Blog

It’s one of those issues that you may feel you don’t have time for because you’re too busy actually running your business. But it’s an important question you need to ask yourself. What are your plans for the business once you’re out of the picture? It’s surprising how few business owners actually know the answer. Statistics show that almost half of family businesses have absolutely no succession plan.

Gilmore Jasion Mahler and Croghan Colonial Bank recently teamed up to present a business succession planning workshop for area business owners. They offered some valuable takeaways including 8 steps to ensure a successful transition to new leadership.

First and foremost, be realistic about how long it will take to sell your business. Croghan’s Paul Wannemacher says the average time to sell a business once it’s listed for sale on the market is 6-11 months. He says one should also factor in 2-3 months to close once an agreement is reached.

“Make sure you’re ready when that prospective buyer does come along,” says Wannemacher. “Create a descriptive listing of the business as well as an overview. Just like when selling your house, you need to think about “curb appeal”. You may need to resurface the parking lot, freshen the landscape or painting to make it look more attractive to a potential buyer.”

Once you’ve tended to that first impression of your business and informed your key management, here are the 8 steps to succession planning:

1. Get a handle on the marketplace. What’s the climate in your industry, the local economy and the national and international economies? Are there potential buyers out there?  Maybe your family members, managers within the company, maybe competitors?
2. Pull together a team of advisors. This team should include your CPA, lawyer, wealth advisor and commercial banker.
3. Get your business ready for transition

• Review metrics
• Make sure your records are accurate and up to date

It’s smart to anticipate some challenges along the way as you get your business ready for transition. Some of those challenges could include:

• Normalizing your income statement
• Cash flow/debt service history and capacity
• The condition of your balance sheet
• Collateral

Who is in the pool of potential buyers?

4. Get a valuation

Gilmore Jasion Mahler CPA Jeff Denning is an expert in business valuation. He says the first question you need to ask yourself before getting a business valuation is: what are you offering to sell?

“Are you selling all of the transferable assets of your business or a fractional interest or equity share? What about your client and customer relationships? Your contracts? What about your workforce? We’re in the midst of a critical workforce shortage,” says Denning. “Many businesses are interested in acquiring other businesses right now to acquire their workers.”

Another challenge can be landing on an asking price for your business. Denning offers these questions to ask yourself:

• Do you have a CFO or controller to assist in this process?
• Do you have an outside CPA with valuation experience?
• Do you need a business broker to help assess market potential or handle the entire sale process?
• Do you need a real estate appraiser?
• Grade your business against other comparable businesses
• Is the business transferable? Owner-operated? How much risk of retaining customers?
• Put yourself in the buyer’s shoes- your advisors should help with this perspective

5. Create a personal financial plan: What amount of sale proceeds do you need to be satisfied? Look at your living expenses, vacations and spending you anticipate, family and charity goals. Don’t discount the emotional toll of finally leaving a business you’ve nurtured and built over the years.
6. Prepare your family for the transition: The sooner you can let family members in the business know your plans the better. You may consider family wealth transfers through trusts or partnerships.
7. Work with prospective buyers: Some things to keep in mind as you consider bids: how will loyal managers and employees be treated? Will the new owners continue with the company, improve it, or close it down?

“The buyer may want you to stay for a period of time after the sale. Just be very clear what that continuing role might be and how long will it last,” adds Croghan Bank’s Chris Kelly.

8. Structure and close the sale

“Once you’ve identified a buyer, be aware that the final stretch can be as difficult as all the other steps that led you to this… and maybe more frustrating,” says Croghan’s Paul Wannemacher. “Will the business organization change? Will there be a reorganization? Are non-compete agreements needed?”

And, what type of financing is available?

• Seller financing (you take on all the risk)
• Conventional bank financing
• SBA 7(a)
• Collateral enhancement
• Equity investors
• ESOP

From assessing the marketplace to closing the sale, these eight steps are meant to be a guideline as you contemplate the future of the business you’ve worked so hard to build. While it may seem daunting, many financial experts agree that perhaps the worst thing you can do in regard to succession planning is to do nothing. If you and your financial team can come up with a strategy, you can rest assured that your exit will leave your business and your employees well positioned for future success.

Jeffrey S. Denning, CPA ABV, CFF is a partner with Gilmore Jasion Mahler, LTD. He has over 30 years of accounting experience, with a focus on providing services as an accredited business appraiser, forensic accountant, litigation consultant, and expert witness.

Chris Kelly is a Vice President and Commercial Loan Officer at Croghan Colonial Bank. He has over 20 years of experience in commercial banking, providing small to medium sized privately held businesses, nonprofits and professional firms with financial solutions.

Paul Wannemacher, CPA, PFS, CFP is a Vice President and Trust Officer at Croghan Trust & Investment Management. He has over 25 years of experience in trust administration, portfolio management, tax & financial planning and business consulting.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. 

Do you need to figure out what your business is worth? If you’re looking into getting a business valuation, you have some decisions to make. Gilmore Jasion Mahler (GJM) Partner Jeff Denning specializes in business valuation and says you could pursue a detailed (possibly 100 page) report, or a less detailed report. Which one do you need? Jeff has some answers in our most recent video blog.

Learn more about Jeff’s expertise in business valuation and GJM's forensic services, and don’t forget to sign up for our free quarterly newsletter The Expert. It offers timely and helpful articles with a focus on business valuation and litigation support. Just click here for quick and easy sign up.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. 

As a business owner there are many reasons why you may need to know how much your business is worth. Perhaps you're considering selling, or maybe the valuation is required by the IRS or a court of law. Gilmore Jasion Mahler (GJM) Partner Jeff Denning specializes in business valuation and explains the process in this short video.

Learn more about Jeff's expertise in business valuation and forensics, and don't forget to sign up for GJM's free quarterly newsletter The Expert. It offers timely and helpful articles with a focus on business valuation and litigation support. Just click here for quick and easy sign up.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

On January 3, 2020, Iranian General Qasem Soleimani died in a Reaper drone attack carried out by American military forces. The American government cited a growing threat against US national security and the interests of the US as predication for the strike. There have been reports that Iranian cyberattacks against American businesses and government agencies are sure to intensify in retaliation.

While this may seem like an issue for the United States government to handle, American companies should recognize the fact that Iranian cyberterrorists and their allies are likely to target US civilian companies in an effort to destabilize as much of the country as possible.

The Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) has issued several warnings to American companies to explain the breadth and depth of the looming threat of cyberterrorism. It is essential for all US companies across all industries to take appropriate measures to defend their interests and digital assets, especially those pertaining to sensitive private data of US citizens.

Defending Your Business Interests and Data from Iranian Cyberterrorism

Ultimately, it’s important for all American business leaders to know that it is virtually impossible for the average company to protect itself from an all-out cyberattack staged by Iranian agents and Iranian allies.

The best a potentially vulnerable company can do is to make the company as hard of a target as possible in the hopes that any attacks against it will appear to be more trouble than they’re worth. It’s also essential to have protections in place in the event your company needs to recover after a cyberattack from Iranian operatives or any other cyberattack.

The CISA recommends American companies take the following steps to minimize their chances of becoming targets and to streamline recovery processes after successful attacks:

• Enable port monitoring and disable all nonessential ports. Companies should know which ports are necessary for business-critical operations and which are vulnerable. For the ports that must remain open, enable port monitoring to track all traffic through those ports.
• Configure advanced email and communications monitoring. Companies should carefully track phishing trends and consider implementing phishing protection measures to prevent employees from inadvertently granted access to cyberterrorists.
• Patch all externally facing equipment immediately. “Day zero” vulnerabilities exist on all types of equipment, so you don’t want to run the risk of letting several patch cycles pass while your systems remain unprotected.
• Limit and restrict PowerShell usage. Log all use of PowerShell within your company and cut off access for any employees who do not require access for day-to-day job duties.
   
• Configure a reliable data backup system. A good rule of thumb is to have at least three copies of your critical data in at least two different locations, one of which should be offsite.
• Conduct response and recovery simulations. It’s a good idea to put your defensive measure to the test and run simulations to see how your team responds to an active threat simulation, including data backup and other recovery processes.

If Iranian agents decide to attack American businesses digitally, experts predict it will be done with the intent of causing chaos and disruption rather than to extort. Businesses that take appropriate precautions will be harder targets and will therefore be more likely to be overlooked by Iranian cyberterrorists.

If you are unsure about your organization’s data security environment, contact Gilmore Jasion Mahler, LTD (GJM) to learn how we can help you defend your interests and protect your data against cyberattacks. GJM’s experts can help to uncover the vulnerabilities of your business and assist with data governance.   

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

On September 30, 2018, the United States-Mexico-Canada Agreement (USMCA) was established after 13 months of negotiations. While the agreement is not currently ratified, the USMCA intends to replace the North American Free Trade Agreement (NAFTA), which has been in place since 1994. Ratification is expected to take place in early 2019.

The USMCA brings several changes to the economic relationship between the three North American countries. These include greater market access, inter-governmental cooperation mechanisms, and higher duty-free limits.

Everyone will feel these changes, not just major government agencies. Three provisions in the USMCA will particularly impact small businesses:

1. The establishment of the Committee on Small and Medium Enterprise (SME) Issues
2. The increase of the de minimis threshold
3. Changes to the automobile industry

The Committee on SME Issues

Chapter 25 of the USMCA will establish a Committee on SME Issues. This committee will assemble within one year of ratification and will be comprised of government officials from the U.S., Canada, and Mexico.

The committee will assist SMEs in their transition to the USMCA, identifying strategies to boost their economic success and increase cooperation between markets. The committee will host an annual SME Dialogue, inviting experts, academics, employers, non-governmental organizations (NGOs), and other stakeholders to engage in conversation on SME issues.

Small business owners may benefit from the representation this committee will provide. However, this committee will only be comprised of government officials. Not implementing the committee effectively may cause the voices of small business owners to drown within a messy bureaucratic system.

The Increase of the De Minimis Threshold

The de minimis threshold refers to the quantity of product you can purchase online and import duty-free. The USMCA raises the de minimis threshold to $800 USD for United States products, $150 CAD for Canadian products, and $100 USD for Mexican products.

This increase can lead to significant benefits for small businesses, which often do not have the resources to pay customs duties and fees. This will increase sales volume, providing greater profits for small business owners.

The 75% Tariff-Free Threshold for Automobile Manufacturers

Under the USMCA, 75% of an automobile must be manufactured within North America to be exempt from tariffs. This is a significant increase from the 62.5% requirement under NAFTA.

This provides an incentive for automakers to decrease operations overseas. The new threshold holds the potential to provide more income for small, local auto parts manufacturers and to increase jobs for North American workers.

If you're interested in staying up on issues impacting the manufacturing world, consider signing up for Gilmore Jasion Mahler's free quarterly e-newsletter The Manufacturer. It addresses a broad range of financial topics impacting the world of manufacturing. Just click here for quick and easy sign up.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.