talked about what exactly exit planning is and who might need it and um we want to call you to action right now we want to ask you if you liked what you heard today subscribe to the podcast or leave a rating and tell us what you really thought about it be nice and uh recommend the recommend the podcast to your friends and family if you know somebody that you think would benefit from this share it with them um if you want to know more you can soon visit leavey buswell decom uh or you can visit our um financial planning business at Moffet Financial strategies.com uh you can also follow Moffet Financial strategies and leave my business well on Facebook and on Twitter or you can send us an email just be sure to T tune in whatever you do be sure to join us next time when we're going to talk about eight exit paths for owners we'll just do a little deeper dive into some of the things that we talked about today

Derek: absolutely well first of all we again thank you so much for tuning in and as always let me leave you with this thought the opinions voiced in this podcast are for general information only and they are not intended to provide specific advice or recommendations for any individual all performance references are references are historical and do not guarantee future results all indices are unmanaged and cannot be invested in directly consult your legal tax or financial advisor before making any decisions thank

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