Adam Hartung, writer for Forbes Magazine, talks about how the same rigid thinking brought down Wall Street and Main Street real estate speculators, and what we can do to avoid it happening again. Very interesting article.

The Real Blindness Behind the Collapse

Peter Christman, Co Founder of The Exit Planning Institute and The Christman Group will be appearing on the WGN’s Noon News Show on Monday, August 3rd. Peter will be interviewed as co-author of the critically acclaimed book, “The $10 Trillion Opportunity”. Don’t miss it!

Virtually every business owner we talk to these days says the same thing – they
wished they had exited their business two years ago.

The political, financial and economic turbulence over the last year-and-a-half seem to have lulled everyone–from private business owners to investors in the public stock market to corporate decision makers–into a perpetual state of wait-and-see. In an uncertain situation it is human nature to hold off until things to settle down before making a decision.

Understandably, during this period of economic contraction, many business owners have postponed their plans to sell or transition out of their business. With the soft economy most businesses have experienced a decrease in revenues and earnings. Whether a privately owned business is valued by an independent appraiser or via the market process, a year or two of decreasing sales and profits will most likely lower a firm’s market value. Owner concerns about the depressed value of a business can delay an ownership transition plan indefinitely.

Clearly, most business owners are not motivated to sell while their company’s
value is depressed. However, regardless of the economic climate, it is important to allow a healthy time horizon for ownership transition. In most cases, it takes between one and three years to successfully and fully transition out of a privately owned business. The pre-sale preparation and planning process can take between 6 months and a year. The actual sale process can take up to a year. Finally, most third party buyers will want the departing owner to stay around for a reasonable transition period after the sale or exit. That transition period can last anywhere from several months to several years. We advise our clients to be prepared for the entire process to take at least two years.

While the tendency may be to hold off on ownership transition plans until the market improves and the firm’s financial outlook has improved, there are several pitfalls that come from delaying the process. There are also several important benefits from being proactive in these market conditions.

Given how long the exit process takes, postponing the decision to begin can result in missing key market opportunities and/or not having the time to take advantage of all the options available to you. The best time to exit from a business is when the economy is in an expansion mode. This growth period usually lasts between two and three years in a typical economic cycle. Many business owners often start the process too late and miss this important window. This usually means leaving a great deal of money on the table. Money that otherwise would be in your pocket.

By being proactive during a soft market, smart business owners can position their
companies to stand out when the business, the market or the general economy improves. This is the single best way to ensure that the company sells for its
maximum value. This also gives business owners the time they need to do adequate tax
planning. Good estate and capital gains tax planning can dramatically reduce the tax
impact of the eventual exit.

The bottom line is that starting the planning process early is the only way to ensure that a business owner maximizes the value of his business, takes advantage of all the options available, and maximizes the after-tax proceeds that he/she receives.

Over the long term, market ups and downs will repeat themselves. Our advice is to
begin the planning process now and then to stay the course. With an exit plan in place
you are in charge of your destiny and can pick and choose from the options available to
you. More importantly, you are empowered with the information you need to make
informed decisions about the timing of your exit and the pros and cons of the various options available to you.

The CHRISTMAN Group is a private investment bank. We specialize in helping owners of privately held companies exit
their businesses on their timetable and on their terms. To arrange a no cost, no obligation meeting to discuss your
objectives and how we might be able to help you, please call 847-303-6554. To learn more about our firm and its
services, please visit us on the Internet at www.christmangroup.com.

Here is an article from Business Week from early May…it talks about $1 Trillion in private equity that is “out there”…and how private equity is still attracting a lot of investment capital, is looking to do deals, and will be one of the ways the economy starts to recover.

Click here to read article »