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CEPA (Certified Exit Planning Advisor)
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What is the calculation for Recasted EBITDA? Addbacks + EBITDA = Recasted EBITDA What does EBITDA stand for? Earnings Before Interest, Taxes, Depreciation, & Amortization What are the three gaps within the Value Acceleration Methodology? Wealth Gap, Value Gap, & Profit Gap What are the Five Stages of Value Maturity in order? Identify, Protect, Build, Harvest, Manage In the Five Stages of Value Maturity, what occurs in the "Identify" stage? Identify and asses the business value. Understand how ready and attractive the business is. What is the current value? What is it's potential value? What are the gaps? What are considered the "Value Creation" stages within the Five Stages of Value Maturity?
Protect Value and Build Value In the Five Stages of Value Maturity, what occurs in the "Protect" stage? Protect what you have because "build" means more risk. Make sure the right systems are in place: the right financial advisor, right financial plan, documented standard operating procedures within the business, insurance, etc. Protect always comes before Build. Non-strategic actions are ALWAYS before strategic actions. In the Five Stages of Value Maturity, what occurs in the "Build" stage? This is made up of strategic actions including culture building, communication building, personnel changes, new products/improvements, etc. In the Five Stages of Value Maturity, what occurs in the "Harvest" stage? This is when the owner exits the company and harvests its value Simply put, what is exit planning? Good Business strategy What are the Four intangible Capitals or "Four C's"? Human Capital, Structural Capital, Customer Capital, & Social Capital How much of a business' value (in percentage) is trapped inside the four intangible capitals or "Four C's"?
What is the Wealth Gap? Understanding the owner's wealth goal (how much money they'll need to fulfill personal needs) and the current value of their assets (not including their business). The gap or difference between these two is usually filled by the business' value. What is the Value Gap? The difference between the owner's current business value and the Best-In-Class business value. What is the Profit Gap? The difference between the owner's current business profit (or recasted EBITDA) and the Best-In-Class business profit (or recasted EBITDA) The two concurrent paths are in which gate within the Value Acceleration Methodology? The Prepare Gate What are the two concurrent paths within the Prepare Gate? The risk mitigation (De-risk) / business improvement path AND The personal/financial ("Vision") path What is the ONE goal of the Value Acceleration Methodology?
To drive value across all three legs of the stool (business, financial & personal) How much of an owner's wealth (in percentage) is locked in their business? 80-90% What's the difference between a Lifestyle Business and Value Creator Business? Lifestyle business = good income; not transferrable Value creator business = good income; transferable (owners treat their business like an asset) Most owners don't address what kind of planning? personal planning What kind of planning could be the key to making an exit successful? personal planning What is the number one reason deals fail? seller's cold feet The Value Maturity Index teaches owner's the concept that they can have and . value AND income (as long as the owner focuses on VALUE first)
Protect and Build Which of the Five Stages of Value Maturity are in the Decide Gate? Harvest What is the definition of a Triggering Event? A business valuation correlated to a personal, financial, and business attractiveness and readiness assessment to determine where the business value lands in the range of value What is the definition of Exit Planning? Exit Planning combines the plan, concept, effort, and process into a clear, simple strategy to build a business that is transferable through strong human, structural, customer, and social capital. The future of you, your family, and your business are addressed by exit planning through creating value today. Who determines the multiple range of a company? The private capital market, but company's can control where they place in that range depending on the strength of their intangibles. Value acceleration occurs by managing the controllable factors (intangibles) within the company's multiple. What're the scoring metrics for the Common Sense Scoring Scale?
- Weak - haven't thought about it
- Have thought about it but they don't have anything
- Below average
- Above average
- Best-In-Class
- Perfect; can't get better; this is rare Most people fall in the 2, 3, 4 or 5 range. 1's and 6's are rare. What are the Range of Values for the Common Sense Scoring Scale? 50% or less = weak; high risk 58% = average 67% = above average; low risk 72% or higher = best-in-class What is the definition of Value Acceleration? A proven process that focuses on value growth and aligning business, personal and financial goals. As it relates to retirement planning, what are the three main business owner issues?
- How much do I need?
- What rate of return (ROR) do I need on my investments?
- Addresses stock market volatility What are the main drivers of financial planning as it fits in with exit planning?
- Establishes, based on fact (not feeling), your present value
- Predicts the probability of succeeding with growth and transition strategies
- Identifies your Profit Gap
- Identifies your Value Gap
- Identifies ACTIONS you can take to protect, build, and harvest value What is the definition of the following Standard of Value? Investment Value The value to a particular investor based on individual investment requirements & expectations. How is Discounted Cash Flow (DCF) predicted? Discounted Cash Flow is predicted on a specific future look at economic benefits. What leg of the stool is most important? All three legs of the stool are EQUALLY important. What is the formula for Value Gap? Best In Class Value - Current Value The biggest obstacle to plans getting done is. poor planning
What is the "Gap Nobody Knows"? "Execution is the great unaddressed issue in the business world today. Its absence is the single biggest obstacle to success"
- Larry Bossidy & Ram Charon What are the three success areas a business owner's goals and objectives should focus on? Personal, Financial, & Business What are the four cornerstones of Relentless Execution?
- Vision
- Alignment
- Accountability
- Rhythm What are SMART goals? Specific, Measurable, Aspirational, Realistic, Time-based What is the definition of Relentless Execution?
- A specific set of behaviors & techniques that companies need to master in order to have a competitive advantage.
- A systematic process of rigorously discussing the how's and what's, questioning, tenaciously following through, and ensuring accountability.
According to the EPI State of Readiness Survey, % of owners need the company to remain profitable, yet % have not done strategic review or a value growth project.
- 50%
- 86% What are the four "inside" exit transfer methods?
- Intergenerational Transfer
- Management Buyout (MBO)
- Sale to Existing Partners
- Sale to Employees (ESOP) What are the three "outside" exit transfer methods?
- Sale to a Third Party
- Recapitalization (Recap)
- Orderly Liquidation What is the definition of a Intergenerational Transfer? Transfer of business stock to direct heirs, usually children. 50% of business owners want to exercise this option -- but in reality, only about 30% actually do so. What are the pros of an Intergenerational Transfer?
- Business legacy preservation
- planned
- lower cost
- more control
- less disruption
- higher buyer/seller motivation What is the definition of a Sale to a Third Party? Owner sells the business to a strategic buyer, financial buyer, or private equity group through a negotiated sale, controlled auction, or unsolicited offer. What is the definition of a Recapitalization? Finding ways to "fund the company's balance sheet". Essentially brings in a lender or equity investor to act as a partner in the business. Can sell minority or majority position. What is the Private Equity Group structure?
- Limited partners invest in a Private Equity Fund.
- The PE Fund makes an investment into a target company via cash or debt
- The investment purchases price proceeds through selling shareholders or existing lenders/bondholders What happens as more money comes into the Private Equity space? The more money that comes into PE, the more competition, and the more competition, the less the returns How long does a deal take on average?
Family issues affect which stools within the Value Acceleration process? All of them (business, personal, and financial) What is a family enterprise? family business, entrepreneurial family, family firm, business family, family company, private company/business, etc. During family transitions, you must the interest of the ownership and management team. align If one of the clients has fear of conflict, as the Advisor, you must do what? You have to help them walk toward resolving it. Fair does not mean. equal What makes a team effective? Trust, conflict, commitment, and results What trusted advisors are a part of the core (discover gate) team? CPA
Attorney Financial Advisor Insurance Advisor Value Advisor What is the Organizing Principle for any exit planning team? To align the three legs of the stool: business, personal, and financial (this is the concept of "Mastering Planning") Master Planning is the Organizing Principle The Organizing Principle is the Three-Legged Stool And the Three-Legged Stool is business, personal, and financial Every business trades within a. Range of Value (ROV). Also known as Range of Multiple (ROM). There is a range of multiple for every industry. A typical range is as low as 3 and all the way up to 10x recasted EBITDA. Your Attractiveness and Readiness Score determines what? Where the company places on the Range of Value. The high/lower the score, the higher/lower the multiple. What is the Common Sense Scoring Scale used for? To analyze a company's attractiveness & readiness
What are other names for the Triggering Event?
- Enterprise Value Assessment
- Discovery
- Opinion of Value Before calculating the Value Gap, you must first. Know the Profit Gap. According to the State of Owner Readiness Survey, % of owners indicated they did not have a formalized exit planning team. 74% Who would be a part of the Extended Team? Investment banker, estate planning attorney, IP attorney, IT consultant, marketing consultant, etc. How are exit planning teams formed? Through education. The likelihood of that the Advisors on your team understand the Value Acceleration process are slim, which is why educating them on this is one of the first things you should do. According to the State of Owner Readiness Survey, % of owners don't know all their exit options. 66%
What does it mean to take "multiple bites of the apple"? Using a multiple exits strategy and partial exits strategies allows the owner to de-risk over time. But this type of strategy requires a few factors to be in place... Growth: A healthy company that is growing or has potential to grow with the assistance from outside resources (including private equity, strategic investment / buyers, recapitalization Time: Has time (these strategies take time to implement, but also allow time for estate & tax planning, which improves the financial outcome) What are the pros and cons of Intergenerational Transfer (a.k.a. family succession or family business transfer)? Pros:
- business legacy preservation
- planned
- lower cost
- more control
- less disruption
- higher buyer / seller motivation Cons:
- family dynamics
- lack of funds/illiquid buyers
- lower sale price
- key employee flight risk
- tradition may outstrip good strategy
- path of least resistance - but not always a path to growth or success
