Valuable Tips

Chip Mayo 2/8/23 Chip Mayo 2/8/23

Building Value Outside the Business

Many business owners find the bulk of their wealth within their businesses. However, planning for a successful future often means wrangling financials outside the business too. This is especially important when markets may not be as favorable to small and mid-sized businesses as they have been in the past. Here are three things to consider to help you build value outside of your business.

1. Know your Business’ Real Value

Before you begin strategizing about the best way to build value outside your business, it’s a good idea to know what your business is actually worth. In many cases, business owners use rules of thumb, comparisons to competitors, or good ol’ fashioned wishful thinking to estimate company value. And it’s not uncommon for business owners to overestimate their company’s value.

1. Know your Business’ Real Value

However, using inaccurate estimates of business value can make it difficult, if not impossible, to create a strong plan to build value outside the business. After all, if you think you have everything you need based on inaccurate assumptions, it’s far too easy to take your foot off the planning pedal.

By working with a professional who can more accurately estimate your company’s value—such as via a Calculation of Value—you can begin to create a more focused plan to build value, both inside and outside the business.

In other words, when you know what you have now, you can carve a clearer path toward getting what you’ll need for later.

2. Diversify investments

Any good financial advisor will tell you that diversifying your investments is one of the most basic things you can do to build value.

With the advent of self-service investment tools and newer asset forms (e.g., cryptocurrency), it seems easier than ever to diversify investments.

Nonetheless, it’s prudent for business owners to be responsible when diversifying their outside investments. Even as technology allows easier access to investing, you should still consider how a diverse portfolio works toward your goals in the long term.

The past few years have shone brightly as a bull run in many markets. It may be tempting to try to catch that lightning again. But history often shows that disciplined investing, especially with professional help, makes longer-term planning more successful and manageable.

3. Minimize taxes

In addition to building value outside your business, it’s just as important to minimize how much value you lose. This often comes in the form of taxes.

For example, if your company is a C corporation, you may face double taxation (once for corporate income, once on your personal income). This could reduce the amount of money available to build wealth outside your business.

Likewise, given the inherent complexity of the US Tax Code, it’s possible that you’re simply paying more than you must by no fault of your own.

Legally minimizing your tax burden, often with the help of a professional, could give you more capital to invest outside the business. This, in turn, could help you build more value toward the future you envision on your terms.

We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Welcome to Cornerstone's Exit Planning newsletter. We'll provide you with practical tips on planning your business exit twice a month. Contact us with any questions or to help get you started with the planning process. Enjoy!

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit www.launchgrowexit.com, call (910) 681-1420 or email Dallas@LaunchGrowExit.com

Chip Mayo 1/18/23 Chip Mayo 1/18/23

Is This Plan Right for You?

A question business owners often ask about planning for a successful future is, “How do I know the plan my advisors are building is right for me?” It’s a good question, and one that we want to help answer for you today by explaining the process of planning for a successful future.

This plan is your plan

The most important thing to know about planning for a successful future is that you are in charge of determining what you want your plan to do.

This plan is your plan

The most important thing to know about planning for a successful future is that you are in charge of determining what you want your plan to do.

This doesn’t mean that you need to come up with every element of the plan. Your advisors do the nitty-gritty work based on what you want. What it does mean is that you are in charge of the following:

What you want the plan to achieve.

What “success” means to you.

For example, if your goals include “Leave my business in 10 years with enough money to never have to work again while traveling the globe with my spouse,” your Advisor Team will craft strategies to help you achieve those goals.

What your Advisor Team won’t do is try to tell you what success looks like to you. For instance, if you want to sell to insiders and can do so while achieving financial independence, your Advisor Team won’t try to persuade you to sell to a third party just so you can make more money.

Likewise, your Advisor Team will not approach you with an off-the-shelf strategy. That’s because such a strategy doesn’t exist. Your plan is unique to your goals, your business, and your desires. It’s the Advisor Team’s job to find and implement the strategies that help you achieve those goals.

Your Advisor Team injects realism into idealism

It’s true that you’re in charge of what success means to you. However, if your goals are unrealistic or too idealistic given your circumstances, your Advisor Team can step in to inject realism into the planning process.

For example, say you tell your Advisor Team, “I want to sell my business for $100 million in the next two years to an outside buyer who won’t change any of my processes.”

Your Advisor Team will likely ask you some of the following questions.

How much is your company currently worth, and how do you know that?
What are your current processes?
How many outside businesses have approached you about buying your business?

In this example, your Advisor Team is asking you these questions to dispel common misperceptions business owners have about their businesses—namely, they think their businesses are worth more than they actually are because they haven’t gotten a professional valuation; they may not have written, scalable processes that don’t require the business owner to drive them; and buyers typically do a lot of due diligence before even considering buying a business.

The advisors on your Advisor Team have likely helped several—if not many—business owners plan for a successful future. They can identify strengths and weaknesses more aptly than business owners, who may elevate their businesses beyond what’s realistic in the market.

That said, once the Advisor Team has established what’s realistic, it can help you recalibrate what success looks like to you in more meaningful ways.

Conclusion

When planning for a successful future, your Advisor Team will be working with you constantly and closely to help you achieve your goals, prepare for unexpected roadblocks or detours, and pivot your planning if necessary. Planning is fluid because your goals and circumstances may also be fluid. Having an Advisor Team that understands what you want and combines that knowledge with their expertise in how to get it helps you craft a plan that is uniquely yours.

Chip Mayo and Dallas Romanowski

Dallas Romanowski 1/4/23 Dallas Romanowski 1/4/23

Getting Good At What You’re Bad At

Knowing what you’re good at is the catalyst behind your business success. To sustain that success and grow to new heights, many business owners must confront the things that they’re not so good—or even bad—at. Consider the following story, "Jill of One Trade", which shows the consequences of when a fictional but representative business owner buttressed her weaknesses to supplement her strengths.

Jill Stork’s online-security software, born out of a desire to fill in security gaps she found in popular applications, had netted her a small fortune. Jill used her programming skills to expand into the software-as-a-service security space for local accounting firms in her area.

Knowing what you’re good at is the catalyst behind your business success. To sustain that success and grow to new heights, many business owners must confront the things that they’re not so good—or even bad—at. Consider the following story, "Jill of One Trade", which shows the consequences of when a fictional but representative business owner buttressed her weaknesses to supplement her strengths.

The problem Jill was having was that word of mouth alone was no longer a sustainable business model. She had no desire to sell her product herself, because she believed that the software spoke for itself.

She also realized, after talking to several accountancy firms she served, that she probably shouldn’t be stocking her small fortune away in her low-yield savings account, like she’d been doing for years.

So, she approached a financial advisor one of her clients recommended and asked for help.

“I just want to program,” she said. “I don’t want to be a salesperson, and I don’t really know much about investing, other than I should be doing it.”

The financial planner asked her about her long-term goals.

“My partner and I want to live on a farm in Wyoming after I retire, probably in the next 10 years. We’ve adopted four children and want to send them to college. And we’ve always been interested in learning how to fly airplanes, so we’d love to have a plane to fly around in at our leisure.”

After reviewing her finances, the financial advisor gave Jill his advice.

“To do everything you want to do, you’ll need to expand your business beyond just you. Since you don’t want to be a salesperson, you’ll certainly need to hire someone who can create a sales team to reach that goal. And we’ll need to begin investing your nest egg outside of a savings account and creating an estate plan.”

“I have no idea how to do any of that,” Jill said.

“You don’t need to,” her financial advisor told her. “You just need a team that does.”

The Advisor Team masters the rest

Jill’s financial advisor referred her to an Exit Planning Advisor he often worked with. The Exit Planning Advisor assembled a team of professionals to help her do the following:

· Hire a next-level sales manager to create a from-scratch sales team

· Hire an operations manager to build a development team and document processes with Jill as the subject-matter expert

· Invest her next egg and future profits to help her reach her target exit date 10 years from now while also saving for her children’s college funds, farm, and airplane

· Create an estate plan for her and her partner

· Create a business continuity plan to mitigate risks of unexpected events

Jill’s management team helped her scale her business and diversify her client base beyond her wildest dreams. They also helped her standardize her code to keep pace with her company’s growth.

When she decided she wanted to retire five years later than her original goal, her Advisor Team helped her keep her estate plan and business continuity instructions current. When she decided that she wanted fewer responsibilities while retaining control over her code, her Advisor Team helped her execute a sale to her trusted managers that fulfilled that desire until she was ready to sell the entire company.

When she finally decided to retire, she had all the time in the world to fly to each of her children’s graduations, from Harvard to Stanford and in between.

Conclusion

You do so many things well as a successful business owner. And as you plan for a successful future, you don’t need to feel like you need to know how to do it all. With the right supporting cast, you can focus on the things you’re best at, along with the things you love most, while delegating other tasks to other experts who can help you reach your goals on your terms.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 12/21/22 Chip Mayo 12/21/22

You’re Never Too Old to Succeed

Occasionally, successful business owners will say to themselves and their advisors, “I’m too old to start a multi-year plan for my future.” In many respects, this mindset is similar to saying, “I’m too old to succeed,” which is preposterous! Let’s look at a few reasons why you’re never too old to plan for a successful future.

Proper planning can give you time back

Successful business owners are often indispensable to their businesses. So, the idea of adding yet another responsibility—planning for a successful future—is sometimes met with, “I just don’t have time for this.” And as owners age, they may tend to ignore things they don’t think they have time for.

However, proper planning can free up a successful business owner’s time. One of the key elements of a successful plan is making yourself inconsequential. Doing so requires a strong next-level management team to run the business in your stead.

When you have a team of managers who can take your business to levels beyond what you yourself can do, it could produce several benefits:

1. A more valuable company to potential buyers—whether insiders or third-party buyers

2. A more efficient company that requires less of your time to achieve success

3. A chance for you to focus on things that you truly love, whether inside or outside of your business.

Instead of having a business that plateaus as you enter the sunset of your career, planning for a successful future—regardless of your age—can help you both improve it and leave it on your terms, regardless of whether you leave by choice, death, or otherwise.

Planning could reduce your workload

A common paradox for successful business owners is that despite getting older and having less energy or desire to run the business, they often find that they need to continue to do more and more to simply sustain their success. This can often lead to burnout and dissatisfaction.

With a proper plan for your successful future, it’s likely that you’ll discover that once you begin implementing your plan, you’ll have fewer things you must do to pursue your longer-term goals.

Having fewer must-do responsibilities can help you achieve the things you’ve always wanted to do. Whether you’re 35, 65, or older, you’d likely rather do what you want than do what you must. A proper plan can help you pursue that and implement realistic strategies to achieve it.

You might live longer than you think

Many business owners underestimate how long they’ll live. Consequentially, this could cause them to underestimate how many resources they’ll need to live a post-business life on their terms. This combination could force you to either go back to work to maintain your lifestyle or reduce your lifestyle after you retire, neither of which is typically a savory outcome for successful business owners.

A proper plan can help you mitigate this likelihood by helping you achieve the breathing room you need to live the post-business life you want. That’s because a proper plan may do the following:

· Assures that you achieve financial independence upon your exit.

· Helps map out a realistic life span for you and those you care about, which can help you plan around that life span.

· Provides a road map for approaching unexpected events, such as expensive medical bills.

Conclusion

You are never too old to succeed. But without a strong plan for a successful future, it’s much more challenging to bring your success to fruition.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 12/7/22 Chip Mayo 12/7/22

How to Plan Like a Thoroughbred

Running a successful business is a lot like a thoroughbred horse running a race. Knowledge of the competition, track conditions, and your own skill play huge roles in how you finish the race. However, it can be easy for business owners to give everything they have and run out of energy right before the biggest moment of the process: when they approach the home stretch of their business exit. Today, we’ll explain why it’s crucial to begin planning for your biggest moment well before it arrives.

Pacing yourself to exit before you’re exhausted

After years of successfully running a business, you’ll likely reach a point where you either cannot or don’t want to continue running yourself ragged. However, waiting until this moment to begin planning for a successful future can hamstring your efforts.

By beginning your planning process earlier than you might think necessary, you can address the common roadblocks that arise due to the limitations of age, boredom caused by routine, and the constant barrage of unexpected events that can derail your success.

Consider the racing style of one of the greatest thoroughbred racehorses in history: Secretariat. Secretariat wasn’t typically a front runner, especially because he took an aggressive bump from another horse early in his career. (As a successful business owner, you might relate to the experience of taking a bump from a competitor earlier in your career that made you a bit more cautious!)

To account for this, he and his jockey often conserved his energy by having him pace himself and run the race from behind, only to drastically pull away from the competition as the race went on. Where other horses faltered, Secretariat exploded, leaving his challengers in the dust.

This combination of discipline, talent, and an adherence to a plan allowed Secretariat to gallop to huge victories time and again.

The Law of Conservation of Business Energy

Energy cannot be created, nor can it be destroyed. It can only be converted from one form to another. As a business owner, you experience this every day. You may need to convert energy from operations to sales, or from short-term planning to planning for a successful future.

A common mistake business owners make is thinking that they can simply create the energy they need to plan for a successful future when they need it. Unfortunately, this mindset can destroy your chances of pursuing a successful future on your terms.

Instead of expecting a sudden burst of energy to simply appear as you approach your inevitable business exit (by choice, death, or otherwise), it’s often much smarter to convert your energy in ways that allow the business to eventually run without you.

Don’t approach retirement tired

It can be scary to hand over the reins of your business for the sake of future success. But converting your energy from the daily grind to the grander vision of life after the business often requires it. It also requires the discipline to know the conditions you’re running in and how to best approach them.

As you begin the race toward a successful future, consider thinking about the strategies other successful business owners have used to plan for a successful future before they were too tired to do so.

1. Determine what you need to finish the race. This includes what it will take for you to be financially independent once you inevitably leave your business.

2. Consider handing the reins to next-level management. Trying to do it all means your business relies entirely on you. Next-level managers can reduce the business’ reliance on you, which often makes it more valuable and efficient.

3. Know your strengths. When you know your strengths, it helps you convert your energy to focus on those strengths. It can also help you buttress your weaknesses, which can make your business even stronger.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 11/16/22 Chip Mayo 11/16/22

How to Plan When You’re Too Busy to Plan

Your daily responsibilities as a successful business owner can make planning for a successful future seem impossible. But with the right process, you may find that this planning is both achievable and a means to give you even more time to do what you want. Consider this three-step process for how to plan when you’re too busy to plan.

1. Find people to plan for you

A big misconception is that you must do all of your business planning by yourself. Under this mindset, planning for a successful future is indeed challenging to fit into your daily routine.

1. Find people to plan for you

A big misconception is that you must do all of your business planning by yourself. Under this mindset, planning for a successful future is indeed challenging to fit into your daily routine.

Instead of trying to plan everything by yourself, consider planning for a successful business future by letting other experts do it for you.

This doesn’t mean that you hand over your vision of success to other people. Instead, find advisors who can help you bring your vision of success to life. And a piece of good news is that you likely have some of these experts on your team already—perhaps in the form of your financial advisor, CPA (or CA), and business attorney.

The key is to begin creating a longer-term plan that your Advisor Team can execute while you commit to your daily routine. In many cases, this team is led by an Exit Planning Advisor, who has expertise in leading Advisor Teams toward a business owner’s longer-term goals.

In many cases, working toward your longer-term goals means that your Advisor Team takes steps to make you inconsequential to your business.

2. Make yourself inconsequential

Some business owners find it challenging to imagine business success without themselves at the helm. However, one of the most important parts of planning for a successful future is having a business that runs well without you.

Many business owners want to one day leave their businesses during their lifetime. To do this, it’s critical for them to achieve financial independence upon leaving the business (unless you want to work for someone else . . . which isn’t common among business owners).

But it’s exceedingly difficult to leave your business with financial independence if the business relies on you for success. Quite simply, buyers are unlikely to give you the money you need if they need you present for the business to continue to succeed, which means you never truly get to leave.

So, becoming inconsequential is important to planning for a successful future. Fortunately, a dedicated Advisor Team can help you create a process to do exactly that, by using some of the following strategies:

1. Finding and implementing a next-level management team. This team takes your business to the next level by optimizing daily routines, giving you more time to focus on your plans for a successful future.

2. Helping you determine what you want and need. Business owners tend to underestimate how much they need to live the life they want after the business. An objective Advisor Team can both help you define these things and help you achieve them on your terms.

3. Planning for the unexpected. All business owners eventually leave their businesses, whether they expect to or not. An Advisor Team helps create plans to mitigate the likelihood that an unexpected event (e.g., death, incapacitation) will completely derail your life’s work.

3. Implement your plan to pursue what you want

Once you’ve outlined your goals, your Advisor Team takes the reins to implement the steps necessary to achieve them. As you and your team implement these steps, it’s likely that you’ll find that you have more time to dedicate to the things you want to do, as opposed to the things you must do to keep the business running.

And even if you plan to die at your desk, creating and implementing a plan for a future without your business could improve its efficiency and the effectiveness of operations. This can help you strengthen your business to the benefit of the people who will still rely on its success after you die.

Conclusion

Creating a plan for a successful future often means delegating at least some of your responsibilities to experts, giving you more time to do the things you want to do. As these experts do what they do best, your business is likely to rely on you less and less, which makes it more valuable to potential buyers. As this is happening, you can still reap the benefits of what you’ve built while reducing the time you must spend to assure the business runs smoothly.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 11/2/22 Chip Mayo 11/2/22

You Will Die: Business Planning for Unexpected Death

Death is the one experience every business owner has in common. Few business owners like to talk about this fact, and even fewer like to plan for this inevitable outcome, especially if they don’t plan to die anytime soon.

Though it may seem morbid, it’s crucial for business owners to plan for their deaths well before they’re ready. Failing to do so could send shockwaves through the lives of the people you care about, your business, and your legacy, like it did for one fictional but representative business owner.

Death visits early

Darnel Peters had everything he’d ever wanted—a large loving family; a locally renowned logistics company that continued to grow; no obvious health problems, save an occasional twinge in his back, which he chalked up to an active lifestyle and aging body.

But after a routine checkup, he learned he had Stage 4 pancreatic cancer. His doctors told him he had maybe 12 months to live, but only if he committed to extremely aggressive chemotherapy, which he knew would take him away from running his business.

Darnel’s business success was primarily because of him. He had good managers but no one who could run the business in his absence. He’d only just started thinking about converting his sole proprietorship into an S corporation, on the advice of his advisors. And Darnel’s post-retirement plan was non-existent, since he figured he wouldn’t leave for another 20 years.

He shared the shocking news with his family and trusted business advisors. His brother and financial advisor, Stephon, felt he had a duty to do whatever he could to give Darnel as much time with his family as possible. He started by asking his brother what he wanted to do with the time he had left.

Prioritizing in the face of death

Darnel was put in an impossible position, but one he couldn’t simply ignore. He was torn between spending as much time as possible with his family and getting his business affairs in order, because his family’s lifestyle relied entirely on him.

His silver lining was that he had a trusted team of advisors, including his brother. Ever the consummate leader, Darnel shared the three things he wanted to do with the time he had left.

1. Be physically with his family as much as possible.

2. Do something that would give them the money they needed to live comfortably after he died.

3. Protect his employees and prevent the business from folding.

Darnel’s Advisor Team scrambled to find someone who could manage the business. Before his diagnosis, Darnel has purchased a $2 million life insurance policy, which would give his family a couple years of breathing room. And his business had flirted with buyers before but never anything formal. Darnel told his team to do whatever they could to fulfill his plans.

No plan, no storybook ending

Darnel died nine months after his diagnosis. His Advisor Team couldn’t find anyone to take the reins of the business in that time. When potential buyers examined the business, they saw that it relied entirely on Darnel’s presence for sales success. The best offer they received was for a paltry $1.5 million, which the Advisor Team accepted per Darnel’s request to do the best they could.

With $3.5 million between the sale and life insurance payout, Darnel’s family survived, but had to sacrifice many of the perks of their lifestyle. His business and employees weren’t as fortunate. The buyer stripped the company for its book of business and laid off 95% of his workforce.

How you can reduce the risk of facing this fate

Death can come unexpectedly and destroy your life’s work. However, there are ways to mitigate the risks that an unexpected death can bring.

1. Know what’s important to you. Ask yourself, “What matters most to me?” This is the first, perhaps most important step toward planning for a successful future.

2. Start planning before you’re ready. Time is one of the most powerful weapons you have in your planning—it’s also limited and difficult to gauge how much you have left. Consider creating both an estate plan and a business continuity plan in writing right away if you haven’t already.

3. Become inconsequential. A business that relies on you often dies with you. Commit to training or hiring next-level management that can run the business in your absence.

The prospect of dying without a plan can be scary. It’s easy to brush it off and believe it won’t ever happen to you. However, doing so can also force you, your business, and the people you care about into a situation that could be avoided with proper planning.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 10/19/22 Chip Mayo 10/19/22

Addressing Apathy Among Managers and Key Employees

Building a successful business is a labor of love. Whether it’s the love of creating something, profit, legacy, or otherwise, your business is most likely your passion. But what if your management team doesn’t seem to share your passion, or worse, doesn’t seem to care about the business at all? While the knee-jerk reaction may be “Get rid of them,” consider some of the reasons why it may seem like your managers and key employees don’t care.

Put your ambition in context

As a successful business owner, you have next-level ambition. Your managers and employees may also be ambitious, but their ambition may not be as high as yours. When the people you hired to grow your company don’t have the same fire as you, it can look like they don’t care at all.

This is a dangerous mindset. It’s also more common among business owners than you’d think.

Some managers and key employees are perfectly happy in their roles. Pushing them to do more—especially when the work they’re doing is already exceptional—can create a bevy of negative effects, such as burnout or apathy.

Consider the causes of apathy

If you have managers or key employees who seem less engaged and more apathetic, it’s important to ask yourself, “Why might this be?” It’s unlikely that you or a manager would hire someone who came to the company with an apathetic attitude.

You may discover that someone who’s feeling apathetic is actually frustrated. They may feel as though the company’s actions don’t align with the company’s stated values, for example. (This is becoming more evident, as younger workers tend to take a more activist bent.)

If you notice less commitment from people you typically count on, it’s important to figure out the reason why before it’s too late. Though this can be challenging when you’re running a business, it’s crucial to retain your top talent.

Act on warning signs

If you have a sense that an important manager or employee has begun to disengage, you’re likely right. At this point, there are several things to consider so you can act properly.

1. Money may not solve everything. When important managers or employees want to leave, it may be tempting to throw money at the problem. However, if pay isn’t the issue, offering more money may exacerbate the problem, as it could show a lack of understanding of the core problem.

2. Resetting expectations. Employee disengagement can sometimes boil down to misaligned expectations. Examining and properly defining what you expect from employees is only one half of the puzzle. You should also consider what the employee expects from the business, and then determine whether those expectations align with your overarching goals.

3. Emotions matter. Hard, effective workers crave tangible acknowledgment of their good work. If your managers and key employees do exceptional work (Which you must define for them!), they want you to not just tell them but also show them that you care about it, via career advancement opportunities, bonuses, and so on.

Above all else, next-level managers and key employees want a chance to do their best in the context of your business. It’s in the interests of your business, your future, and your success that you position them to do just that.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 10/5/22 Chip Mayo 10/5/22

What to Do When Everyone’s Ready for Your Retirement Except You

Many successful business owners (and their families) look forward to retirement. After years of hard work, retirement lets business owners kick up their feet and live the dream. But what if everyone is ready for your retirement except you? Consider the story of Felix Bellissima, a fictional but representative owner who faced this fate.

Felix refuses an offer

For 40 years, Felix Bellissima ran a successful beauty-products manufacturing company. He always promised his son, Vinny, that he’d pass the business to him when he retired. Vinny expanded his father’s business from a local player to a nationwide powerhouse, and he was getting restless.

Over the last 10 years, Vinny watched his father’s target retirement date come and go five times. Each time, Felix had another reason why he couldn’t retire. So, Vinny approached a trusted family advisor, Monalisa, and floated the idea of resigning.

Felix refuses an offer

Knowing that Vinny’s absence would throw the business into disarray, she immediately set up a meeting with Felix and Vinny to solve the crisis.

“Five times, Dad,” Vinny said. “Five times you said you’d retire, and you’re still here. I feel stuck.”

“I’m not ready,” Felix replied. “You have to understand that.”

“You’ve got grandkids now. Ma’s got trips planned for you. You just bought a vineyard. What aren’t you ready for?”

Felix shrugged and waved his son’s question away, which prompted Monalisa to interject.

“Felix, your son has some good points. What’s holding you back?”

“All of that stuff is nice, and I love it, especially my grandkids,” Felix said. “But none of that is this. This— my business, my work—is all I’ve ever known. I don’t think I can give it up.”

Preparing for life after the business

Giving up something you’ve nurtured, grown, and fallen in love with is extremely difficult. Even worse, many business owners fail to realize just how intertwined their businesses and identities can become. This can lead to problems for yourself, your business, and your family.

Whether you know exactly when you want to retire or are only thinking about your retirement because everyone else keeps talking to you about it, there are a few things to consider.

1. Avoid making promises you might not keep

Whether verbally or in writing, it’s important that you aren’t making promises that you might not keep. Children, managers, and key employees can have very long memories. Promising or even broaching the topic of potential ownership carries a lot of meaning. If you don’t follow through, it could come back to bite you.

In Felix’s case, he thought he could keep his son hungry by continuing to promise him ownership. When he came to realize (too late in his process) that retirement wasn’t something he wanted, Felix effectively threw his business into disarray.

2. Dip your toe in retirement before you retire

A great benefit of planning for a successful future is that doing so makes you less consequential to the business’ success. In other words, you have fewer things to do because your next-level managers are doing the heavy lifting. This can give you an opportunity to test the retirement waters.

You might explore hobbies you’d always dreamed about doing, such as traveling, or take more time with grandchildren. Note how doing these things makes you feel. These trial runs can give you a better idea for how ready you are for retirement.

3. Plan as though you’ll retire (even if you don’t)

For some business owners, like Felix, work is all they’ve ever known, and they like it that way. While there’s no shame in this mindset, it can create dissonance for others, such as family members or potential successors. For instance, they may wonder what happens if you do literally die at your desk.

This is a strong reason why business owners should plan as though they’ll retire, even if they don’t. Planning can help position your family for financial independence when you leave your business via death. It can strengthen the business so that when you do die, it, and the people who rely on it, can continue to thrive.

Conclusion

Let’s turn to Felix once more.

Felix had built a turnkey operation but felt that if he didn’t own it, his life wouldn’t be as fulfilling. But the reason it was turnkey was because of Vinny. To give the Bellissimas a chance to reset, Monalisa recommended that Vinny take a month of paid time off.

During that month, Felix realized how much more he’d have to do without Vinny. He saw his grandchildren much less than he wanted to, not because Vinny wouldn’t let him but because he was working more. His wife became anxious that he wouldn’t join her on their trips. The vineyard sat barren.

It turned out that Felix needed something to do, not everything. When Vinny returned, Felix notified him and Monalisa that he’d be willing to transfer ownership to Vinny on a specific date but that he still wanted a role in the company. Vinny and Monalisa began building an Advisor Team to make that happen.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 9/21/22 Chip Mayo 9/21/22

Don’t Eat the Bear in One Bite: Planning Your Future in Steps

Planning for a successful business future is like being confronted by a bear. If you run from it, it’ll catch up to you and eat you. If you attack it without a strategy, it’ll overwhelm you. And, to stretch the metaphor, simply rolling over and playing dead isn’t in the DNA of many business owners, especially when it comes to their businesses.

With preparation and the right tools, you can come out on top. However, many business owners fall prey to the misconception that they must have a fully fleshed-out plan for a successful future. Just like you don’t need to eat the bear in one bite, you don’t need to have a full plan for a successful future.

Let’s examine how planning your future in steps can help you take on the bear of planning for a successful future on your terms.

Step 1: Find your golden number

Regardless of the business you run, its size, or what you want your future to look like, every single business owner has a golden number. The golden number is equal to the amount of money you must have to become financially independent without your business.

When planning for a successful future, it’s imperative that you know what your golden number is. This means going beyond assumptions about what you and those you care about will need once you inevitably leave your business—by choice, death, or otherwise.

Taking this first step sets the tone for everything else. It can also motivate you to begin your planning long before you intend (or are forced) to leave your business.

Step 2: Start filling in your Asset Gap

Recall that the Asset Gap is the difference between (a) the amount of money you currently have and (b) the amount of money you must have to attain financial independence without your business.

Determining the Asset Gap is something that many business owners find challenging. That’s because business owners sometimes make three misguided assumptions:

1. They think their businesses are worth more than they are.

2. They believe they’ll need less money than they actually do after they leave the business.

3. They underestimate how long they’ll live after leaving the business.

Fortunately, you can dispel these misconceptions with help from an unbiased Advisor Team. A strong Advisor Team does everything it can to maximize your company’s value and pursue your goals. By using objective measurements and strong strategies, your Advisor Team can position you to uncover and fill your Asset Gap.

Step 3: Maximize business value, lower taxes

Once you have your golden number and understand your Asset Gap, you can begin maximizing business value.

There are many facets to maximizing business value. Some of these Value Drivers include the following:

· Hiring next-level management and retaining key employees

· Operating systems demonstrated to increase cash flow sustainability

· Diversified customer base

· Proven growth strategy

· Recurring revenue that is sustainable and resistant to commoditization

While installing these Value Drivers can take time, your next-level managers and key employees can help quicken the process.

Additionally, working with tax professionals to minimize your tax obligations can create more funds that you can use to invest in your business, helping you further maximize business value.

Step 4: Determine your successor

Many business owners like to start here. However, starting by determining your successor can sometimes box you in.

For example, you may want to eventually transfer ownership to an employee, only to find they have no interest in ownership. Similarly, if you don’t have an accurate company valuation, you may be surprised by lower-than-expected third-party offers, which can lead to tainting the marketplace.

Remember that attaining financial independence is what defines a strong plan for a successful business future. Once you know what it takes to get you there, you can begin developing strategies that allow you to obtain financial independence via your chosen successor.

On the other hand, knowing what you need to attain financial independence can change who you want to succeed you. It’s much better to make that change before everything else is in place.

Step 5: Plan for the unexpected

The beauty of planning is that it could mitigate the negative effects of unexpected events. There are two things you can start doing right away—even if you haven’t taken any other steps yet—to prepare for the unexpected.

1. Create Business Continuity Instructions

2. Update or create your estate plan

Business Continuity Instructions provide guidance to your advisors, family, co-owners, and employees for what to do with your business if you were to unexpectedly die or become incapacitated. Few things are more frightening than losing the captain of the ship without any guidance on what to do in such an event. Business Continuity Instructions can be that guide.

Similarly, updating (or creating) an estate plan can give survivors guidance about what you would have wanted if you were to die unexpectedly. This is especially important for owners who intend to die at their desks.

However, it’s also important if you intend to leave your business during your lifetime. That’s because a well-crafted estate plan can provide strategies for allowing those you care for most to achieve the financial independence you’d been working toward if you die unexpectedly.

Conclusion

You don’t need to eat the entire planning bear in one bite. Instead, you can break it up into smaller pieces, savor the flavor of success, and still keep moving toward the trophy of a successful future on your terms.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 9/7/22 Chip Mayo 9/7/22

Becoming More Recession Resistant Through Planning

The last two-and-a-half years have been tumultuous, and owners of small to mid-sized businesses have borne the brunt of the pain. Though few people could have predicted the effects of the pandemic, business owners with plans for a successful future tended to feel more comfortable confronting the challenges they faced.

Now, as whispers about a recession grow louder, business owners are taking stock of what to do next. Let’s look at how planning for a successful future can make you more recession-resistant.

Handcuffing the Great Resignation

One of the most intriguing narratives surrounding the current market is the Great Resignation. More employees have resigned their positions for greener pastures, putting the onus on employers to more readily meet their demands. This is a challenge under normal circumstances. But finding and retaining talent is even more challenging in the midst of a potential recession.

However, business owners who have begun planning for a successful future typically have a built-in solution to issues like this. The solution is golden handcuffs.

The golden handcuff is a concept in which business owners incentivize next-level managers and key employees to stay with a company long term. These managers and employees have tangible effects on business performance, and their absence would have a noticeable negative effect.

Including golden handcuffs—in the forms of exceptional pay and benefits, opportunities for ownership, and other perks—is crucial to having a plan for a successful future. After all, these are the managers and employees who will take your business to the next level, allowing you to one day leave it on your terms (or die at your desk on your terms).

It can also help you weather the storm of recession-based resignations. Your most important employees are more unlikely to leave for greener pastures if your pasture is indeed the greenest.

Diversifying your (client) portfolio

When recessions hit, they tend to affect most, if not all, of your clients. This can lead to lower demand and smaller margins. However, as is the case in so many other areas of business, diversification is key to long-term success.

In fact, having a diverse customer base is one of the most important drivers of your company’s value. It’s also a key element of planning for a successful future, both inside and outside of your business.

If you rely on a handful of clients to guide your success, you may be boxing yourself in. Ask yourself: What would happen if I lost just one or two of my biggest clients?

If the answer to that question makes you anxious or nervous, you aren’t alone. However, you may need to begin taking steps to widen your range in terms of clientele. There are a couple of ways to begin doing so.

· Create a competitive advantage within your products and services

· Find and hire next-level management to break through to new prospects

Defending what’s yours

As interest rates begin to rise, so do the costs of business. This means that protecting what’s yours—especially against the drain of taxes—takes on even more importance.

Nearly all business owners love the idea of paying as little in taxes as legally possible. But fewer owners actively take steps to minimize their tax obligations. While there may not be as many tangible effects to forgoing tax minimization when times are good, during a recession, it can have different effects.

Business owners who can minimize their tax obligations could free up more money for business operations, investment, and even next-level management. Though many tax-minimization strategies can take years to implement, savvy business owners start as soon as they can.

Conclusion

Planning for a successful future and preparing for a potential recession have a lot of overlap for business owners. Taking steps toward planning for a successful business future can also have tangible effects on how your business weathers the storm of a possible recession.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 8/17/22 Chip Mayo 8/17/22

How to Remove “I Can’t Retire” From Your Planning Mindset

There’s a big difference between not wanting to retire and not being able to retire. Even business owners who intend to die at their desks can appreciate the safety net of financial independence should something unexpected occur. But many business owners look forward to an ideal future without implementing the proper planning to achieve it.

Today, we’ll discuss ways to mitigate the risk of not having enough money to retire on your terms.

There’s a big difference between not wanting to retire and not being able to retire. Even business owners who intend to die at their desks can appreciate the safety net of financial independence should something unexpected occur. But many business owners look forward to an ideal future without implementing the proper planning to achieve it.

Today, we’ll discuss ways to mitigate the risk of not having enough money to retire on your terms.

Start by understanding the Asset Gap

A common mistake successful business owners make is assuming they have more than they need, while assuming they need less than they do. The difference between what you currently have and what you must have to achieve financial independence is called the Asset Gap.

Understanding your Asset Gap is critical to mitigating the likelihood that you won’t have enough money to retire. (And even if you intend to work until you die, knowing your Asset Gap is crucial to achieving other goals, such as providing generational wealth for family or leaving a lasting business legacy.)

There are several things you can do to begin determining your personal Asset Gap.

· Obtain a professional business valuation

· Accurately assess your net worth with help from your CPA

· Discuss your vision of an ideal future with a trusted advisor

Obtaining a professional business valuation helps you understand what you need to do to reach a value that will one day allow you to retire with financial independence.

Accurately assessing your net worth can have two positive consequences. First, it gives you an idea of what you’re working with. Second, it can help you dispel misperceptions about what you want in retirement (more on this shortly).

Discussing your vision of an ideal future with a trusted advisor can help you map the steps you need to take to reach that ideal future. It can also show you if your ideal future is realistic, which can reduce the likelihood of taking an impossible path.

Be realistic about your wants and needs

Retirement is a dream for many business owners. But that dream can turn into a nightmare if you don’t know what it will take to fulfill your wants and needs.

For example, many business owners underestimate how long they’ll live. This underestimation can create a financial bind where they simply don’t have enough money to maintain the quality of life they’ve gotten used to. There are vanishingly few, if any, business owners who want to have to scrimp and save to survive their golden years.

Instead, it’s a good idea to determine some of the following facts:

· How long you and your spouse/partner are likely to live after your retirement

· How much money you must have to fulfill your needs in retirement

· What you intend to do in retirement, and how much it will cost you

It’s a risky proposition to “figure it out as you go.” If you can figure these things out while you’re still in control of your business, you’re more likely to make decisions from a position of strength, rather than from a position of desperation.

Look before you leap

Retiring without financial independence is a huge gamble. However, understanding your Asset Gap, along with what you want and need from retirement, are two strong ways to work toward financial independence.

Nonetheless, pursuing retirement on your terms can be full of surprises.

For instance, you may want to transfer your business to a child, only to find out that the child was only still in the business to make you happy and has no intention of running it when you leave.

Likewise, you may decide you want to sell your business to a third party, only to find that while they will pay you enough for financial independence, they also plan to lay off 95% of your workforce when you leave.

Trying to anticipate these surprises by yourself is often a fool’s errand. After all, you’re still running a business that many people—including yourself, your family, and your employees—rely on. But with help from a dedicated Advisor Team, you can more deftly anticipate and plan for contingencies and surprises on your way to retiring on your terms . . . even if that means never retiring at all.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 8/3/22 Chip Mayo 8/3/22

Love Can’t Be Blind: Preparing for a Business Transfer to Children or Insiders

Successful business owners do a lot of things well, and they make it look easy. This is often a sign of well-running processes and years of discipline. However, it can also be a trap for successful business owners who intend to pass their businesses onto their children or business insiders. While you may love the idea of keeping the business with someone close to you, you cannot let that love blind you to the realities of insider transfers.

Today, we’ll examine three things you should consider if you intend to pass the business to your children or insiders.

1. Financial independence must come first

Financial independence is the most important consideration for business owners as they plan for a successful future. However, it can also force you to make tough decisions about your business's future.

Today, we’ll examine three things you should consider if you intend to pass the business to your children or insiders.

1. Financial independence must come first

If you’re thinking about one day selling or gifting your business to a child or insider, it’s prudent to ponder how this decision can affect your financial independence.

For example, many business-active children and insiders don’t have the money you may need to achieve financial independence. This may mean that you must rely on promissory notes or consistent business success without you at the helm to attain financial independence. If your child or insider proves incapable of delivering, it could leave you in a financial undertow.

Before taking steps to hand the reins to a child or insider, it’s important to do two things.

1. Determine the amount of money you must have to attain financial independence

2. Compare the amount you must have against the amount you currently have

This information can help you create a plan to achieve financial independence in the context of transferring it to a child or insider. Without it, you may be leaving your future to fate.

2. Next-level management is crucial

When you know what you must have to achieve financial independence, you can begin planning the process you’ll use to successfully obtain it. When considering a transfer of ownership to a child or insider, next-level management can make a big difference in whether your plan succeeds.

Running a subset of a business is often much, much different than running the entire business. While you understand this, it may be harder for your child or insider to grasp.

It can be similar to a baseball player who does exceptionally well in the minor leagues but can’t keep up in the majors. Except in this case, your financial independence—along with your legacy—could hang in the balance.

To best position yourself and your successor for success, next-level management is crucial. These are managers who can take the business to new heights. They may also help your child or insider settle into their new responsibilities without noticeably affecting business performance.

3. Always have a backup plan

Sometimes, your child or insider simply isn’t capable of running a business, even if they were exceptionally good in their former role with the company. This is why it’s so important to have a backup plan.

For example, though you may want to transfer your business to a child or insider, it could be a good idea to include clauses in your transfer plans that allow you the right to reacquire the business if your child or insider cannot perform as expected. Doing so can protect your financial independence by allowing you to re-enter the fray and reposition the business for a transfer to a third party that does allow you to achieve financial independence.

Transferring the business to a child or insider is a common desire among successful business owners. But it comes with risks to your financial independence, business’ future, and important relationships. Creating a plan to mitigate those risks is extremely important for owners who want to have as much control as possible over their business and personal futures.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 7/20/22 Chip Mayo 7/20/22

3 Value Drivers You Can Start Installing Right Now

An important aspect of growing a successful business Is creating transferable value. Transferable value is what your business is worth to someone else without you at the helm. Whether you plan to retire or die at your desk, transferable value is what increases business value. To create transferable value, you’ll need to install several Value Drivers. Here are three important Value Drivers that you can start installing right now.

1. Next-level management: The Mother of All Value Drivers

A next-level management team is the most important Value Driver of all. This is the team that takes the business to new heights and executes on your vision. Without it, it’s extremely difficult to create transferable value.

An important aspect of growing a successful business Is creating transferable value. Transferable value is what your business is worth to someone else without you at the helm. Whether you plan to retire or die at your desk, transferable value is what increases business value. To create transferable value, you’ll need to install several Value Drivers. Here are three important Value Drivers that you can start installing right now.

1. Next-level management: The Mother of All Value Drivers

A common mistake business owners make is assuming that whoever takes over their business when they leave will bring their own management team with them. That’s usually not the case, as potential buyers prefer businesses with strong management teams already in place.

It’s imperative that you begin building a next-level management team regardless of to whom you want to sell it or when you plan to leave. To do so, you’ll need to take a few steps.

1. Determine whether your current managers can take the business to the next level.

2. If they can’t, you may need to look outside the business for these managers.

a. This doesn’t mean you must fire your current managers.

3. Once you find next-level managers, create strong incentive plans that encourage them to achieve ambitious goals that contribute to your vision of a successful future.

A next-level management team often determines whether your plans for a successful future become reality or not.

2. Operating systems demonstrated to increase cash flow sustainability

It’s nice when the business operates well while you’re running it. It’s even better when the business operates well regardless of whether you’re in the office or Aruba. A strong way to position your business for success—with or without you—is by creating operating systems that are proven to increase cash flow sustainability.

Operating systems include things like marketing and sales, accounting, production, and CRM systems. As your business grows, you’ll likely have less time to consider how each of these systems functions. Nonetheless, these systems must be able to provide consistent performance and meet or exceed stakeholder expectations.

In short, if operations always run through you, then your business can only grow based on the time and resources you personally have. With operating systems that your next-level managers can successfully choose, use, and control, you have a better chance of growing your business beyond your personal bandwidth.

3. A solid, diversified customer base

As in many aspects of life, diversification is key to risk reduction. A diverse customer base is imperative to growing the value of your business. That’s especially true if a handful of larger customers work with your business because they like you personally.

When businesses rely on just a few large accounts, their transferable value can suffer greatly. One major reason is that a large account may not want to work with anyone but the owner. In cases like these, the owner must always have a presence to keep the account. As we’ve discussed, this can reduce your control over your future.

Creating a solid, diversified customer base typically requires next-level managers with the talent, skill, and foresight to identify and attract new clients. Once those teams have enticed those customers to do business, strong operating systems play a crucial role in retaining those customers.

And in the longer term, a diversified customer base shows insiders and outsiders that the company is strong and isn’t likely to be devastated by normal retention churn. This can further increase business value, as next-level managers and key employees are more likely to stay with companies that consistently exceed customer and employee expectations.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 7/6/22 Chip Mayo 7/6/22

4 Reasons Why Planning for a Successful Future Isn’t DIY

At their core, successful business owners like you are builders. Whether you founded your business, or purchased one and took it to new heights, doing it yourself runs through your veins. Why, then, would you need professional help to plan for a successful business future?

We could go on and on about all the reasons why, but let’s focus on four major elements of planning for a successful future that are typically complex and extremely challenging for even the most talented business owners to handle alone.

1. Your individual brilliance may not be scalable

Business owners are a special breed of ambition and brilliance. As you run the business, you may have methods that work well based on your individual talents and idiosyncrasies.

However, a key to a successful business future is building a business that doesn’t rely on you. Because if it relies on you, you can never leave it. And even if you never want to leave it during your lifetime, a business that lives by you may also die by you, which can have wide-ranging effects on others.

The true tragedy of individual brilliance is that when it comes naturally, it’s hard to explain to others. A classic example of this is Wayne Gretzky. Gretzky was the greatest hockey player in history, setting unbreakable records with ease. But when he tried his hand at coaching, he was much less successful because he struggled to explain how he did the things that made him so outstanding, which came so naturally to him.

So it goes in running a successful business. Having (a) documented operating systems that increase cash flow sustainability and (b) a way to scale those systems in ways that don’t involve you, are profoundly important for a successful future.

A professional advisor can help you distill your individual brilliance into something that doesn’t rely on you for success.

2. What does a successful future mean?

The idea of a successful future might seem easy to understand at first glance. Maybe you want enough money to retire with some left over to begin building generational wealth. Perhaps keeping the business in the family is your idea of success.

Whatever your vision of success is, do you know precisely what it takes to achieve it? And have you begun implementing a plan to pursue it?

Many business owners have two jarring experiences when they start considering the nuts and bolts of a successful future. First is the Misperception Spell. This is when a business owner becomes complacent because they believe they’re farther ahead in their planning than they truly are.

For example, you may think that having $3 million in retirement is enough for you. But how can you know that for sure? What happens if your estimate is wrong? What if you live longer than you expect? Would you be willing to go back to work for someone else if you were wrong about your estimates?

Second, and related to the Misperception Spell, is that many business owners have an Asset Gap. This is the difference between what you actually have and what you’ll actually need to achieve financial independence, whether you leave your business during your lifetime or die at your desk.

Without accurate information, planning for a successful business future is essentially a gamble. Professional advisors can help you obtain accurate information about your wants and needs, and then create plans that help you achieve them.

3. Best friends may not make best managers

A crucial element of planning for a successful business future is Next-Level Management. However, many business owners struggle with this because it could mean that longtime, loyal managers aren’t the best people to help them pursue future business success.

This doesn’t necessarily mean that you need to be starkly Machiavellian with your current managers. However, a professional advisor may be able to examine your talent pool more objectively. Then, they can help create a plan that allows you to maximize your business’ potential through Next-Level Management.

This may include incentivizing current managers to achieve more ambitious goals if they’re capable. It may also mean finding a more appropriate role for your current managers as you bring in next-level managers, if necessary.

4. Honesty is hard when it’s your baby

Finally, planning a successful business future is emotional. It often requires owners to confront the warty parts of their business to take the business to the next level.

For instance, business owners typically place a higher monetary value on their businesses because of how much the business means to them personally. It can be devastating, even financially harmful, to find that an objective valuation doesn’t agree.

Though many business owners believe they can handle the slings and arrows of building a successful business future, it’s much, much harder when their expectations fall short of reality. However, with the help of professional advisors, business owners can obtain accurate information; begin to act in ways that improve business performance; and gain a clearer path toward creating the business future they want, rather than a business future they’re forced into.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 6/20/22 Chip Mayo 6/20/22

Building an Advisor Team That Works for You (Not Against Each Other)

Building a business is challenging enough as it is. With the right Advisor Team, you can focus on business challenges while your advisors create strategies that help you compound your success in the future. But how do you build an Advisor Team that works for you instead of against each other?

Consider the story of a fictional but representative owner who learned how important it is to have an advisor who can lead the charge.

Animus at AniMals

Consider the story of a fictional but representative owner who learned how important it is to have an advisor who can lead the charge.

Animus at AniMals

Annie Mahl was in a bind. Her company, AniMals, which produced specialty dog toys under the tagline “Tough Chew Toys for Rough-Chewing Boys,” had grown into a pet-care powerhouse over the last 20 years. Her financial advisor Grover and business-growth consultant Oscar had served her for most of the company’s history.

When Annie told each advisor that she wanted to sell her business in the near future, they had vastly different reactions.

Grover began researching what Annie would need to sell her business within three years and gain financial independence. He presented Annie with spreadsheets of information about the best strategies to pursue, many of which Annie found overwhelming.

Oscar tried instead to convince Annie to stay at the business longer. “You’d be leaving right before the biggest boom. Let me show you how much more you could make if you stay longer.”

The deeper Annie got into planning with each advisor, the less comfortable she became about their strategies. She loved her business and wanted to find a buyer who loved its mission just as much as she did, but she also wanted to sell for enough money to retire comfortably.

Grover and Oscar began openly butting heads, with Grover trying to help Annie sell as soon as possible and Oscar trying to help Annie make as much money as possible.

Though she initially felt a little guilty (Grover and Oscar were always her go-to guys), she decided to seek the advice of a professional business-and-exit planning advisor, Burt.

Follow the Leader

Annie shared her goals with Burt. She wanted to sell within six years, but she wasn’t sure what her business was worth. She told Burt that it was hard to plan with her trusted advisors disagreeing about strategies so vehemently.

“I trust them and could never let them go. I want them to be a part of this planning. I think they have good intentions, but I’m not sure which strategy is the right one,” she said.

“The right strategy is the one that helps you achieve your goals, not what they assume is best for you,” Burt said.

Annie let out an exasperated laugh.

“Try telling them that,” she responded sarcastically.

“I’d love to,” Burt said. “Can I show you what I have in mind?”

Pulling the Advisor Team Together

Over the next month, Burt met with Annie, Grover, and Oscar. With Annie’s input, Burt laid out Annie’s goals and what it would take to help her pursue them.

“She wants to sell her business within six years. We need to figure out how to make that happen so she can achieve all of her goals.”

“We can do it in three if she would just . . .” Grover began.

“Three years? There’s so much more money to make!” Oscar interjected.

Before they began fighting again, Burt stepped in.

“Our job is to help Annie achieve her goals. And neither of you can help her do that if you think you know what she wants better than her.”

Grover and Oscar sat in silence before Burt continued.

“The first thing we need to do is figure out what this business is really worth. Then we can talk about timelines and payouts.”

Burt presented each step of his planning process, showing Grover and Oscar how they fit into it, and what they’d need to do to fulfill their obligations.

With Burt leading the charge and finding all of the appropriate advisors for Annie’s team, Annie felt more confident in her direction. She hired a business valuator, a tax professional, and an attorney based on Burt’s recommendations.

While she continued to run the business, Burt and the Advisor Team worked together toward Annie’s goals. Grover and Oscar focused on what they needed to do instead of trying to control the process themselves.

The result was a successful sale on Annie’s timeline to a buyer Annie trusted for the amount of money she needed and wanted.

You Aren’t Alone in This

Your advisors must work toward your goals to help you achieve your vision of success. One of the best ways to position your Advisor Team to do so is to work with a dedicated business-and-exit planning advisor. These advisors can guide the process based on what you want and need, and assure that your team works for you not against each other.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

5/18/22 5/18/22

You Can Run, But You Can’t Hide

Successful business owners are proud people—and with good reason. Their businesses are the heartbeat of the economy, and have immense effects on the lives of people inside and outside the business. With so much riding on the business’ success, it’s only natural for business owners to feel the temptation to withhold certain pieces of business information when things don’t go precisely as planned. Today, we’ll explain why and how to avoid this temptation.

Nobody is perfect: Why withholding information is dangerous

Nobody is perfect: Why withholding information is dangerous

Your business affects your future, your family’s future, and the futures of those you care about. So, when things aren’t going perfectly, you may want to withhold information until things begin looking up again. But the longer you wait to discuss less-than-ideal information, the harder it may be to address the issues.

In other words, you can run, but you can’t hide. And instead of expending energy running from business issues, you may want to consider a process that keeps your goals, and how to achieve them, in front of the very people who can help move you closer to them.

1. Work with advisors you trust

Your business is likely one of the most important things in your life. So, you don’t want just anyone coming in and telling you how to run it. This mindset is correct, but it can also be a source of pain if taken too far.

When planning for a successful business future, many business owners work with Advisor Teams. These Advisor Teams help business owners achieve three important goals:

1. Financial independence (Foundational Goal)

2. Leaving the business when they want (even if “when” is “never”), to whom they want, for the money they want (Universal Goals)

3. Pursuing aspirations (Values-Based Goals)

It can be easy to lose sight of those goals in the fog of daily operations. And when you experience an ebb in success—as every business eventually does—you may turn inward and say “Only I can fix this.”

A problem with this mindset is that the “fix” is often more complex than one business owner—even one as talented as you—can realistically solve alone. That’s why it’s so important to work with advisors you trust.

You likely have advisors within your business right now that you’ve trusted for years to help you make important decisions. In addition to the important work they’re doing now, they may be able to introduce you to other advisors who can help you tackle issues outside of their area of expertise.

Similarly, you may consider reaching out to an advisor who specializes in planning for the future of the business. Such advisors excel at finding, vetting, and getting best-in-class Advisor Team members (including those you currently work with) on the same page and working toward your personal, business, and aspirational goals.

2. Be ambitious and let it all hang out

Some owners feel obligated to hold back with their advisors because they worry those advisors might think their goals are too ambitious or they don’t want to hear “this can’t be done.” However, a strong Advisor Team doesn’t look for reasons not to try something.

A strong Advisor Team includes experts from various professions. This wide-ranging expertise can help you find solutions to complex business issues. They ask probing questions to shine light on the why behind your goals, which can give you a clearer vision of what matters most.

Good advisors aren’t there to judge. They’re there to find ways to tailor solutions and achieve your goals.

3. Remember that your advisors are here to help

Your success likely stems from your ambition. It may even have an element of showing people you can do what they said couldn’t be done. This valiant mind-set can clearly be an asset, but sometimes, it can be a detriment.

A common fear business owners have is that advisors may not “get” their vision. Though it’s true that each business is unique, there are certain standards that determine whether you’re on the path toward a successful business future.

Your advisors can help find ways to achieve ambitious goals while pulling the reins when necessary. They can help you turn unbridled idealism into ideal realism, which can keep you on the right path toward achieving your goals without overreaching or underachieving.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 5/4/22 Chip Mayo 5/4/22

Ready or Not: Why Planning Now Beats Planning Procrastination

All successful business owners must eventually face a stark reality: One day, they will no longer run their business! If this idea makes you uneasy, you aren’t alone. Today, we’ll show you how preparing for a future you may not be ready for now can benefit you both today and when you are ready.

Overcoming ‘I’m not ready’

If you’re like many business owners, your business likely relies heavily on your presence for success. Your business may also support your family and non-business-related goals. This may make the idea of preparing the business for a future without you seem preposterous, especially if you have no plans to leave your business anytime soon.

Overcoming ‘I’m not ready’

But consider the other side of the coin: If your business, family, and personal goals rely on your presence as a business owner, what happens if you were unexpectedly forced from the helm—by death, injury, or otherwise?

In other words, if you’re indispensable to your business, it becomes extremely challenging to leave it, even when you are ready.

To reduce the likelihood that you’ll face this fate, consider taking the following actions, which can benefit you and your business now and in the future.

Hire next-level management

It’s hard to overstate the importance of next-level management. Next-level management can provide the expertise that shores up your business’ strengths, improves its weaknesses, and directly contributes to your most important goal: financial independence.

Better still, next-level management teams can help you focus on what you want for yourself, your business, and the things that matter most to you in the future. That’s because next-level managers can take your business’ most pressing issues off your plate.

Finally, next-level management is crucial to growing the value of your business. Next-level managers have track records of growing businesses to achieve ambitious goals. This growth can have a cascading effect, giving you more freedom to determine what a successful future looks like.

In short, next-level management can give you more control over your goals, both now and in the future.

Create Business Continuity Instructions

Business Continuity Instructions are another crucial aspect of planning for a successful future. These instructions can provide guidance to co-owners, managers, family members, and advisors in case you are no longer able to run the business (e.g., unexpected death or incapacity). This can help mitigate risks and offer solutions for the people who rely on you and your business to maintain their lifestyles.

Additionally, Business Continuity Instructions can help you uncover weaknesses in your business and improve upon them. For instance, a key aspect of Business Continuity Instructions is determining how to handle future contracts with important clients. In the process of creating these instructions, you may find that your company relies heavily on just a few large clients. This, in turn, can help you determine how to diversify your clientele, which can strengthen your business in the short and long term.

Looking to the future can benefit you now

Even if you aren’t ready for a future outside your business just yet (and even if you plan to die at your desk), taking steps toward planning for that inevitability can provide important benefits for you right now. By confronting the reality that no business owner owns their business forever, you can create plans to maximize your success while you are at the helm, while simultaneously giving yourself more freedom to pursue your goals inside and outside the business.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

Chip Mayo 4/20/22 Chip Mayo 4/20/22

Getting Personal in Business Planning

It’s not uncommon to hear the phrase “Don’t take it personally” in terms of business decisions. But when you own a business, it’s difficult—if not impossible—to not take business decisions personally. After all, it’s likely that you, your family, and others you care about rely on your business to maintain or their lifestyles or their sense of family legacy.

This can be a heavy burden for owners. And often, it takes the right kind of planning, rather than planning for its own sake, to relieve owners of that burden. Consider the story of how one business owner took business planning personally and how it affected her future.

Starting Fresh

After 5 years, Amber Auerbach decided to set out on her own. Her boss and owner of the medical supply distribution business she worked for, Bobby Glass, had refused her requests for more responsibilities in exchange for ownership opportunities, despite her key role in growing the company.

Starting Fresh

“This is a family business, and you are not family,” he’d told her curtly.

When Amber submitted her resignation, Bobby wished her luck, saying, “We’ll be just fine without you.”

Amber’s first inclination was to pull as many clients away from her old employer as possible. But she met with Mabel, a longtime friend who was also a business advisor, who helped her refocus on what was most important.

“You have an idea, but it’s a bit too fuzzy. What you need is a plan that goes beyond spiting your old boss,” Mabel said. “So, what is it you really want to do?”

Making the Business Plan Personal

“Ownership was always my goal,” Amber told Mabel. “What I really want is a chance to retire before I’m 50, and leave a legacy where my employees think highly of me and the opportunities I provided.”

“That’s a good start,” Mabel said. Let’s first figure out what you need to reach that retirement goal.

Over the next 5 years, Mabel and her advisor team began laying the foundation for achieving Amber’s retirement goal. They helped her set up her new business in a field related to the work she’d done for Bobby’s company, hire a topline management team to enact Amber’s vision and implemented robust incentive plans.

In that time, Amber got married and had two children. Her husband entered the business as a staff accountant. Amber told Mabel that she refused to let the fact that this was now a family business affect her business family.

So, Mabel and the advisor team created written performance standards to reduce the likelihood that her business would fall prey to nepotism like Amber had experienced at Bobby’s company. Additionally, they helped her identify the differences between her key employees and important employees. This created a culture of proper incentivization, which led to skyrocketing morale.

Overcoming Trouble

At the 15-year mark, Amber’s company had bought out the remains of Bobby’s family enterprise. No one could replace Amber there, and following Bobby’s death and the taking up of the reins by his two children, things got tough for Bobby’s family. His children offered Amber their ownership so they could cash out and do what they actually wanted to do.

Having vanquished her old foe, Amber asked Mabel what else there was for her to do. She was on pace to retire when she wanted, her employees loved her, and she’d managed to keep her family business running and her business family happy.

“You’ve set yourself up for success, but we need to think about a future without you,” Mabel told her. Over the next two years, Mabel and the advisor team finalized Amber’s business continuity instructions, along with a plan for her to sell to her management team.

With three years until her target retirement date, tragedy struck. Amber was diagnosed with an aggressive disease that, though manageable, would force her to be away from the business for months at a time.

Her business continuity instructions gave her management team and family guidance about what to do when she was undergoing treatment. They also allowed her to rely on her family and non-family team members to carry on in a way that was consistent with her leadership of the business.

The Final Sale

It took two years before Amber could get back to work full time. Despite her absence, her business continued to grow, thanks to her diligent planning and strong management team.

With just one year remaining before her targeted retirement date, Amber felt anxious. She wanted to make sure that her children had the money and skills they needed to live fulfilling and productive lives, doing whatever they wanted to do.

Thanks to her planning foresight and dedication to her employees, Amber had a solution.

Immediately after finalizing the sale, Amber’s management team announced that the company had founded a charity to raise funds for people who had the disease Amber beat.

Then, Mabel and the advisor team helped Amber use a portion of her sale proceeds to give her children a nest egg in case they ever suffered from the same disease.

Amber and her husband retired in style, and eventually, her children and some of her grandchildren went on to work for the company she had founded.

Amber had successfully made business planning personal, and it made her personal and professional life all the more fulfilling.

Where do your business and personal lives intersect? Are you doing the planning necessary to make those connections more meaningful?

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.

4/7/22 4/7/22

Business Continuity: Is Your Business Built on Sand or Stone?

The strongest businesses often have written plans for how to address unexpected events and mitigate risk, known as business continuity instructions. Their owners ask questions like, “What happens if a co-owner or I die?”, “How do we protect key employees from competitors?”, and “How do we address interruptions in our supply chain?” Here are three major items to consider as you create your own written business continuity instructions.

Focus on Yourself First

Much like an emergency on an airplane, you need to focus on protecting yourself before you can begin protecting others. One of the most important questions to ask at the outset of your planning is, “Can this business survive without me?”

Focus on Yourself First

Much like an emergency on an airplane, you need to focus on protecting yourself before you can begin protecting others. One of the most important questions to ask at the outset of your planning is, “Can this business survive without me?”

If the answer is “No,” business continuity instructions can help you begin the process of figuring out how to make yourself dispensable to the business.

If the answer is “Yes,” business continuity instructions can answer the question, “How?”

This is because business continuity instructions ask and answer important questions about your business’ strengths and weaknesses with and without you, in writing. For instance, if you tend to use personal guarantees when taking on company debt, what would happen if you were gone and your company’s creditors came calling with claims against your personal estate? What would happen to your business if you no longer provide those personal guarantees?

Additionally, business continuity instructions can provide guidance to your co-owners, employees, and family if you were to die or become incapacitated unexpectedly. For many businesses, final decisions run through the owner. Business continuity instructions can help answer, “What do we do without you?”, and “Who will make this decision?”

Next, Protect What Matters Most

While many owners use business continuity instructions to plan for their unexpected absence, they’re also designed to mitigate other kinds of risks and take care of other priorities.

For example, business continuity instructions can be a starting point for how to address the loss of a key employee. Recall that a key employee is someone who has a difficult-to-replace skill and whose absence would harm the company. If such an employee were to leave for a competitor, it could be a double whammy for your company.

In the process of planning for this worst-case scenario, you’ll likely work with your advisor team to entice such employees to forgo other offers (e.g., non-compete agreements, lucrative incentive plans).

Similarly, business continuity instructions can help you minimize risks for your family if something were to go wrong. Without written instructions, your family may find themselves adrift without a compass. By providing written instructions, you can help them sail through stormy seas more smoothly. They need not wonder how you’d handle certain situations if you’ve given the answers in your continuity instructions.

Plan to Control the Uncontrollable

Finally, business continuity instructions can help you better control the uncontrollable. For example, they can provide alternative paths for success if a key customer were to go bankrupt. Additionally, they may be able to help you minimize the effects of macroeconomic issues, like supply chain interruptions or labor shortages. As part of the process of creating your instructions, you’ll think through the events that might adversely impact your business and how you’d handle them.

Your business likely relies on many outside moving pieces (vendors, suppliers, etc.). While it’s impossible for you to control what happens to them, with proper planning, you can reduce the likelihood of an outside failure causing your business’ failure.

Conclusion

Your business is too complex and important to leave risk mitigation to chance. One unexpected problem shouldn’t have the power to topple all of your hard work. Written and disciplined business continuity instructions, updated regularly, can help you continue building your business on solid stone instead of sand.

Chip Mayo and Dallas Romanowski

As a member of the Business Enterprise Institute (BEI), Cornerstone Business Advisors is an authorized distributor of BEI’s content and Exit Planning Tools.