All Posts By

Will Burnett

Your business 2.0:
Passing the torch to the next generation

By | Business Transition, Succession Planning | No Comments

It’s taken you years to build your business – you’ve been at the helm for its successes, helped it recover from setbacks, and created an incredible legacy that you’re proud of. So what’s next?

You may be at a point in your life when you’ve started thinking about scaling back, maybe eventually handing over the reins to a family member or trusted employee(s). But how do you ensure that transition is successful – that it doesn’t just preserve your legacy, but keeps building on the gains you’ve already achieved? How do you put the right people in the right seats for the next generation of leadership?

It is vital that all business owners build a succession plan. Not just a vague assumption that a son or daughter will take over one day, or that you’ll eventually sell to a willing executive team. Regardless of timing, every business owner needs to come up with a solid plan that has everyone prepared and knowing exactly what to expect.

5 steps you can take now to set your company up for success

Step 1: Start having some serious conversations.

Don’t assume you know what your family members or executive team want or expect. And if you haven’t stated it explicitly, don’t assume they know what you want the future of the company to look like. If you’ve got a family business, get a sense of the level of involvement and roles your family members want to play, now and moving forward. The son or daughter you don’t think is interested may be chomping at the bit to implement their ideas as a CEO, while the one you’re assuming will be next in line may actually only be agreeing to make you happy.

Have the conversations, even if they’re tough. Explore other roles for reluctant leaders – maybe your son or daughter would be more interested in leading the company’s philanthropic efforts, for instance. Try to come to a consensus on what’s best for both the business and the family, with the understanding that making everyone 100% happy may not be possible.

If your succession plan involves your executive team, those conversations are just as important. Understand their goals, be open to their ideas, and be transparent about your own plans.

Step 2: Conduct an honest skills assessment for your potential leaders.

Many business owners don’t start planning their exit strategy until very late in the game. But it takes time to put the right person in place and ensure they’re set up to succeed. Start thinking about it well before you’re ready to step back or step down. Don’t let sentimentality cloud your judgment – someone can have the right resume (or family name!) but the wrong disposition to be the face of the company.

To understand who’s a fit and who isn’t, make a list of qualities needed to successfully run your business. Look at both tangible and intangible traits to identify the right person – don’t just rely on your heart to make that choice. Consider bringing in outside help to facilitate the transition and add an unbiased opinion to the conversation. 

Step 3: Make yourself replaceable.

If the success of your business is tied to your presence, do everything you can to change that. Share the responsibility and give people opportunities to grow.  Being irreplaceable might be nice for your ego, but it won’t do anything for your risk profile. In fact, it will make your company less valuable in the eyes of potential buyers and investors, and make the transition much harder for everyone involved.

Step 4: Groom your next CEO.

To get your successor CEO-ready, involve them in strategic decisions. Identify traits (both personality and functional expertise) they need to have, and foster those elements through training and mentorship. It’s up to you to make sure they’re qualified to lead the company.

Step 5: Figure out financing for the transition.

How will you enable your successors to buy into the company? You’ve got a few options:

  1. Bank financing. Your commercial banker can help you build a plan that factors in timing, financial needs, ideal purchase terms – and maintaining the legacy of your business. The only caution here is you probably won’t be able to finance the entire purchase price with the bank and may need to supplement with seller financing. In addition, the bank will likely ask the buyer for a personal guarantee.
  2. Seller financing. This is where you provide a loan to the purchaser so they can buy the company from you over time. This is an option for slowly transitioning ownership to a management team or family, but it puts financial risk on you, while taking away operational control. And if the company doesn’t perform as well as anticipated or hits a prolonged rough patch, you may not get repaid.
  3. Employee Stock Ownership Plan (ESOP). ESOPs are retirement plans in which the company contributes stock for the benefit of employees, and they can slowly increase ownership over time. Benefits include favorable tax treatment, employee ownership and (hopefully) increased productivity. However, they are expensive to set up, and expensive and complex to exit if you would like to do so down the road. Plus, there is increased complexity in IRS compliance, and liability through repurchase obligations can put pressure on cash flow during a slowdown in the business.
  4. Private equity. A private equity (PE) firm can be a good option if you are looking for a way to reward yourself after all your years of hard work and get some ownership into the hands of the next generation of leadership. A PE firm’s sole purpose is to help companies grow, so this is also a good option if you’d like to retain some ownership and get that second bite at the apple. Bringing in a private equity firm can help with a transition in a few ways:
    • They can partner with your management team to help them acquire a significant portion of the business when they otherwise wouldn’t have the funding to do so
    • Private equity firms can help with talent acquisition or to support your team in areas of the business that may not be your core strength
    • Most PE firms have additional capital as well as industry resources and functional expertise to help you and/or your management team grow the business to the next level

You’ve built your business from the ground up. More than anything, you want it to keep succeeding, no matter what your future role in it may be. Setting the next generation of leadership up for success will help you maintain that legacy – and keep it growing well into the coming years.

Thinking about your options? Let’s talk.

Need help meeting the goals of your current ownership team and achieving your own vision at the same time? ORG could be the partner you’re looking for. Get in touch with ORG at 512.320.4086 or  to find out how ORG can help you take your company – and your stake in it – to the next level.

Adding a Capital Partner: a Win-Win For Owners and Management

By | Business Transition | No Comments

As a key executive in a privately-owned business, you may find yourself feeling differently than the founder/owner about the direction the business is taking. After you’ve put a good chunk of your career into helping the company grow, running up against resistance to your vision can be frustrating.

Disagreements can be based on a host of scenarios: passive owners, multiple owners with competing priorities, resistance from family members (even ones not involved in the business), a desire to move faster, unwillingness or inability to invest in growth, ownership that’s getting older but hasn’t made a succession plan, etc.

So how do you take the business in a different direction?

For many executives and management teams, it means bringing on a capital partner like a private equity (PE) firm. A PE firm can help you achieve your goals for the business, provide you equity in the company – and ensure the owner gets what he or she wants, too.

When you work with a PE firm, you have a couple of options:

  1. The owner can take some chips off the table (by selling part of his/her ownership) while staying involved in a more strategic or limited role. This opens equity ownership opportunities for the management team and potentially allows the owner to refocus on the area(s) of the business that excite him/her most.
  2. The management team can partner with a private equity firm to buy the owner out completely, establishing or increasing equity in the business – and getting access to the capital needed to take the business to the next level.

Start by finding the right partner.

Step one should always be research. Not all private equity groups are created equal, so do your due diligence. Talk to them, connect with other companies they’ve worked with, read about them online – get all the info you need to ensure you’ll have a partner that fully understands your business, your industry and its specific challenges, and most importantly, is aligned with your goals.

Look for a PE firm with a strong network of sales and industry contacts, supportive resources, management- and board-level talent, and solid relationships with financial institutions. Try to find a firm with a long-term view and the singular goal of unlocking your company’s full potential by spending on things like sales, marketing, product development, management talent, capital expenditures and acquisitions. In short, don’t look for an acquirer: focus on finding a partner.

Position partnership as a solution.

Once you’ve landed on the right capital partner, the next step is approaching the business owner(s) with your idea. This can be a pretty sensitive conversation: no owner wants to feel pushed aside, or like something has been happening behind their back. So start the conversation by focusing sincerely on what they want. Get a sense of their vision for the future, then position a private equity investment not as a threat, but as a solution for achieving those goals.

“If they haven’t talked about their succession plan or exit strategy, start there,” says Jessica Borowy, Vice President. “Whether or not bringing on a private equity partner is the right solution, they owe it to you and themselves to have a plan in place. What’s their vision for the future of the business, and who do they want to run it if and when they’re unable to do so? Do they have a plan for when they want to retire? Would a phased retirement be attractive, where they can step back a little, but still keep some skin in the game? Do they want to put enough money in their pocket for retirement while sticking around to see more growth – without having to invest in that growth on their own?”

Once you’ve talked about their goals, you can let them know you’ve been thinking, too, and present them with your ideas. If you’ve been a key driver of strategy and growth, say so, and have a frank discussion about where you can take the business and what you need to make that happen. If you get push-back because the owner isn’t willing to make big investments, present the option that allows them to stay in the game and get the money they need to grow: a partnership with a private equity firm.

 Play up the benefits to the owner – and to the business.

A capital partner can take the business to the next phase of growth. It can allow the owner to reward loyal employees with equity. And it can mean seeing their legacy grow and thrive – without having to risk their own money or do too much heavy lifting themselves.

Enabling growth is another big plus. As an owner, it can be tough to take on the debt needed to push through major improvements. But a capital partner can do things like upgrade facilities and/or optimize layouts, help with strategic acquisitions, hire additional talent, and install new technology systems – all improvements that could force an owner to take on a lot of debt, and a significant amount of risk.

“We take risk away from the owner,” Jessica says. “Often these businesses don’t grow because the owner isn’t willing or able to invest. That’s understandable, because in many cases, most or all of their personal wealth is tied up in the business. Bringing us in gives them the chance to do things they couldn’t do on their own. And even if there’s a downturn, our support means the company can weather the storm.”

Capital partners bring more than just money to the table: they bring expertise and resources. So, for example, when it comes to identifying strategic acquisitions for the company, the CEO and management team don’t have to spin their wheels doing time-consuming research and outreach. A private equity firm can look for and vet corporate development opportunities on their behalf so management can focus on running the business.

The goal of any private equity firm is to make the business better. ORG focuses on doing exactly that by partnering with capable management teams and making significant investments that can greatly improve company profitability and, in turn, market valuation. It really is a win-win for everyone involved.

Thinking about your options? Let’s talk.

Need help meeting the goals of your current ownership team and achieving your own vision at the same time? ORG could be the partner you’re looking for. Get in touch with us at 512.320.4086 or  to find out how ORG can help you take your company – and your stake in it – to the next level.

2019 Year-end Tax Planning

By | Tax Planning | No Comments

Owner Resource Group is pleased to offer valuable Year-End Tax Planning Advice from our friends at accounting firm Maxwell, Locke and Ritter. Hopefully these tips will help set you and your business up for success as we all continue to navigate changes from the Tax Cuts and Jobs Act (TCJA) of 2017.


Dear Clients and Friends:

Year-end tax planning in 2019 remains as complicated as ever. Notably, many are still coping with the massive changes included in the biggest piece of new tax legislation in decades—the Tax Cuts and Jobs Act (TCJA) of 2017—and determining the most favorable strategies. This monumental tax legislation includes a myriad of provisions affecting a wide range of individual and business taxpayers.

Among other key changes for individuals, the TCJA reduced tax rates, suspended personal exemptions, increased the standard deduction and revamped the rules for itemized deductions. Generally, the provisions affecting individuals went into effect in 2018, but are scheduled to “sunset” after 2025. This provides a limited window of opportunity in some cases.

The impact on businesses was just as significant. For starters, the TCJA imposed a flat 21% tax rate on corporations, doubled the maximum Section 179 “expensing” allowance, limited business interest deductions and repealed write-offs for entertainment expenses. In addition, the TCJA made extensive changes affecting international taxpayers which are outside the scope of our resources below but could play an important role in any year-end planning decisions.  Unlike the changes for individuals, most of these business provisions are permanent, but could be revised if Congress acts again.

Keeping all that in mind, we have prepared our 2019 year-end tax planning tips as 3 separate resources:

Be aware that the concepts discussed are intended to provide only a general overview of year-end tax planning and are subject to change, especially if additional tax legislation is enacted by Congress before the end of the year, so we recommend that you review your personal situation with a tax professional.  Please contact MLR if you are a client of the firm and would like to schedule a meeting so that we can assist with your tax planning needs.