If you contemplate transferring your business to an insider (employees, children or co-owner) and you want to get paid the value of your business, then, generally speaking, the value of your business cannot exceed four times the true cash flow of the business (as illustrated in the previous issue of The Exit Planning Review™). We have defined true cash flow as the amount of pre-tax money distributed to owners via salary, bonus, distributions from the company such as S-distributions, and rental payments in excess of fair market rental value of the equipment or building used in the business. Let’s look at how cash flow determines the sale price to insiders.
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December 2009 Articles
Selling To Insiders
Saturday, December 26th, 2009
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Are We Men or Mitochondria?
Friday, December 25th, 2009 Throughout mankind’s history work has been accomplished in a group. Early man took advantage of group efforts in order to fell larger prey. Cooperation was needed when systematic rabbit hunts were conducted.
As chronicled in Wealth of Nations by Adam Smith, specialization and division of labor resulted in dramatic improvements in productivity. For example, in pinmaking the division of labor and cooperative efforts of many resulted in the increase of pin production by a factor of a hundredfold or more per laborer compared to a worker doing every part of pin production himself.
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It is About the Relationship – Not the Release
Thursday, December 24th, 2009
Social media expert Jason Falls
relatively accessible and open to story suggestions.
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Neglecting to Plan
Wednesday, December 23rd, 2009
Do me a favor. Tell me what you did this past Monday.
Tell me exactly what you accomplished from the moment you got into your office until the minute you left. If you’re like most business owners, your answer is something along the lines of “When I got to the office I had 137 emails, 4 voice mails and I just dove into it.”
Now, I want you to consider a similar question. If I asked you on a Friday afternoon what you got done during the week what would you say? Again, I typically hear something like, “It’s Friday already? I’ve been putting fires out all week!”
Unfortunately, I can’t promise you that planning will eliminate all of the challenges you deal with each week. However, I can assure you that a few minutes of planning each day will dramatically increase your productivity over time.
“But CJ” you’ll cry, “I’m working hard every day! I don’t take lunch and can’t remember the last time I got home before 6:30pm”. The problem isn’t the amount of hours you’re working. The problem is that you’ve got a lot of activity and very little achievement.
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