Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
re*********@*******er.com“>re*********@*******er.com;www.redladder.com
PERSONAL FINANCE
DEAR INFORMER: How can you diversify assets for retirement when you own a small business? Like many owners I know, everything I have goes into my company, and that seems risky.
DEAR SAVINGS: “It’s really tough” to put assets in something other than the business, concedes Nicole Middendorf, president of Strategic Financial Inc. in Plymouth. She has to remind herself, a financial planner who helps people invest, along with her clients that diversification is a must.
When the Informer reached her by phone, Middendorf says she was just thinking about buying more real estate properties. But then she thought about options: Should she invest in more stocks instead, or perhaps put the money into marketing of the book she’s writing?
“Most business owners have a good sense of how the business is doing,” Middendorf says, and will be able to decide where they’ll get the best return on that investment. “But you always want to take advantage of the opportunities.”
She advises people to put money in different areas: a different industry from your business, for example, or a segment that has an economic cycle different from your other investments. If one area is down, perhaps another will be up, is the idea.
The Informer knows real estate brokers who invest in early-stage med-tech companies, for example, and financial planners who invest in real estate. She also knows at least one business owner who says he puts money in his retirement plan every month first, always the same percentage.
Middendorf says she sees too often owners who can’t sell their company after 30 years at work. That’s why she insists on retirement plans for the owners and for employees. The latter will help to attract and retain staff, too.
After three to five years in business, many owners are advised by their tax planners to open a SEP plan. “You can take 25 percent of the net from the business, and that’s a deduction right there,” she says.
Another common occurrence: after a few years entrepreneurs will get a new business idea, and start investing money in a new company, thus effectively diversifying their assets.
“It’s risky” to tie up all your money in your company, Middendorf says, but she also understands.
“When I wasn’t a business owner myself, I had a completely different perspective. When I was financial adviser at a corporation I thought, why wouldn’t someone take that money and put it in the stock market for retirement? Now that I’m a business owner I think, why wouldn’t I put that money into marketing or a new staff member? Why wouldn’t I put my money in my book?”
Accepting that tendency, but deliberately adding diversity to your holdings, helps take some risk out of the risky proposition of owning a business.
Nicole Middendorf, Strategic Financial Inc.: 763.208.0482; ***************@*pl.com“>ni***************@*pl.com; www.helpingyouinvest.com
BUYING A BUSINESS
DEAR INFORMER: I’m a former general manager of a large company who wants to be a chief operating officer for a small-business owner, with the idea that one day I’ll buy the business. How can I find an owner to bring me on?
DEAR FORMER CORPORATE: There is one sure way to endear yourself to a small-business owner: Offer cold hard cash to purchase a minority share in the business. Without that, it can be difficult to make the transition from corporate Minnesota to small-business officer.
Crass, but true. Owners will look first to people they know, usually hard-working employees who have been with them from the beginning, if not family members who want to be groomed for ownership one day. They’ll look to outsiders only if they bring equity to the table — along with many years of expertise in the same industry.
Tom Lyons is a business broker who’s seen dozens of displaced corporate executives who want to get into a small business. He is president of Faelon in St. Louis Park. He advises them to consider carefully how much money it will take to buy a business.
“Do they have enough money?” he always asks. “Whatever money you have, divide it in three parts: one-third down payment, one-third operating dollars, and one-third what I call dry powder, or reserves” for unexpected expenses. If the total is “a couple of hundred thousand dollars,” the best option might be a franchise, with a defined and relatively lower price tag.
For this questioner, he would recommend an extensive search in her area of expertise.
“A lot of times buyers say, ‘I want anything but what I had before.’ I say, why turn your back on all that experience?
“We go by industry experience, size of company, and geographic territory, and we contact every firm with a fit,” Lyons says. “Occasionally we’ll find someone who would sell a minority interest, because the owner has way too much to do.”
He also recommends taking some aptitude tests and defining your skills before searching. “Understand what you’re good at, and then balance yourself off with other skills,” Lyons says. “Are you great in sales? In administration? There’s a lot of tools that can help” people find their strengths.
Tom Lyons, Faelon: 952.591.1998, ext. 1;***@****on.com“> ly***@****on.com; www.faelon.com
