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How to Save a Legacy Business: Lessons from Sam Wo’s Possible Closure

December 9, 2024

Sam Wo, a 115-year-old Chinatown institution, faces closure as its owner retires without a successor. This historic restaurant, known for its simple Cantonese dishes and colorful legacy, highlights the vital role of Exit Planning. With proper preparation, its future could have been secured, preserving its cultural significance. Can Sam Wo’s story inspire businesses to protect their legacies?

How to Save a Legacy Business: Lessons from Sam Wo’s Possible Closure

December 9, 2024

The story of Sam Wo Restaurant, a 116-year-old Chinatown institution in San Francisco, is a bittersweet reflection of the complexities surrounding family-owned businesses and the necessity of proactive Exit Planning.

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Recipe For Success: Building an Advisor Team

Just like every business is unique, so are the plans owners have for transitioning out of business. Their financial and values-based goals, the desired exit path, and their timeline are all specific to their personal and professional situation. For these reasons, there is no one advisor that can successfully manage an entire Exit Plan from start to finish on their own. A team of experts is needed to successfully build and execute on the plan to meet the owners’ objectives. Whether you want to take the lead in designing the Exit Plan and coordinating the team on execution, or you want to focus on performing your area specific tasks, there are opportunities for every type of advisor to make a significant difference in the lives of their clients. By being in a network of advisors that can be called on when the time is right, you can save time by working with advisors familiar with your process, open up doors to working with new clients, and ultimately differentiate your practice from others that do similar work. What other advisors are needed for an Exit Plan? While this list is not exhaustive and does not include specialties within a profession, these are the most common advisors included on an advisor involved in Exit Planning. When developing your network, there are certain characteristics you’ll want to look for when determining if a particular advisor will be effective on an Advisor Team. When is the Advisor Team involved in the planning process? It would take more than the standard length of a blog post to list out all the possible scenarios in which each advisor type may get involved in an Exit Plan, especially when considering each unique exit path. However, we do want to showcase a few of the more common scenarios. For more on creating a comprehensive Exit Plan, check out this blog post on the BEI Exit Planning Process and working with an advisor team! A financial planner will look at the business owner’s personal goals and lifestyle to determine how much is needed from the transfer of the business to meet that financial need. Additionally, they can look at the current resources to determine if there is a financial gap between where the owner is today and where they need to be at the exit event. They are looking to answer if there is enough capital and assets, given the chosen exit path, to ensure financial independence from the business. A CPA has a key role when determining the pros and cons of each exit path, specifically with regard to structuring the transfer to minimize taxes upon exit. CPAs are also involved in the valuation of the business for the purpose of buy-sell agreements, cash flow projections, and preparing financial audits for potential buyers. Having someone on your team to help the owner not only get the highest number for their business, but make sure they get to keep the most from that, is valuable to all members involved in the process. It’s important for an insurance professional to look at the amount of coverage needed to fund lost income if the owner dies prior to their exit from the business. They will also review the estate plan to ensure consistency between the exit objectives and existing resources and make any modifications necessary for business continuity. An insurance professional will also analyze the need for key-person life insurance as part of preserving the business value. Regardless of if the owner desires to transfer to an insider or sell to a third-party buyer, you’ll need an attorney on the team to draft necessary legal documents. For insider transfers, an attorney can support with purchase agreements, buy-back agreements, incentivizing key employees and designing buy-sell agreements for the new owners. In a third-party sale, you may need several specialized advisors, such as an M&A specialist, investment banker, or business broker. These advisors will perform pre-sale due diligence to ensure a business is ready to go to market and negotiate the sale of the business. An attorney can also work with the owner on Non-Qualified Deferred Compensation plans to motivate and keep key employees as part of promoting business value. Key Ingredients to Building an Advisor Team Start building your team early. The earlier you have advisors in place, the easier it will be to get aligned in what the planning process looks like and each advisor’s role in that process. As you can see just from the few insights provided in this blog, there is a lot to consider for each Exit Plan, and you will need to coordinate the activities of those advisors to ensure the recommendations are designed and executed in a way that allows the owner to leave their business when they want, to the person they choose, and for the money they need.

Building a Business that Outlasts the Owner

An unexpected and untimely death is a business challenge that most business owners don’t want to talk about. Even fewer like to plan for this inevitable outcome, especially younger owners who don’t plan to die anytime soon. According to BEI’s 2022 Business Owner Survey, a significant percentage of owners say that the largest obstacle to Exit Planning is that they believe it’s too early and not necessary yet. While it’s also reported in the survey that a larger number of young owners are considering planning than ever before, it’s unlikely that many are concerned about death or disability. Though it may seem morbid, it is critical for owners to plan for their death well before they’re ready. Failing to do so could majorly disrupt the lives of the people they care about, their businesses, and their legacy. What Happens Without a Succession Plan? As an Exit Planning Advisor knows, an essential function of an Exit Plan is to dictate the next steps after the owner dies or becomes disabled. However, it’s often challenging to convince these owners, especially younger owners, that a succession plan must be a high-priority issue. It’s important to share with your clients the various ways a business can quickly spiral into chaos without a plan in place. Consider a few of the following pitfalls: How to Reduce Risks While it can be a lofty and challenging task, your job as an Exit Planning Advisor is to make your clients aware of the risks of failing to plan, and encourage them to start a succession plan as early as possible. Death can come unexpectedly and destroy their life’s work. When the goal of an Exit Plan is to protect that important work, you must help your clients mitigate the risks that an unexpected death can bring by utilizing the following tactics: The Bottom Line A business owner’s unexpected death will almost certainly have negative consequences for a company. The prospect of dying without a plan in place can be scary. However, if the business and the owner are able to establish a succession plan and take the necessary actions to prepare, it can cushion the impact.

Business Owners Stepping Back to Grow Value

For many small business owners, they run the show. Owners often have too much on their plate to make any real progress. This includes creating a marketing and sales strategy, as well as taking on leadership roles such as President or CEO. As business advisors, you likely encounter business owners with the belief that success only comes through relentless effort and complete control of their company. However, the truth is that working harder and longer hours doesn’t always equate to stronger business value. In fact, it can often hinder growth and limit potential to grow value exponentially. Throughout this blog post, we’ll dive into the concept of laying off the gas to grow business value. We’ll also explore the concept of stepping back to grow value and how delegating tasks can lead to exponential scaling and increased profitability for business owners. We’ll even draw inspiration from the idea of taking summer trips as a test of how a business can run without its owner’s constant presence. For more on working less to create value, check out this Forbes Article! Transitioning from Startup to Growth Phase: In the early stages of a business, founders typically wear multiple hats and handle every aspect of the operation. This hands-on approach is necessary for a startup, but as the business grows, it can become a burden. As an advisor, working with your client to develop a business growth strategy can significantly contribute to their long term success and competitive advantage To move past the startup phase, owners must shift their mindset from execution to strategy, vision, and growth. The Art of Delegation: When was the last time your business-owning client took some time off for themselves? Let’s take some time to run through the benefits of delegating tasks to employees. Empowering Employees: Developing Leadership Skills: Identifying Potential Successors: Fostering a Collaborative Environment: Enhancing Employee Morale and Engagement: Building Systems and Replicating Success: As entrepreneurs step back from day-to-day operations, they can focus on building systems, automating processes, and creating an organization that runs independently of their daily contributions. With well-established systems in place, replicating success becomes easier. Opening new offices, branches, or locations becomes feasible without overwhelming the business. Economies of scale improve margins, and the business owner can refine and build upon their achievements. Where Does Exit Planning Fit In? What does all of this mean for the overall value of the business? When considering business value, especially in the eyes of a third-party value, they want to know they are acquiring a business that does not rely on the current owner for success. Helping your clients ensure they have a next-level management team in place to keep the business running during the transition of ownership is one of the biggest value drivers to a business. At the same time, encouraging your client to take time away will help them with the emotional side of transitioning out of the business they built because they can preview other activities or causes they are passionate about. The Bottom Line: Stepping back to grow value is a fundamental concept for business advisors to impart to their clients. By delegating tasks and focusing on strategy and growth, owners can unlock the true potential of their businesses. Taking inspiration from the idea of taking summer trips as a test of a business’s autonomy, entrepreneurs can embrace delegation, build systems, and achieve exponential scaling. Remember, working less can indeed lead to making more. Are you ready to guide your clients towards success? Start embracing the art of delegation and witness the remarkable transformation it brings to their businesses.

Burnout: More Than a Buzzword for Business Owners

Burnout has been one of the biggest buzzwords in recent years. In fact, in 2019 the World Health Organization (WHO) officially recognized burnout as an official syndrome due to chronic workplace stress that has not been successfully managed. As a professional advisor to business owners, it’s important to be able to acknowledge the signs of burnout in your clients, and more importantly, how to work with them to overcome those stressors and stay the course when it comes to planning for one the most important financial events of their lives: the exit of their business. In this blog, we will: Defining Business Owner Burnout The WHO characterizes professional burnout by three factors: Looking at burnout through the lens of Exit Planning, burnout can be specifically problematic when working with owners who wear many hats. The mental and economic strain of running a business in a constantly changing and challenging marketplace continues to grow. A recent Forbes article cited statistics from a new national survey that reported 42% of small business owners have experienced burnout in the past month and 24% reported that they are currently experiencing burnout. The same article indicated that present-day burnout is likely building on top of the mental issues that were created for business owners amidst the Covid pandemic. As an Exit Planning Advisor, what can you do to ease the exhaustion felt by owners who have been bearing this impact for many years? Is it possible to keep them motivated enough to continue or begin an Exit Planning engagement? Signs of Burnout in a Business Owner Among all the stress that comes with owning and running a business, burnout develops deeper from the perspective of maintaining a healthy work-life balance. “While some symptoms of burnout can be apparent to those around you, many are internal, especially for driven entrepreneurs who pride themselves in their work.” (Friedman, 2022). In the conversations that you are having with business owners, you are in a unique position as the advisor to provide perspective to your clients. If you catch on that your clients are questioning their abilities, changing behaviors, or are totally resistant to planning or conversations about their exit, it may be time for them to take a step back and consider the signs and symptoms of burnout. A Hubspot article discussing recovery from professional burnout lists the following signs to look out for: When it comes to noticing these signs in an Exit Planning client, the consequences could be critical if it means that the owner would procrastinate or put off working on their Exit Plan. Since burnout is specifically caused by some or many job-related factors, there are a few encouraging ways to help your clients overcome these stressors. Overcoming Work-Related Stressors As businesses grow, they usually become more complex. Many business owners one day realize that they simply cannot do everything all by themselves, nor should they try to. One of the top tips that Exit Planning Advisors should try in order to address burnout is shifting the focus to delegating tasks and developing next-level managers. Next-level managers are those who have the skills and experience to take the business to the next level, and ultimately take over when the owner is ready to exit. By helping your clients recruit and implement management systems, it takes away some of their job-related stressors while also setting the business up for a successful future. When next-level managers are brought in as part of the Exit Planning Process, the business begins to rely less on the business owner and without this reliance, there are more opportunities for your client to exit their business on their terms. Even if your client has no intention of leaving any time soon, installing next-level management improves business value and gives them the freedom to focus on the most impactful business needs. As a business evolves, your client’s goals, skills and passions will transform too. Regardless of the reasons or details, circumstances with the business can change. When the owner’s plans don’t change with reality, it can inevitably bring out burnout in your client, and lead to frustration for the advisor. It’s important to form habits of frequent evaluation and restructuring when it comes to matching goals with the strategies to get there. One of the biggest benefits to an owner working with an Exit Planning Advisor is that planning strategies are designed to shift as the owner’s goals change. When an Exit Plan is designed to evolve with the owner, there is more potential to pivot and reignite the fire in your clients. When it comes to overcoming burnout, much of it has to be decided and acted upon by the business owner themselves. However, Exit Planning Advisors are often faced with pushback and resistance from owners hesitant to move forward in Exit Planning. These same roadblocks can and will appear when owners are faced with burnout. Therefore, encouraging your owner clients to take part in positive recovery methods, even while still working, could help them in the long run. A few ideas to suggest to your owner clients could include: Consequences of Burnout Burnout can be costly if not acknowledged or managed properly. For business owners, burnout can have consequences that resonate with a lack of planning for the business exit. That said, many of the consequences of burnout and poor management of the stressors referenced above can have an immense negative impact on the business in one or more of the following ways: The Bottom Line One of the most difficult parts of addressing burnout is beginning the process before it hits. While it is possible to address burnout even in the midst of it – prevention and planning before getting too burnt out brings on a more favorable result. Fortunately, an inherent benefit of planning for a successful future is that these plans are designed to address many of the causes of burnout. From installing a next-level management team to ensuring the plans align with your client’s evolving goals, planning for a successful future with the help of

Navigating Emotional Challenges in Exit Planning

Chasing The American Dream The United States has always been known as the land of opportunity and new beginnings. For many, families moved to the United States with limited resources and built their own businesses from the ground up. As families grew, family-owned businesses grew with them, establishing community ties and contributing to the economy. The American economy is largely supported by family businesses, generating over 78% of jobs and contributing to 58% of the country’s GDP (Hiebert, PhD, CFP). But, what happens when a family business owner can no longer run his or her business at its maximum potential? What can you do as a business advisor to convince your potential clients that implementing an Exit Plan benefits both the business and their family? This blog post explores a study published by Daniel Hiebert, PhD, CFP which focused on emotional and psychological factors that contribute to Exit Planning challenges in family businesses, and highlights the importance of involving experienced Exit Planners to ensure successful transitions between families and their businesses. To read the full article, click here: Emotional Attachment and Decision by Family Business-Owners to Seek Help From a Succession Planner. The Emotional Component: Letting Go of the Business One significant factor compounding the problem of transition failure lies in the emotional and psychological attachment of business owners to their enterprises. Many owners find it difficult to let go, neglecting the necessary planning for a successful transfer. In many cases, the relationship between an owner and their business becomes quite similar to a relationship between a parent and their child. Similarly to a parent nurturing their child up until adulthood, owners often build their firms from a blank slate. When it comes time for a parent to send their child to college or into the next chapter of life, attachment anxieties arise. The same argument can be made for owners and their businesses as they grow anxious about a business transfer. Furthermore, family relationships intertwine with business management and ownership issues, creating a complex web of emotions and goals that can hinder the planning process and further estate planning. The business becomes intertwined with the individual’s identity, making it harder to separate personal and professional aspirations. Overcoming Emotional Barriers: The Role of Exit Planners To address the emotional challenges associated with Exit Planning, family business owners must seek the guidance of experienced Exit Planners. These professionals possess a comprehensive understanding of both financial planning along with non-financial goals, allowing them to guide owners through the transition process. Research from the article suggests that emotionally attached owners are less likely to seek help from planners, even though their businesses stand to benefit the most from professional guidance. Key Findings and Challenges: Various factors contribute to the emotional struggle of letting go and the subsequent planning challenges in family businesses. We’ve highlighted some of these key obstacles below: The Role of the Exit Planner: An Opportunity to Overcome Emotional Attachments Exit Planners have a unique opportunity to address the emotional challenges faced by family business owners. Advisors benefit from continuous involvement in the creation of Exit Plans. By understanding the owners’ attachment to their businesses, planners can qualify potential clients based on their emotional readiness for succession planning. As an advisor, this presents an opportunity to save time and resources, or work with that owner to overcome their attachment. Avoiding Exit Planning Mistakes can be challenging, check out that blog post for tips and resources to become indispensable! Additionally, advisors can work with owners to help them overcome emotional barriers, encouraging them to shift their perspective from the past to the future. This approach not only supports successful business transfers but also presents an opportunity for Exit Planners to market their services effectively. You can collaborate with your clients to strategize and plan for the future, providing them with insightful recommendations on how to effectively allocate their time and resources. Owners that gradually detach themselves from the business are able to see the big picture, facilitating a smoother business transition. The Bottom Line Emotional and psychological factors significantly impact Exit Planning in family businesses. Letting go of a business can be an emotional struggle for owners who have dedicated their lives to its growth and success. Owners often shy away from enlisting the help of experienced advisors the more emotionally attached they are to the business. Conversely, failing to plan for the eventual exit from can result in loss of business value, resulting in adverse effects on the company culture and value, local economy, and ultimately the personal goals for the owner’s family. However, involving experienced Exit Planners who understand the intricacies of family dynamics and possess the skills to address emotional challenges can pave the way for a successful transition. By overcoming emotional attachments and embracing the future, family businesses can secure their continuity, contribute to the economy, and preserve their cultural legacy.

What to Expect at the 2023 BEI National Conference

The 2023 BEI National Conference will be held this year on August 7 – 9, 2023 at the Four Seasons Hotel Denver in Denver, Colorado.

ESOPs In Action and Establishing a Legacy

What is an ESOP? Employee Stock Ownership Programs (ESOPs) have become increasingly popular among companies as a way to engage and retain employees while also providing a unique ownership structure. This exit path allows employees to own shares in the company they work for, which can result in significant benefits for both the business and the community it serves. In this blog post, we’ll explore two examples of ESOPs in action within the Colorado community. Benefits of an ESOP: The main benefit of an ESOP is that it incentivizes employees to work harder, stay with the company longer, and feel more invested in its success. ESOP guru and BEI Member, Kelly Finnell had the opportunity to work with Denver Restaurant Group, Edible Beats, to create an ESOP for its employees. Kelly and his team at Executive Financial Services worked to develop an ESOP for Edible Beats Founder, Justin Cucci, and his hard-working team of 325+ employees. Here’s what Kelly and his team were able to accomplish with Edible Beats through the creation and implementation of an ESOP: At Edible Beats, every employee regardless of tenure was eligible to be included in the plan. According to Founder, Justin Cucci, new employees must wait a year from the start of employment in order to get vested, and will earn 25% of their shares each year after. Cucci spoke about how life changing it can be to own shares in a company. Equity provided from shares can assist in purchasing a home or a business down the road. “The only thing the shares can’t do is be transferred or sold to another person. Shareholders who want to disinvest must sell their shares back to Edible Beats”, wrote Linnea Covington. “For Cucci, creating the ESOP means he doesn’t have to sell off Edible Beats in pieces, or to an owner who may dismantle the business that he built so carefully. Eventually, the idea is to have the Edible Beats restaurants completely employee owned.” For more details on Edible Beats and their recent ESOP strategy, check out this article from Restaurant Hospitality written by Linnea Covington: Denver Restaurant Group Offers Stock To Employees. Building a Sense of Community: So, how does an ESOP positively impact the community? Let’s take a look at a long time Colorado favorite, Beau Jo’s Pizza. Chip Bair, the owner and founder of Beau Jo’s pizza restaurant in Idaho Springs, announced at the 50th anniversary celebration that he’ll be selling the business to his employees through an Employee Stock Ownership Plan (ESOP). As a Colorado institution that’s served approximately three million pies over the years, Beau Jo’s move to an ESOP will ensure that the business will remain in the hands of employees who have helped make it a success over the years. This move demonstrates Bair’s commitment to the community and his employees who have helped make Beau Jo’s a beloved institution over the past half-century. Here’s how: In an article published by Jason Blevins for The Colorado Sun on Employee Ownership and Creating a Legacy, Jason wrote about an Idaho Springs Local, “Alex Dunn worked at Beau Jo’s during college and in the summers when she was a teacher. She started working full-time at the Idaho Springs restaurant 17 years ago and now she is the general manager.” Leaving a Lasting Legacy In addition to the benefits mentioned above, ESOPs are also a valuable tool for building a lasting legacy. ESOPs can help to paint the picture about: The Bottom Line An ESOP can provide significant benefits for both the business and the community it serves. They can improve employee retention, motivation, and productivity, while also stimulating economic growth and community involvement. Additionally, ESOPs are a valuable tool for building a lasting legacy.

Why Should a Business Owner Work With a CExP?

You’ve put in the effort to recognize how essential it is to have a well-structured plan in place when a business owner is ready to leave their business. You know that, eventually, every business owner will want or need to exit their business, whether it’s for retirement, pursuing other ventures, or due to unexpected circumstances. This is where hiring a Certified Exit Planner (CExP) can be invaluable to the business owner in helping achieve their goals. What is a Certified Exit Planner? A CExP is a professional who has undergone extensive training and certification in the field of Exit Planning.They have specialized knowledge in various aspects of business Exit Planning, such as financial planning, tax implications, legal considerations, and more. They have the skills and training necessary to take individual components of a business plan and integrate them into the exit strategy. Interested in learning more? Check out this article from Yahoo Finance, All About Certified Exit Planners (CExP)! Follow along for reasons why a business owner should work with a CExP, and why it can be a valuable addition to your Exit Planning toolkit: Comprehensive Exit Planning A CExP will work with the business owner to develop a comprehensive Exit Plan that considers all aspects of their business and personal finances. They will help identify financial goals, determine the value of the business, and create a plan to maximize its value upon exit. They can implement a comprehensive plan and bring in all the necessary experts to execute for the best possible outcome based on the owner’s financial and non-financial goals. Expertise in Tax Planning A CExP can provide advice on tax planning strategies to minimize the business owner’s tax liability upon exiting their business. They will also work with the tax advisor to ensure that the plan aligns with the business owner’s long-term financial goals and minimizes the impact of taxes on the exit. Protection of Your Business and Personal Assets An Exit Plan can help protect the business and personal assets from potential liabilities that may arise during the exit event or after the business owner leaves. A CExP can help identify and address any risks that could impact the business’s value and the business owner’s personal finances. Increased Likelihood of Success Working with a CExP can significantly increase the likelihood of a successful business exit. They can help navigate the complexities of Exit Planning and ensure that the plan aligns with the business owner’s long-term financial goals. With their guidance, a business owner can create a plan that maximizes the value of their business, minimizes their tax liability, and protects their personal and business assets. Peace of Mind Having a comprehensive Exit Plan in place can provide peace of mind for both the business owner, their family, and the new owners. A CExP can help create a plan that ensures a smooth transition and allows the business owner to exit their business on their terms, with confidence. The Bottom Line Owners looking to begin planning for their eventual transition out of business should look for advisors that have this level of expertise. Obtaining an advisor that is not only knowledgeable in their specific field, but also in how all the pieces fit together and when the team works together to execute will save time, money, and potentially heartache during the exit. With their guidance, business owners can exit their business with confidence, knowing that they have a solid plan in place to achieve their goals. A CExP can also help owners to identify potential exit paths, complete due diligence before preparing the business for sale, as well as ensure that the terms of the transfer are in their best interest. In addition, a CExP can help business owners to develop a plan to maintain their legacy after exiting the business. Whatever the business owner’s goals are, a CExP can help them to achieve them.If you are an advisor driven to help clients achieve their goals for exiting their business, the Certified Exit Planner Course may be right for you! Take the next step in your Exit Planning career, we invite you to learn more about obtaining a CExP. There is a better way to plan. Let BEI show you the path to success.

Legacy Planning in Your Exit

When it comes to building a legacy after retirement, Avoiding Exit Planning Mistakes early on in the Exit Process can save your client both time and money.

Be Proactive: Avoiding Exit Planning Mistakes

At the cornerstone of a functional Exit Plan, your job as the business advisor is to guide the business owner so that the business can live on after the owner exits.

Selecting the Best-Suited Successor to the Business Owner

Every exit path requires a solid planning and implementation foundation. At the cornerstone of a functional Exit Plan, your job as the business advisor is to help select the best-suited successor to the business owner so that the business can live on after the owner exits.

Choosing the Right M&A Option for your Clients

This week, one of our newest partners, CSG Partners, gives a high-level overview of multiple M&A transaction types and the pros and cons of each.

Exit Planning Process: Creating a Comprehensive Plan

In this blog, we’ll conclude the Exit Planning Process series with an introduction into the Representation Process and the four key steps involved in creating an executable Exit Plan.

Exit Planning Process: Overcoming Fee Apprehension

Simply quoting a price will not suffice. You need to set the stage for the conversation by explaining the value and benefits of Exit Planning.

Exit Planning Process: The Engagement Meeting

The Engagement Meeting is a critical step in the Exit Planning Process. In this meeting, you will have the opportunity to convert your prospects into clients by discussing the goals of the business owner and how you can help them achieve those goals.

Exit Planning Process: The Discovery Meeting

During the Discovery Meeting, your goal as the business advisor is to understand the owner’s goals and aspirations, and determine whether you can help them achieve those goals.

Common Misperceptions in an Owner’s View of Exit Planning

In today’s blog, we’ll look at 4 common misperceptions about planning so you can match your tactics with the reasons why owners are holding back.

ESOPs: The Good, The Bad, and The Ugly

To best determine whether an ESOP is a viable Exit Path for your clients, it’s best to know the general advantages and disadvantages present in all ESOPs.