The X’s & O’s

There is no doubt that business owners have hectic schedules and work tirelessly to maintain what they have created. However, it is vital to take a step back and create an exit plan for the business that you have put all of your effort into. Brent, Matthew, and Joshua talk about the important questions that need to be answered when putting together an exit plan and how to build an effective team that will help you through this process.

Listen to the podcast episode…

The Hosts:

Brent Pasqua, Matthew Theal and Joshua Winterswyk

Transcript:

Brent Pasqua: Welcome you into the Retirement Plan Playbook. I’m Brent and joined as always by Matthew Theal and Joshua Winterswyk. How’s it going today, guys?

Matthew Theal: It’s going well, Brent. Are you going to inform our listeners where we’re broadcasting from today?

Brent Pasqua: Yeah. We finally stepped into the office to do a real podcast from a real podcast room, and we’re off the Zoom, so it feels nice to see you guys a little bit in person.

Matthew Theal: Yeah, it is nice, though I do see Joshua all the time because him and I are big golf guys.

Joshua Winterswyk: Yeah, big golf guys. This is actually kind of weird, though. I’m kind of used to seeing you guys on the screen. I think I got used to the Zoom podcast. Feels different.

Matthew Theal: Yeah.

Brent Pasqua: I think obviously, with the exception of podcasts we probably would be doing a lot more Zoom still in the future, but it feels good to be back.

Matthew Theal: I have Zoom fatigue, so if we never have to go on Zoom again I’ll be real happy.

Brent Pasqua: It’s better to see people in person, though.

Matthew Theal: Yeah, definitely.

Brent Pasqua: Today’s topic is exit planning, how business owners cash out. But before we start, let’s start as always with a quick question. PGA started this weekend, did you guys watch it?

Matthew Theal: Yeah, I watched a little Thursday, a little Friday, and then I watched most of the final round on Sunday. I don’t watch a lot of golf, it’s really not been my thing. I find it boring, and if I want to watch a boring sport I’d rather watch baseball. But towards the end of the tournament my wife got to saying like, “What inning are we in? Are they out yet? Can we watch something else?” I just thought it was funny.

Brent Pasqua: Did you enjoy it? Did you catch it, Josh?

Joshua Winterswyk: Yeah, I actually… it was interesting because the tournament started Thursday but it wasn’t broadcast on regular television in the morning.

Matthew Theal: Golf TV, right?

Joshua Winterswyk: Yeah. The broadcast was kind of different. Once I got where it was being broadcast down, because I don’t really watch golf much at all, but because it was a live sport and it was back I was interested in it, and I did watch it sporadically through the weekend. And Matt, my wife was the same, she’s like, “Why are you watching golf?”

Brent Pasqua: I didn’t get a chance to catch it. I’m assuming for obvious reasons there’s no fans, is that correct? Did they have people spaced out, or what did they do?

Matthew Theal: I didn’t see fans on the course.

Joshua Winterswyk: Yeah, it was no fans.

Matthew Theal: Yeah.

Joshua Winterswyk: And I think that they even did essential workers only, because they had additional staff, people who track your ball and stuff like that. I heard the announcers talking that it was the bare minimum to making sure the golf tournament went off and was televised.

Brent Pasqua: And is there another one coming up?

Matthew Theal: Thursday.

Brent Pasqua: Nice.

Joshua Winterswyk: I think they’re on like every weekend, right?

Matthew Theal: Yeah, the Tour’s back. I think we might even try a little DFS golf, so that’s Daily Fantasy Sports.

Brent Pasqua: So this wasn’t just a special event golf game, this is the PGA Tour coming back for the season.

Joshua Winterswyk: Yeah. Yeah, and they had tons, most all of the big stars are playing, so that’s what made it even better.

Matthew Theal: Yeah. Just waiting on Tiger.

Joshua Winterswyk: Yeah.

Brent Pasqua: Is he coming back?

Matthew Theal: I don’t know if he’s playing this weekend. I haven’t seen anything. Well, I mean, we know he’s good because he just did the match with Phil.

Brent Pasqua: It’s always better with Tiger.

Joshua Winterswyk: Yeah, it is.

Brent Pasqua: All right, let’s get into the hot take headlines. After reopening of the economy we are now being hit with the second wave of COVID-19. What’s you take on what’s happening, Matt?

Matthew Theal: My take is be careful with the data. It does seem like the cases are spiking, that’s true, but also, you know a COVID case isn’t created equal and we’ve learned that at this point. I think people would be wise to start following hospitalizations or even ventilations, right, because that’s where the serious cases are. But a case of COVID isn’t created equal. The football player Ezekiel Elliott just tested positive for COVID but he’s fine. There’s nothing wrong with him.

Brent Pasqua: Right.

Matthew Theal: So I don’t know. The media’s just trying to create hysteria.

Brent Pasqua: My question is, they keep saying the second wave but when did we finish the first wave? I know New York flattened the curve but nobody else really flattened the curve so it’s not really a second wave, it’s an extension of the first wave.

Joshua Winterswyk: It’s kind of just more like the trend of lower numbers stopped decreasing, so yeah, I agree with you. Is it really a second wave?

Matthew Theal: Yeah.

Brent Pasqua: It just seems that people are getting very relaxed, for obvious reasons. I mean, I think a lot of people have quarantine fatigue. Everyone’s ready to be out, but my feeling is is that there needs to be really nationwide guidelines. Either everybody needs to wear a mask, or just, there should be consistent guidelines across the board, and I feel like there’s just been mixed messages this whole time.

Matthew Theal: Just put a mask on.

Joshua Winterswyk: Yeah, and that’s the consensus. I mean, there’s so much research out now, and the consensus research is social distancing still, and wearing masks.

Matthew Theal: Right.

Joshua Winterswyk: So when those things aren’t happening, can we expect to see more cases? Yeah, probably. So is anyone really, really that surprised? But let’s continue to focus on the areas that we know are effective.

Brent Pasqua: And this is what we do know. Businesses are no longer shutting down. We’re not all shutting down again, so there’s a new normal for most businesses, and if we just practice safe guidelines we should be okay.

Matthew Theal: Yeah. I agree.

Brent Pasqua: With sports canceled, and I think this is interesting, young people are turning to the stock market. What do you think about the Dave Portnoy and the army of Robinhood traders?

Matthew Theal: So you should probably define who Dave Portnoy is. Is that how you say it?

Brent Pasqua: Portnoy, I think?

Matthew Theal: Portnoy? Is that correct, Josh?

Joshua Winterswyk: Yeah, I think that’s how you say it.

Matthew Theal: AKA Davey Day Trader, right?

Joshua Winterswyk: That’s his alias when he trades, yeah, Davey Day Trader.

Matthew Theal: Yeah, so he’s the founder of Barstool Sports, which is a popular sports gambling entertainment company.

Brent Pasqua: Sports publication.

Matthew Theal: Right. And so he recently got paid, was it in December, November when Penn National Gaming took that big stake in Barstool?

Joshua Winterswyk: Yeah, some time in the fourth quarter of last year.

Matthew Theal: Anyways, I think his net worth is like 300 million, right?

Brent Pasqua: I think it’s 100, but.

Matthew Theal: Oh, 100?

Brent Pasqua: Yeah.

Matthew Theal: Okay. So he got bored because there’s no sports and decided to start investing in the stock market because he couldn’t gamble anymore. So he put some of his funds in a E*TRADE account and essentially started broadcasting on Twitter.

Brent Pasqua: Right.

Matthew Theal: And then all the other people who just were into fantasy sports and sports gambling opened up these Robinhood accounts, which is a free trading app, and they’ve been trading, right?

Brent Pasqua: Right.

Matthew Theal: So kind of crazy. And then I saw that retail participation’s at its highest level ever.

Joshua Winterswyk: Now the sports gambling’s done so everyone’s day trading.

Matthew Theal: And the crazy thing is you think, oh, they’re day trading. They’re making $10,000, $20,000 a day. I read this article, man. Some kid put $100 in and his account went to $200. They’re literally trading in very, very small size. It’s fascinating, because all these young people are learning about the stock market, but in a way they’re also picking up some bad habits, too.

Brent Pasqua: Yeah, that’s kind of the mixed message that I get. For me, I think it’s really neat for young people. I think it’s really neat for people who don’t have a lot of experience trading. I’ve been telling my brothers for years to open up a small account and trade their own money so you get used to looking at companies, buying companies, and putting good, strong fundamentals and just purchasing stock. That’s an important aspect of life that people should be doing that. It’s not till this Portnoy effect that they actually started doing it, and there is no sports gambling right now, so this is what everybody is sort of, it seems like, turning to. Does it continue? That’s what I would want to know.

Brent Pasqua: It’s cool. All these people going online, putting some money in, trading, and doing this? I think that’s really neat. I really find it very neat for people to get that experience. It should be taught in high school. It should be taught in college. People should learn how to do these things at a younger age, and it’s neat that these kids and the young people are going on these platforms and being able to do this now. But there’s risk that comes with that, also.

Joshua Winterswyk: Yeah, and he’s very polarizing. You can see just so many people start trading because this is his new persona every day during the week, instead of being the sports guy.

Brent Pasqua: Right.

Joshua Winterswyk: So he has tons of followers. The only thing that kind of scares me, some of the things that he says is, “Stocks only go up. Repeat back to my first rule.” That kind of leads me to my thought or my take on this is, just be careful. But ultimately, if this is going to get you to start investing and learning, it is a great way. You’re only really going to get that experience by actually doing it. So great for young investors, I think. The younger you can start and the younger you can learn, the better. Just don’t risk more than you can afford.

Matthew Theal: What a talented guy, though. I mean, here he is, he’s got this big following. He is moving stock markets right now.

Brent Pasqua: I agree.

Matthew Theal: Whether you believe it or not, his trades, his picks people are following on, and it’s definitely moving the needle on Robinhood at least, from a brokerage standpoint. But he could build, if he wanted to, 100+-million-dollar investment company right now.

Brent Pasqua: Right.

Matthew Theal: Media company, right? He is so talented. So you have sports and gambling, and then investment if he really wanted to.

Brent Pasqua: He said on CNBC yesterday that once sports goes back that he’ll be done with this, but I think that the following is so large I would have to imagine that this continues in some other capacity, or in some capacity.

Joshua Winterswyk: I just don’t see how he captured an audience, and potentially a new audience with investing. How do you just walk away from it? You got to still satisfy that craving for all those people who are tearing into you for your stock pick of the day, right?

Matthew Theal: And he’s probably going to learn real fast you make a lot more money in the stock market than you do gambling on sports.

Joshua Winterswyk: Yeah. Exactly.

Brent Pasqua: I don’t know if you saw, I think it was a tweet yesterday that said something like, because the stock market was down yesterday, oh, just wait till 11:00 because that’s when all the Portnoy army will start waking up.

Matthew Theal: That’s funny.

Joshua Winterswyk: That’s pretty good.

Brent Pasqua: All right, so let’s get into the retirement planning corner. What is exit planning, and how do business owners actually exit their business? You want to start with that?

Matthew Theal: Yeah, so the way I like to think of exit planning is it’s financial planning for business owners. It’s taking what a business owner has created throughout their life, that business, built it up from scratch, and getting paid for it. It’s the roadmap, the steps to getting paid for what you have created.

Brent Pasqua: Yeah, I think of it as also, and that’s a great point, selling your business is kind of like selling your house. If you have a lot of equity in your business and you want to cash out that equity, the only way to get the equity out of your house is to sell your house. And the only way to sell your house is really to have a buyer. And if somebody came in and said, “Hey, you do X, Y, Z to your house and you’re going to get exponential more money for selling your house, you could tweak a little few things and then start to exit your business and sell your house. When you go to really exit your business and sell, you’re actually walking away and selling your business to somebody else to actually start cashing it out at that point.

Joshua Winterswyk: Yeah, and I take it one step even back. Exit planning to me, when I first hear that, you’re actually then tying a goal to the future of your business. I feel like a lot of people, when we meet small business owners especially, great at what they’re doing, but everything is sort of in that short term because we want to succeed in the short term. There’s just so much work that goes into running a business, but to take a step back and to think about an exit plan or that long-term goal of when are you eventually going to get paid, or when you’re going to retire. I mean, I think that that’s kind of I kind of summarize that exit planning thought.

Brent Pasqua: Let’s discuss the four areas that build a really strong exit plan. What questions do business owners really need to answer in that process? What are some of those created exit objectives, Matt?

Matthew Theal: Yeah, so when we’re talking about exit objectives, there’s three main questions business owners need to ask themselves, and they don’t have to know the answers right away, but they should be thinking of them. Number one is, when do you want to leave? Number two is, how much money do you need from your business? How much do you actually need to sell it for? And then finally, and this one’s really important, to whom do you want to sell the business to?

Brent Pasqua: So when do you want to leave, how much do you need, and who do you want to sell it to? All critical aspects. Now if we look at number one, the first one, is that easy of a question for a business owner to answer?

Joshua Winterswyk: No. When you look at these questions and we read them back, I think all three of them are extremely difficult to answer.

Matthew Theal: And I think a lot of business owners when they do hire us to do exit planning they come in and they’ll have a set timetable. They’ll be like, “I want to sell my business within the next year. I’m just done, I’m out. Get me out. Tell me how to do it.” So they kind of have an idea, but it takes much longer than that.

Joshua Winterswyk: Well, I feel like even some business owners, that’s kind of the idea. But when you’re like, “No, really, when do you want to leave?” There is that timeframe, it’s just, there’s a lot of gray area to that timeframe. “Well, I would like to leave in a year, but”, and there’s this laundry list behind it. So to answer that question’s just very difficult.

Matthew Theal: That’s true. That’s a good point.

Brent Pasqua: And I feel like either business owners want to leave, “Let’s leave now”, or they’re more or less like, “Yeah, I want to leave, but I really don’t know what I want to do after I leave. So I do want to leave, but I want to actually stay in the business.”

Joshua Winterswyk: Yeah, and that’s why these questions are really good. Even the next one, how much money do you need from your business? I think that’s one of the big buts or the fears is, yeah I want to leave but I don’t know how I’m going to generate income, or how much money I need from the business to actually live the life I think I want.

Brent Pasqua: It’s a critical aspect of doing business exit planning. If you’re used to your business generating a certain amount of revenue or cash flow to you, you live a certain lifestyle based on what your business provides you. At some point you really need to figure out how much am I going to need from this business when I sell it to sustain the lifestyle that I’ve lived all of these years, to maintain that for the rest of my life? And that could be a short time in retirement, and that could be a long time, and that’s an important question to answer, and that’s something we address right off the bat.

Matthew Theal: Right, and we can use some financial planning, some retirement planning techniques to help come up with those numbers.

Brent Pasqua: Yeah, and that’s a process that business owners have to address first, because if not, then what are you solving for, I guess?

Matthew Theal: Yeah. I mean, you’re just randomly selling, right?

Brent Pasqua: Yeah.

Matthew Theal: Well, two million sounds good to me. I’ll take it.

Brent Pasqua: Yeah. And you don’t know if that’s enough, because as both of you know, just because you sell your business for two million doesn’t mean you’re walking away with two million dollars in your pocket.

Joshua Winterswyk: No.

Brent Pasqua: And then the last one obviously is, to whom do you want to sell your business to, so that leaves a lot of questions also.

Matthew Theal: Yes, you can sell your business to a lot of different parties, right? Third party internal sale, you could sell it to your family members. There’s a lot of different ways to sell your business, and a business is kind of like a home that you’ve lived in for a really long time. It’s a great analogy that you used, Brent, where you might really care who buys your business just like you might really care who buys your home. A lot of people don’t want to sell their home to that family that’s just going to come in and rip it apart, or a certain couple or whatever.

Brent Pasqua: And I feel like business owners reach a lot of roadblocks where they think, oh, nobody inside my business can afford it. They really don’t know who they could sell it to, so they kind of hit this mental roadblock where they don’t really know what their options are selling except all they think is, I just have to sell it to a third party, which that necessarily is not true.

Joshua Winterswyk: Mm-hmm (affirmative).

Matthew Theal: Yeah. That’s a good point.

Brent Pasqua: I mean, there’s so many ways that you could sell your business. So once we start answering these objectives, I mean, what’s that next step? Our next step is obviously creating an advisor team. So to do a proper exit plan you need to create a team. What type of players do you want on your team at that point?

Matthew Theal: Yeah, so you’re definitely going to want to have a good CPA, and I know this is a mistake quite a few business owners make is, they actually don’t have a good CPA. They either have been going to the same guy for 30 years or someone in their company does the accounting, or they try and do it themselves. So you’re definitely going to want a CPA who’s very, very well versed in helping business owners exit. Number two, you’re always going to want to have attorneys, right, that’s where you get the protection from. You’re going to want a financial advisor, someone to help you invest the money you get. And then if you go the third party route you’re going to want to have a business broker, and that’s just like having a real estate agent.

Brent Pasqua: Yeah, I think with the CPA, I mean, if you’re going to sell your business, your books have to be correct, and you have to do projected future cash flow in your books. If you’re also doing an evaluation on your business, the CPA has to be doing their job and it has to be done right.

Matthew Theal: Right, because who’s ever buying your business is going to come in and do their own projections, and if yours are wrong they’re going to rip it up and you’re going to get a lot less money than your business is worth.

Brent Pasqua: Yeah, and buyers who buy businesses, and I don’t know, you could tell me if you think different, but buyers who buy businesses, they buy businesses. They know how to buy businesses. A seller who sells a business, most sellers aren’t selling multiple businesses in their lifetime.

Matthew Theal: Right. And then that’s like our friend who works in the eye care industry who buys small eye care practices. His job is just to look at the financials of eye care practices and buy them and roll them up.

Joshua Winterswyk: And you’re potentially going into a negotiation. Don’t you want to be, ultimately, the most prepared?

Matthew Theal: Yeah.

Joshua Winterswyk: So I mean, if your data isn’t great, you’re limping into the negotiation.

Matthew Theal: That’s a great point.

Brent Pasqua: Yeah, you want that upper hand. I mean, just like anything else in negotiation, you want to know what you have, you want to know that what you’ve built you’re going to get what you deserve out of it, and the last thing you need is someone come in and picking apart numbers and you not really having any idea how to debate that issue.

Joshua Winterswyk: Yeah, or just even answer the questions.

Brent Pasqua: Right. Anything else on the team that gets put in there? I know we kind of picked on the CPAs there for a while, but-

Matthew Theal: All I would say to leave people with is, exit planner, what they really are is your general contractor, and they’re subbing out all the other work, right?

Brent Pasqua: Right.

Matthew Theal: So to kind use that construction analogy. So that’s the role, their running point on everything, they sub out the work to make sure it gets done.

Brent Pasqua: And someone has to be leading that point to communicate with all of the people involved, the whole team, because somebody has to be leading that communication because communication is key as you’re doing exit planning.

Matthew Theal: Exactly. If the accountant doesn’t know what kind of trust the attorney’s using then everything’s going to get messed up.

Brent Pasqua: Absolutely. Yeah, and a financial advisor is so critical also, to be able to prepare what the business owner’s going to, obviously, as you said, do with the money once it comes in, but also prepare on what the business owner’s going to need to get out of the business or you can’t sell at that point.

Joshua Winterswyk: That part’s critical. Right from the beginning you could have a good understanding of, does the business sell for really, and kind of complete all of the objectives you’re looking to get out of the sale. So it really answers a lot of questions from working with an advisor on the team is saying, we’re going to get some of these questions answered that you might not know the answers to because we’re going to run all the data and the numbers for you.

Brent Pasqua: Yeah, and a business broker’s so critical, too. I mean, if you’re going to the market to sell, can you imagine being a business owner and just trying to go and sell it yourself and negotiate? I mean, that seems like an impossible task.

Matthew Theal: Yeah, I don’t see how you could unless you’re one of those CFO financial types who’s really good at sales. Yeah.

Brent Pasqua: And I think there’s eight different ways that you can sell your business, and we’re going to have to do a podcast on those eight different ways. We’ll break them all down, because there’s just so much that goes into the options of selling your business. Let’s go into the next one. What is the exit planner doing behind the scenes when you start the planning process?

Matthew Theal: So just like when we’re doing financial planning, it’s a discovery process, right? We’re trying to learn as much as we can about not only the business owner but the business or different businesses that that person is involved in. So we start by learning goals and objectives. We then move into getting the value of that business, right? What’s an idea of what it’s worth? Once we know what it’s worth we can start discussing how we’re going to increase the value of that business using different value drivers. From there we talk about, okay, then we’re going to sell the business, how are we going to invest the money and protect the money so that you can pass it on for generations to come and really create that generational wealth, that legacy plan.

Brent Pasqua: Yeah, and you know when you start looking at what buyers are looking for when they’re coming in to buy you business, I think this is a critical aspect to increase the value of what your business is going to be. I mean, if you start putting these planning techniques in place you’re going to increase the multiple of what your business is worth.

Matthew Theal: Oh yeah, absolutely.

Joshua Winterswyk: And that’s what you meant, right, when you said value? I know you said value drivers, but just for the audience, techniques or strategies that are going to maximize the value of the business?

Matthew Theal: Strategies that will increase what a buyer’s willing to pay for your business.

Brent Pasqua: Right. Because the buyer comes in and they want to see key factors, and if they see these key factors, the value of your business is going to go up because the buyer knows that they’re buying something that’s sustainable and something that they can manage and control and build off of as they take over. But if you don’t have these key value drivers in place, they’re buying a business that potentially has holes in it, and then that’s a potential way for them to lose money. So buyers want to see value drivers, and business owners, and most business owners really don’t know what value drivers are until you get into the last stage of selling your business, and by that time you can’t put those in place.

Matthew Theal: Right. You need to plan ahead for them.

Brent Pasqua: Absolutely. And that’s why every business owner, I think it’s critical as we put value drivers in place, you want to increase the maximum value of the business. That’s what I was talking about when I said with your house, you tweak a couple of things and your house could potentially be worth more money. I mean, wouldn’t everybody want to do that?

Matthew Theal: Yeah. New countertops, maybe a fresh coat of paint.

Joshua Winterswyk: New cabinet faces.

Matthew Theal: Yeah.

Joshua Winterswyk: And it’s more calculated value instead of just perceived value of what the owner perceives the value is. It’s eliminating some of that and actually focusing on calculated value, in this case drivers.

Matthew Theal: Absolutely.

Brent Pasqua: And then the other one is creating a plan. So what do you actually receive when you create the plan on business exit planning?

Matthew Theal: This is like that Michael Kitces’ question, right? Yeah, this all sounds good, but at the end of the day what am I actually getting? Well, you’re getting a set of strategies and recommendations, right? And throughout the process we’re going through and implementing all these recommendations, and in a way, turning your business from a good business into a great business.

Brent Pasqua: Right. And then turning your great business into something that you’re eventually selling for a lot of money and potentially, hopefully saving a lot of money in taxes on it as you exit out.

Matthew Theal: Yes. Exactly. Getting you paid for what you created.

Brent Pasqua: What is your thought on this, Josh?

Joshua Winterswyk: I think that we know creating the plan and a big part of the recommendation was just looking at this and talking it out. Brent, you mentioned there’s eight different ways to exit the business. Just those recommendations on that piece of helping someone close in on the different options that they have to actually exit the business. I know we talk about maximizing value and exiting the business, but let’s really explore all of the different ways for you to exit. It doesn’t always mean selling it to some outside party. Matt talked about internal transfers too, so just creating that plan and getting that recommendation list to help a business owner really understand their situation and have some clarity, like we do with retirement planning too, is just very, very valuable.

Brent Pasqua: Yeah. And I think once you really start to go through the exit planning process, there’s so many areas of planning that you go through from whether it’s the cash flow planning to the valuation to the value drivers, the internal transfer versus a third party sale, and then all of the legal aspect of it, protecting your business and the continuity plan, the compensation plan for employees that will keep them there. There’s a lot of aspects of really creating a strong plan that all really goes into that. But when you’re really just looking at, what does the business owner get for the financial planner creating the plan process? It’s a very detailed-out way to put things into place that will then become and help your business be worth money and more money as you go through that exit process.

Matthew Theal: Yeah. Well said.

Joshua Winterswyk: Mm-hmm (affirmative).

Brent Pasqua: What are the various strategies business owners can use to exit their business and move on to other endeavors? These are things that we’re going to get into in more depth on the next podcast, but what are the main ones? Let’s talk quickly about those.

Matthew Theal: Yeah, so they break down into basically two of them, right? You could do an internal transfer, which has its own list, and then you could do an external transfer, which has its own list of ways you can sell. I think you’ve been hinting at we’re going to dive deep in them later, but on the external side that would mean most likely selling it to a third party on probably a private equity firm, or it could be a search fund, right? So search funds are usually a bunch of MBAs get together, they raise some money, then they look for good businesses to buy. Or it could just be a career changing professional who wants to do something else. They’re sick of the 9:00 to 5:00 grind and they want to be their own boss. So that would be good examples of external transfers.

Matthew Theal: Then on the internal side, your number one internal transfer would be selling it to someone who actually works for you. Maybe some key executives, some key employees. Maybe if you have a family member in there you do a family transfer.

Brent Pasqua: Children.

Matthew Theal: Children. And then the one we haven’t hit on, I think I hit on almost all of them but ESOPs.

Brent Pasqua: Yes.

Matthew Theal: You can also do an ESOP.

Brent Pasqua: Right.

Matthew Theal: Again, very complex. That’s probably a show in and of itself.

Brent Pasqua: Yeah, and when you’re looking at external transfers and you’re selling to a third party, I mean, you have either a negotiated sale or you have a controlled auction. So that we’ll also dive into next time, but there’s a very specific way your business gets sold to a third party. And one of the key factors, when it’s an internal sale I think what’s critical here is that the excuse from the business owner can’t be, well, my key employees don’t have money. That’s not the reason you can’t sell to an internal person. There’s ways that you sell internally where they don’t have to come up with money right away out of pocket.

Matthew Theal: And sometimes that can be the best strategy, right?

Brent Pasqua: Absolutely.

Matthew Theal: Especially if you care about your business.

Joshua Winterswyk: And I think that’s one of the biggest takeaways from this podcast, too, from this exit planning, is don’t let your perception of what your company is able to do or your family or your employees dictate the direction you’re taking that business. Like you said, don’t let the amount of money your key employer family member has let you think that you can’t structure a deal for you to exit the company.

Brent Pasqua: Correct. And selling to a third party can be obviously way more expensive, and you could be paying a lot more in taxes. So to just say, well, my only option is to sell it in market and take it to sale, that’s not always the top option. There’s a lot of options on the table there, they just have to be explored on what’s most important to the business owner. I think all business owners, they have in their mind what they want to see happen to their business once they step away. We all who are business owners do not build a business just to not leave a legacy. There’s some sort of something we’ve built their emotionally, mentally, and physically that we want to carry on, and we all have a good idea of what and how we want to carry it on.

Matthew Theal: Yeah, well said.

Joshua Winterswyk: It’s the blood, sweat, and tears.

Matthew Theal: Absolutely.

Brent Pasqua: So going through the exit planning process I think is a very detailed process that can open the eyes and really teach business owners how to maximize value, and then also how to actually properly step away from the business.

Brent Pasqua: All right, so we’ll touch more on those topics as we get into the next podcast on business owners selling the business, and we’ll talk in great depth about it. Let’s go into RPA Recommends. Josh, I’m going to start with you. What do you have for us?

Joshua Winterswyk: RPA Recommends.

Matthew Theal: Does that have to be business-related? Sorry to cut you off, Josh. Is this a business pod or can it be personal?

Brent Pasqua: Well, I think most business owners probably are the ones listening to it, so if you have something business, that’d be good.

Matthew Theal: Okay. You want to go, Josh?

Joshua Winterswyk: Sure, sure. I don’t know if we’ve done this but it kind of popped into my head. I had someone, you kind of switched my mindset when you said business. Has anyone done Grammarly?

Matthew Theal: Grammarly’s a great product.

Joshua Winterswyk: Has anyone recommended that yet?

Matthew Theal: No.

Joshua Winterswyk: As far as business owners go, so Grammarly, it’s kind of like spell-check. It helps your grammar whenever you’re typing an email. It can even be an online form, so it connects to your web browser. But I love it, and I know Matt uses it. Brent, do you use it?

Brent Pasqua: Yeah.

Joshua Winterswyk: Yeah, yeah. So we all use it here, but just a great tool. If you’re typing and using a computer to send emails or typing Word documents, papers, Grammarly is a great asset.

Matthew Theal: That’s a good one. I didn’t know both of you were using it. We’re going to have to get up on a corporate account and start saving some money.

Joshua Winterswyk: Do you pay for premium?

Matthew Theal: Of course I pay for premium. Haven’t you picked that up? We’ve been doing this show for a while. I’m the premium guy.

Joshua Winterswyk: If there’s a premium, you’re signing up.

Brent Pasqua: I’m going to go a little bit different on this one. Usually I have a product that I recommend on most of our shows, and I have a good one for our next show. But I’m going to keep this one business-related and I’m going to say, just have good books and records. Whether you use QuickBooks, something very simple, or something very elaborate because your business needs something way more advanced, if you want to do business exit planning, you need to have accurate books and records. It is a critical step 101. They have to be right, and if they’re not right we’ll help you get them right. But if they’re not right, have good books and records. It’s such an important aspect to get your business to the next step.

Matthew Theal: Yeah. Nothing is more discouraging than when we sign on a new business client, we request to see their books and records, and then we look at them and you can just tell right away they’re wrong, and it’s like, oh, no.

Brent Pasqua: Yeah. That’s a great one.

Matthew Theal: You guys know I’m on the golf course once a week now, huge golf guy. I actually haven’t tried these out but I’m going to order some for the Retirement Plan Playbook, but Vice golf balls. They make customizable, they’re really cool looking, it says Vice Golf on the ball, but then you can put your logo on there. So I’m going to get some Retirement Plan Playbook golf balls made.

Joshua Winterswyk: Ooh, I see what you’re doing there, okay.

Matthew Theal: Yeah.

Joshua Winterswyk: It’s the business marketing tip.

Matthew Theal: Exactly. A little marketing. But here’s the catch though, boys. I lose my balls so much there’s just going to be Retirement Plan Playbook balls scattered all throughout the golf course.

Joshua Winterswyk: I like you took that a step further.

Brent Pasqua: So are you guys playing that much where if somebody’s listening to the podcast and they want to go hit around with you guys you’re going out there with them?

Joshua Winterswyk: Are you that confident yet, Matt, with your game?

Matthew Theal: Absolutely. Yeah. I mean, we have the apps, and the apps say we’re about the average golfer.

Joshua Winterswyk: Oh, okay. I didn’t know that.

Matthew Theal: Yeah. I think people are… I mean, there’s definitely people like our buddy that we golf with, Matt. He’s breaking 80 ever time. He’s really good.

Joshua Winterswyk: He’s a freak.

Matthew Theal: So, I mean, I float around 100.

Joshua Winterswyk: Yeah, yeah, no, no. To answer your question though, yeah, of course. I think it’s just… we really enjoyed it. Matt and I have kind of, I think since this year we’ve played every round together, right?

Matthew Theal: I had to back out of one.

Joshua Winterswyk: Oh, okay. Yeah. It’s just been a lot of fun, so anyone who wants to play, yeah. We’re ready to play.

Brent Pasqua: And I know more clients are reaching out. They want to get back on the course and play.

Joshua Winterswyk: Yeah. Yeah, yeah.

Brent Pasqua: I got to get back out there.

Matthew Theal: Maybe we should do a company tournament.

Joshua Winterswyk: Ooh. Let’s see if we can get enough interest. That’s a good question.

Brent Pasqua: Yeah, reach out to us. Reach out to us by email or send us a message, and maybe we’ll get a tournament going and get some business owners and some clients out there.

Joshua Winterswyk: Matt will have his Vice golf balls.

Matthew Theal: Yeah.

Brent Pasqua: We’ll check out Matt’s bag. Well, thank you for listening to Retirement Plan Playbook. If you’d like to learn more about us or read the show notes, please go to Retirement Plan Playbook. You can also send us a message there about the new golf tournament we just started. Thanks for listening.

Matthew Theal: Thank you, guys.

Joshua Winterswyk: Thank you. Bye.

Matthew Theal: Bye.

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