As discussed in the previous issue of The Exit Planning Review™, it is important to select your successor early in the Exit Planning Process. One of the great advantages of having other owners in your business is that they can be your means for retirement. Especially with smaller businesses, a common Exit Planning technique is to have a younger individual buy into your business while you are still active. Upon your exit, the younger owner will purchase your remaining stock.
This can be advantageous because the younger person learns the business — its structure, employees, customers, operation and management — while you are still active in the business. More important to you, the younger person’s capabilities (as well as his or her weaknesses) are known to you, so you have a pretty good idea of how your business will be run after you leave. And most important of all, the business can be sold to a market you create and control.
The following are additional advantages to selling your business to other owners or employees, as well as the disadvantages of this type of exit path. Take time to compare the advantages and disadvantages of this scenario before picking your target successor.

Advantages
• Owner can structure the deal ahead of time to suit his or her particular needs and objectives.
• With proper planning, it is possible to be cashed out of the business when you sell the controlling interest.
• Maintains a greater measure of control during the buyout.
• Pre-qualifies the buyer(s) through on-the-job training and observation.
• Continues the “culture” or mission of the business.
• Ensures that all of the employees who helped build the business won’t lose their jobs and future with the company.
• A side benefit of planning an employee buyout is that the steps taken to build value and train future owners will make the business more profitable, more stable and better managed — even if the owner decides to postpone his or her retirement or eventually to sell to an outside party. Thus, grooming the “heir apparent” allows flexibility in case the unexpected happens to the heir, such as sudden disability or receiving a large family inheritance. At the same time, the owner has developed a stronger business, both from a financial and employee standpoint.
Disadvantages
• No cash up front, unless the owner has pre-funded, and even then, he or she has probably pre-funded with money that was the owner’s anyway.
• Unless proper planning and implementation has occurred, a greater risk may exist because the owner’s buyout money typically comes from the future earnings of the business after he or she leaves it.
• In some instances, if the business is worth more than $3 million or so, it can be very difficult for the employees to be able to afford it. The owner may simply have too much money and financial goals at risk.
• Employees are often employees because they don’t have an owner “mindset.” They’re not entrepreneurs and they may not respond well to the challenges and pressures of ownership.
Although there are many ways to minimize the disadvantages of this transfer strategy, it is important for you to bear in mind that there is still a significant risk in transferring control of the business to an insider when you leave your company, unless you are cashed out. As always, it is important to undergo proper planning so that you can take advantage of the positive outcomes associated with your chosen exit path.

Article presented by T. Ray Phillips, CFBS, AEP, ChFC with The Family Business Legacy Co., LLC, is a member of Business Enterprise Institute’s Network Of Exit Planning Professionals™. © 2009 Business Enterprise Institute, Inc. To contact T. Ray Re: subject matter in this article, call (317) 208-6312 OR e-mail trphillips@finsvcs.com

DISCLAIMER: The information contained in this article is general in nature and is not legal advice. For information regarding your particular situation, contact an attorney or tax advisor. This newsletter is believed to provide accurate and authoritative information related to the subject matter. The accuracy of the information is not guaranteed and is provided with the understanding that none of the providers of this newsletter, including Business Enterprise Institute, Inc., is rendering legal, accounting or tax advice. In specific cases, clients should consult their legal, accounting or tax advisors.

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To attend the Indianapolis August Small Business Marketing Idol Contest (or participate yourself), link to this page.

Indianapolis Small Business – Tell Your Own Story

Got2Know is a national video production & social media company based in Carmel (Indiana, not California). Our mission says it all –”Helping you succeed in life, via video” — we see it as our job to connect the 217 MILLION people that are online everyday to the 8 million+ businesses that have great products and services that these people want to know about. And we do so through VIDEO.

Our local clients range from the Indiana State Police (for example, http://www.igot2know.com/action/viewvideo/416/Underwater_Search__amp__Rescue/) to Meyer Najem to Commonwealth Engineering to The Children’s Museum. Nationally, we have provided services to well known authors, motivational speakers, global companies, non-profits, etc. We have been fortunate to “shoot” and “edit” videos from Bill Clinton to Margaret Spellings to Tony Dungy to Drew Barrymore. We have produced over 1,800 videos in the past year and half.

Getting to where we are now has been a complicated journey. It is almost impossible for us to believe that the journey began 3 ½ years ago. At times it seems like 1 year but to be honest, most of time, it seems like 5 years! Shortly after choosing a name and while on my way to a conference, I heard a stranger say “So, what is it that I “got2know?” as he sat beside me on a short flight to NYC from D.C. The fact that he thought the name was catchy was a good sign, right?
Indianapolis Entrepreneurs: Meet with other small business owners for Actionable content to grow your business. Click here for your free ticket and information.

That poor stranger. For the next 20 minutes, I passionately explained Got2Know, our services and our value to companies and professionals and non-profits of all sizes – as if we were already a large, successful company instead of a start-up based in Noblesville, Indiana. We didn’t even have a website and had not made our first sale. Oh, those were the days (ones that I would not ever want to relive).

We were confident that Got2Know would become one of the first marketing companies that could offer high quality, 100% professionally produced short informational videos in the U.S. We believed we could differentiate ourselves because we would have both a full video portal for the general public to view all the information they wanted (i.e. how to find the right college, how to buy a car, how to choose the right doctor, lawyer, etc.), combined with an online community so we could deliver the “knowledge” they were wanting but ALL IN VIDEO – not just writing.

Looking back over these past years, I think our team would say without any doubt, we have learned many valuable lessons. Personally, I learned more in 3 years than in my 15+ years of working in Management roles at Large Corporations. While my husband, Craig, and I had been fortunate to be sole proprietors in the past, we knew that Got2Know was going to be different, very, very different from the start.

Craig and I have always had the philosophy that failure is not an option. If Got2Know didn’t attain a milestone, then, we just learned another lesson. Some of the lessons were learned after the fact, some before we knew we needed to learn them (thanks to great mentors) and some just in time. The very first lesson we learned and now would pass on to anyone who is thinking of starting any type of business is try never to underestimate the capital you will need. When you think you are asking for enough money, when you think to yourself, it would be a dream come true to secure XYZ amount then, dream bigger! When we started, we planned and planned. We estimated and readily secured $30,000.00 in trade for equity in our company. While this amount did “start” the company, within months, it was evident that it would not sustain us for any period of time.

Our strategy called for sales in 2007 to sustain our growth. We now know, we did not plan enough. While it would be hard for anyone to plan for the direction the economy was about to go, if we had more capital, life would have been easier. We were able to secure a Small Business Loan to get us through. The Second Lesson we learned: Build the right team – get the right partners on board early on. Having people who each bring something different to the table. At least we got this lesson right. It is one of the best moves we were fortunate enough to make.

The third lesson: Never give up. There were several times when it just seemed that the economy was going to take us down and just then, we would make another sale. By early 2008, Got2Know was rapidly growing. We had become an internet marketing and video production company but as we struggled to better understand the national market, the world of video and social media had shifted into high gear. Everybody seemed to be wanting to take advantage of leveraging technology. 2008 was particularly challenging because “online marketing and social media experts” were popping up everywhere while our nation’s economy was facing tough times. Credit tightened just as we were needing more capital to grow. We were convinced we were in the right space at the right time because:

• The number of individuals going online to “find information” and “make purchases of goods and services” had grown from 177 million people in 2006 to 200 million by end of 2008. Today, more than 217 million are online every day.
• The number of videos being watched online had exploded – from 15 billion a month by early 2007 to an estimated 25 billion per month through 2008. In May 2010, over 33B videos were watched online.
• Advertising dollars were following the masses and going online.

Armed with this information and our desire to catapult our little Got2Know to the next level, we would require more capital (sound familiar?). While we raised some money and kept our company going – thanks to local angel investors, we knew that we would need more to get to the next level We had to find a partner with a very high level of expertise in Technology & Social Media, therefore, bringing in house the ability to manage our website and the programming behind G2K, and help us to achieve our goals. So, we started to search – from New York to San Francisco and back to Boston.

Now comes the most important lesson of all: Network constantly. You will never know who can be helping you even right in your own backyard! Networking (not the 25+ business start up and/or angel investing books we were reading) led us to our next partners and they were right here in Hamilton County.

From Start Up to Success

It all happened kind of like a real life Linked In when we received a call in November 2008 to meet with several individuals who had a tremendous amount of experience in IT – specifically, website design, development, SEO, SEM, data solutions, and more. They had been successful for more than 17 years. Today, I can say, beyond any lessons – luck also had some part in the deal.

Megachip Technology, a less known high tech firm in Carmel, IN was just what we needed. Sanjay Shukla and his team was our game changer. Within hours, the Megachip Team quickly understood G2K’s vision, our technology needs, our financial and capital requirements and at the end of 1 meeting, we had an investment offer from the Megachip Team. So, you think, this only happens in movies? Well, we are here to say, this was reality. By partnering with Megachip, we knew we were well-equipped with a powerful team and the right technology. All our hard work had paid off. With a new website, revised go to market strategy, and the expertise of the bigger team, we began growing more rapidly and nationally.

We implemented new robust IT and marketing solutions and now offer customers exceptional value not only in video production, but complete video distribution and analytics. While raising capital is always helpful, doing so from the right team who brings more value to your company to guide it and grow it beyond what money alone can do was hitting a jackpot.

Today, G2K is one of the largest national video production companies in the U.S and we continue to grow explosively quarter over quarter.

A Look Back

Whether it was turning down the chance of pursuing Venture Capital money, since many experts said we would not likely succeed in Indiana; or deciding to sell more equity or to partner or not to partner with Megachip, decisions are not always easy to make – but we needed to make them. Risk taking is always part of the entrepreneur’s life. Megachip Technology made our decision easy.

We were fortunate that our decision was truly a “game changer” for Got2Know. Today, Got2Know is NOT just one of probably a hundred companies that can produce professional videos. We are happy that we chose to stay in Indiana. We had a goal to become a successful Indiana based company who would compete on a national level. Now, as one of the premier video production companies in the U.S. with a full video portal, we are very excited about our future.

So, if you are thinking about starting a company in our community but are concerned because your competition is based on the East or West Coast and is even likely to be ventured backed, we would say Go For It! We are going head to head with similar companies and we are able to win.

Crucial to our competitive success are:

1) We not only offer professional video production services but we help our clients “deploy” their videos to many other mediums so as to leverage their “video” assets – doing so helps to get more traffic to their site. We help our clients with additional services from digital magazines to email campaigns, blogging, social media widgets and more.

2) We have services that meet almost any budget. While many national and local video production companies are charging the “going” rate for the full production and delivery of 1(typically 1 – 3 min in length) video at $1,200 or more, we are able to produce the same or better quality for 30 – 50% lower!

3) We have www.igot2know.com – a portal on which we can serve up our
professionally shot videos for all of our clients – FREE (think of us as the
positive, informational, YouTube!)

We now know that yet another valuable lesson to learn is that not only can you build a successful company here in Indiana but it is very likely it can be done for a lot less money than on one of the coasts. We hope the lessons we learned help you and your team. We know that through networking and hard work, you can make your dream come true. And remember, if you “Got2Know”, you got to go to www.igot2know.com.

Craig and Lisa Feeley are Noblesville residents of almost 11 years. Got2Know was founded in Noblesville and recently re-located their offices in with Megachip Technology in Carmel. For more information about G2K and Megachip, visit www.g2k.igot2know.com and www.megachiptech.com.

Contact Lisa Feeley Managing Partner of Got2Know, at: lisa@igot2know.com

Vote for your favorite of the 9 contestants. To attend the August Small Business Marketing Idol Contest (or participate yourself), link to this page.

Contestant #1: Carol Coots

Contestant #2: Neil Richmund

Contestant #3: Sandra Nardoni

Vote for your favorite of the 9 contestants. To attend the Indianapolis August Small Business Marketing Idol Contest (or participate yourself), link to this page.
Contestant #4: Suzanne Shafer

Contestant #5: Becky Cash

Contestant #6: Christian Tombers

Vote for your favorite of the 9 contestants. To attend the Indianapolis August Small Business Marketing Idol Contest (or participate yourself), link to this page.
Contestant #7: Nick Milano

See article by Nick Milano

Contestant #8 Joe Strange

Contestant #9: Sondra Gunnell

Vote for your favorite of the 9 contestants. To attend the Indianapolis August Small Business Marketing Idol Contest (or participate yourself), link to this page.