Here, Kennedy and Bazzano discuss their inspiration for the book, including how to make your sheet metal company attractive to outside buyers and why, with proper planning, you don't have to fear outliving your money. 

What inspired you to write this book? Were you seeing a pattern where people didn’t know how to let go and retire? 

Kevin Kennedy: After retiring and selling our ENR Top 20 Specialty Contractor, I then went back to school for a certification in exit planning. It was this education where I discovered that our company, buyers and sellers overspent millions in our management buy-out.

This discovery would not have happened unless I was in that class. It made me realized how unprepared owners and most of their advisers are for the largest financial event of an owner’s life. This is the inspiration for starting Beacon Exit Planning, my/our motivation for this book and sharing my story with the contracting industry.

You simply don’t know what you don’t know ... and that can be a very expensive mistake. Letting go, for the owner the business, is not just what they do but who they are many times. It is hard to let go for many reasons. The three elephants in the room are taxes, succession and what do I do next?

When it comes to taxes, how would you like to cash out and leave 60 percent of the harvest to Uncle Sam. This happens way too often and can be reduced considerably by a strategic exit plan. On the subject of succession, who is going to replace the CEO? In an internal exit who is going to buy the company and pay you when you are no longer engaged day to day? There is system to move your managers to a higher level of performance, into leadership and replace the CEO. Then there is, what do I do next? This becomes easier once the owner has clarity with their financial future and not running out of money that is created in the exit plan. We coach owners on this state of mind early in the exit process and focus of life outside of the business.

Why is it called the '60-minute' exit plan? Can you really do it in 60 minutes? 

Kevin Kennedy: We intentionally wrote it to be a “60-Minute” book. The challenge was creating a 60-minute book instead of a 240- minute book. We are not teaching contractors how to build a watch, but rather, how to tell time.

I was a teacher in my first career. The quintessence of teaching is making the complex understandable. The exit process is technically very complex dealing with the professional team that includes your accountant, certified valuator, attorney, tax attorney, estate attorney, insurance adviser, and financial adviser.

I bought and sold a company and understand how intimidating the process can be. Even more confusing is when all the different advisers are giving scattered information that is uncoordinated, further complicated by your pre-occupation in running a business.

Beacon’s role as an exit planner is to understand the owner’s goals and design and pull together all the moving parts into a cohesive and comprehensive coordinated document that serves as the blueprint moving forward. This will allow the owner to continue their focus on the company, and separately, for the exit planner to create a comprehensive retirement plan to continue their lifestyle independent from the business.

The book was written by a contractor for a contractor without all the legal and adviser jargon by walking the owner through the process by examples, stories to visualize the plan unfolding into a complete plan and a case study demonstrating millions in tax savings.

Further, when an owner is burning 60 to 70-hour weeks they do not have a lot of time to read. The book is meant to take an hour and will be read several times by the owner. The investment of time will pay huge dividends.

Let’s say you are ready to sell your business or perhaps one of your children is buying you out, what needs to be the first step on your agenda? 

Joseph Bazzano: The first step in any transaction is to create a replacement for yourself, or the buyer for the company. For internal transfers its more important than ever because these are the people that you are depending on to cut you your buyout checks. This is called succession planning and all too often we are confronted by business owners who literally have no one to sell too because they have done a poor job at letting go of their control and stretching the next generation of owners. It is important to start the process of creating and identifying “bench strength” for the future sustainability of the organization.

And the second? 

Joseph Bazzano: Begin to see your financial future. The fear of outliving your money is one of the greatest obstacles for getting a business owner to start the planning process. With everyone living longer, health care and other costs skyrocketing, it becomes more important than ever to have a financial plan. 

It has become our experience that when a business owner completes the exit plan and can clearly see their financial future, (meaning they have a good sense that they will be “OK”, financially), they will be able to concentrate of the succession process.

Then they can focus of building a championship team, moving management into leadership and replacing themselves. Emotions aside, the ability to coach the next generation of owners becomes the exiting owner’s primary focus. Then the whole process becomes easier.

What is the most important thing you risk with improper exit planning? 

Joseph Bazzano: For most business owners there is a dependency on the proceeds from the sale of their business in order to retire.  Some have a greater dependency than others but for the most part business owners are relying on the value of the company in order to maintain their lifestyle once they exit the business. 

There are several risks that can derail and exit. The first item, succession planning, has been addressed. The next significant risk is the tax burden that many of these transactions can carry.  In some situations that tax burden can exceed 55 percent. 

That amount of money going to tax obligations could be the difference between maintaining and altering your post exit lifestyle. A comprehensive exit plan should provide the owner with alternatives to exit the business and understand the various “tools” that are available to make the process more tax efficient to the business, the buyers and the sellers. Since the company pays for everything it must be a key strategy, and bottom line, keeping more of the harvest for owners to retire.

How do you recommend making your company appealing for purchase?

Joseph Bazzano: When creating a valuation for an outside sale it is profits, profits, profits! It all starts with profitability or cash flow.  If a buyer can see a trend of profits and surplus cash flow, it certainly helps to make the company more marketable. 

The next items that should be considered is the quality of profits. What do I mean by “quality”? A company that generates 85 percent of their operations from one customer, while it may be profitable, is not a good quality of revenue because the entire business is dependent on that one customer for survival. 

That concept holds true for suppliers and employees as well. A key employee’s departure, including the shareholders, can have a devastating effect on the business operations. Creating golden handcuffs for your key players will be attractive to the buyer as the owner will usually be absent in the future.

A broad management team should be established that can be integrated into operations. This will help reduce a buyer’s perspective that there is too much dependency on any one person and as such will help with continuity.

Another task that a business owner should consider with the quality of earnings concept is to create a business with recurring and sustainable income stream. A company that is primarily project based is only as good as its last contract. Companies with recurring revenue creates value in that the income will usually be diverse and can be relied on for several years.