When a business is owner-dependent, with no family transition opportunity, it can be a challenge to find an exit. This case study shows the challenges many proprietor of owner-dependent businesses face. Although our client in this case study is a speciality manufacturer, the situation is not unique to his industry.
Three questions you may have:
How to retire?
What is the best way to transition the business?
How to maximize the value of the business?
Our 65-year-old client has been operating a custom wood window and door manufacturing business for 30 years. With 24 – 36 months to go, before the desired exit, he needed a plan to exit strategically. With a proprietary product line up of custom solutions, the business delivers best-in-class, innovative products direct to architects, homeowners & builders.
Three Key Challenges:
An owner dependent business
Production: With no two jobs the same, time tracking and efficiencies are hard to come by keeping profit margins low.
Sales: With a stellar reputation behind him and a passion for dealing with clients, the owner handles sales direct to architects, homeowners and builders
The client’s secure data room in the Central Document Registry (CDR) was populated allowing for a holistic view of the business and personal affairs. Industry benchmarking and valuation report delivered valuable insight on current results as compared to like businesses in a comparable jurisdiction.
An evaluation of business drivers provided these windows of opportunity:
Restructure corporate share structure to allow income sprinkling
Add talent to the team to reduce owner dependency
New software to track and measure productivity
Taxes are minimized for the owner with the proper share structure in place and is set up for a tax-efficient sale.
Owner dependency has been reduced with the addition of high quality senior employees.
Profit margins are increasing because of software to improve productivity “Time in Motion” study and an “Ownership Thinking Program” was initiated.
Solid new product lines have been added to meet market demand and increase future revenue.
Owner currently has a firm goal post of 24 months to retirement and a new investment advisor to facilitate his cash flow.
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