Entrepreneurship Podcast post

Business Exit Planning with Violetta Terpeluk

George Grombacher June 9, 2023

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Business Exit Planning with Violetta Terpeluk

LifeBlood: We talked about business exit planning, why so many business owners fail to plan and how that negatively impacts the value they receive, the biggest regrets owners have one year after sale, the important variables to consider, and how to get started, with Violetta Terpeluk, CFP, MBA, CPWA, CEPA, and Financial Advisor.     

Listen to learn the biggest pitfalls for business owners to avoid when thinking about selling their businesses!

You can learn more about Violetta at ViolettaTerpeluk.com, Facebook and LinkedIn.

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Our Guests

George Grombacher

Violetta Terpeluk

Violetta Terpeluk

Episode Transcript

george grombacher 0:15
blood blood. This is George G and the time is right look at today’s guest strong and powerful. Violetta terpil Ik Violetta, are you ready to do this?

Violetta Terpeluk 0:22
Yes, absolutely. Thanks for having me.

george grombacher 0:25
excited to have you on let’s go. Violetta is a certified financial planner. She’s an MBA a CP WA, and a C E P A or SEPA. She’s a financial advisor helping business owners successfully exit their businesses and managing everything that goes along with that process. Violetta excited to have you on, tell us a little about your personal lives more about your work and why you do what you do.

Speaker 2 0:51
Good question personal life. I’m mean, located in Northern California to get a 20 year old and 17 year old, married for 22 years, my husband is a business owner, I came from a business owner background. That’s part of why I do what I do. I was born in China. And then when I was a teenager, my parents moved us to Hong Kong where their credentials were not recognized. They were professors while professors in China, so they were forced into starting the business and you know, started it important for business. They never plan, they never build something that has sustainable value. I when I was growing up, I overheard a lot of conversation about tight cash flow, employee issues, business development issues, banking issues. And then my dad got very ill and my mom became his caregiver. As you know, both of them had to put money into business. That years later, my dad passed away. And there’s nothing left in the business. It was not sellable. They didn’t save enough, even though they pay for our college education, we are debt free. And hence my mom now left with me. So at that age, I just vowed to myself, I’ve got to find a way to help people, particularly business owners, like my parents who work so hard and sacrifice so much to end up having something and reap the benefit of their business. And then fast forward. I came to the United States, I did my MBA in corporate strategy at University of Michigan in Ann Arbor, and I became a management consultant for PricewaterhouseCoopers. For a few years. It wasn’t as fulfilling as I hoped to. So in 2022, I became a personal financial planner, I felt that I find a lot more meaning and working with individuals and business owners who shared values with me and also to answer my childhood vow to find my calling in working with business owners and retirees to help them live, you know, their fulfilling life and passing down legacy.

george grombacher 3:12
I appreciate that very much. Why is it that business owners fail to plan for contingencies or for exits?

Speaker 2 3:25
Yes. Hence, I talked about you know, the pitfalls, I can just pivot into that topic. I think there’s quite a few reasons having lived through my parent failure and I am a business owner to I owe my practice. I see some patterns there. One thing is that a lot of business owners think that exit quote unquote exit is a one time event far into the future. It’s not an ongoing process. Right. So they never if you know that you think that your ex is 10 years from now, why start now that’s one. The second is that they only think that they’re only considered the planned exit or I call it a vertical exit. And they forget that things can happen to them such as we call the five DS a SEPA right to death, disability, divorce, distress and disagreement, which could happen tomorrow. That means that their exit can be involuntary or at I call horizontal exit. They don’t think about that. They think they’re invincible everything can be planned. And then the third reason the third pitfall is that it’s just life or business gets in the way they just want to solve this our short term problem usually is cashflow, profitability, employee issues, government regulation, even real estate, you know, rent, you know, office leases. The exit is something that’s so far into the future they tend to just procrastinate on that And there are so many reasons why they procrastinate, part of that is probably just lack of knowledge right? Within a SEPA exit strategy is good business strategy, it’s a way you should run your business. The fourth pitfall is that they think business is only a business decision. However, as small business owners, the exit of business exit is actually a very personal decision, such as our emotional readiness, our personal financial readiness. So when they bucket them into into business decision, they don’t tied up with a personal retirement, they feel it well, you know, I just keep running the business, right. And then the last Pitfall, one of the last pitfall is they just have no professional people to help them. You know, a lot of them will say, Oh, I’m going to have this insurance agency to do my work because calm or I have a commercial real estate, or I have a moving company, I have a technology company, just big fragmented, nobody is really looking at the 30,000 foot log, particularly looking at both a personal and business, financial issue to give them that guidance. I think it just the lack of professional support.

george grombacher 6:13
Those are compelling reasons. Certainly, it’s it’s it’s hard to start a business, it’s hard to get it up and running. It’s hard to have a successful business. So that that really occupies a lot of the time and the attention and the headspace. That That doesn’t surprise me at all.

Speaker 2 6:28
Yeah, the exoplanet Institute actually did studies, they call the state of the owner readiness study. And they said that in the study, it shows that 50% of business owners are over the age of 55, I would think this study is almost 10 years old. So that means it’s over 65 Now, right? And most of them will need to exit in the next three to 10 years 76% plan to use the business as a primary source of your time. And because so much wealth is tied up in the business. 99% of them agree to have the transitional strategies important. And yet only 20% of them have some kind of transition plan in place. And worse yet, only 6% of them have what we call live attribute after plan meaning Who am I after the exit. That’s another reason I think business owners don’t do it. Because business is a way of their self expression, right? Without the business many of them struggle with who they are and what kind of life they’re going to live without having to go to the work and without having employees or suppliers to deal with.

george grombacher 7:37
That’s interesting that only 6% have really thought that all the way through, like what am I going to do? Should I no longer have this business to go to anymore that I’ve done for my whole life?

Speaker 2 7:48
I know. And then that’s why many of them that they don’t plan, they just think oh, I’m just going to work until I die or I’m going to work until I have to stop such as getting seriously ill unfortunately, that’s when the wrong time to try to sell your business. Because at that point, you’re that’s exactly what happened to my dad, you know, he had to stop at that point in the business was worth nothing. Because it’s overly dependent on him. Right. And he cannot be dependent on when he’s sick. And it was worth nothing.

george grombacher 8:22
And it doesn’t need to be that way. There’s things that he probably could have done along the way.

Speaker 2 8:28
Yeah, as a business owner a treat or business truly as one of the asset classes, right? You You can own real estate, you can own stocks, bonds, and you can own you know, you know, any kind of alternative investment you have, right? If business owner just treat this business as another piece of asset in their overall portfolio, it will then it will have a different mindset. I think business owners don’t they treat this as cash cow, which is where they extract the cash flow, right? It’s just cash cash and they don’t think this is actually an asset.

george grombacher 9:09
So oftentimes, I think that we spent so much time sort of wondering, wonder what the future is gonna hold and and what if, but we already know, we already know what those big mistakes are because people have interviewed people towards the end of their lives. They’ve they’ve interviewed people who have sold their businesses and have regrets about it.

Speaker 2 9:33
Yes, yeah, the research actually shows that you just touch on that as 75% of business owners actually regret one year after their exit and only 5% were happy with the net proceeds of the selling and value builder which is another organization that does x applying. They said there are four main reasons for such regret. I mean when people die of course they have lot more regret I’ve seen In those regrets, right not being happy, not having great real life relationship, but for business owner, particularly after they sell the business, the four regrets are tied to number one is they didn’t have before they agree, they their exit, they don’t have a clear vision of what their life is. And in fact, they don’t have a clear vision, what the purpose of the business serves in their life. Right? You know, your business is just an engine, your life is your life, right? Business is part of your life, but it’s not your life, right? So, so they don’t have a clear vision. And then the second is that they did not go through the process of a fully evaluate, identify, evaluate all their options. A lot of times due to ignorance, they don’t know how many options they have many owners that I talked to, so I’m just going to pass down to my employees, the most qualified employees, or I’m going to pass out to my kid, that’s it, they didn’t even think about, oh, I could have sold it to private equity, I could have merged with my competitors, or I could have done an ESOP, or you know, there’s so many options out there, they’re just not aware of, therefore, after the exit did that the I could have evaluated that option of this option. And that’s why they regret right. And then the third reason is that there are so attached emotionally and financially attached to the business after the exit. They’re still attached. I have a client, who was a president of a construction company. And he was so attached to the business after he had exited the business. He rented an office right next to his old company, to one his soccer team. He said, Okay, now I don’t have this construction business. My new business is my soccer team. And he had to commute like, he did think that he was so used to commuting, he literally just come in next door to his old office. That was his new job. And then the third, the last, the fourth reason is a lot of business owners are unhappy, how their employees and clients are treated by the buyers. And I think it is related to the fact that they didn’t plan it and they didn’t fully evaluate their options. And worse yet, is they didn’t build the business to be so attractive, so that they have the negotiating power to require the buyer to do a certain way or they didn’t even have to spend a ton to build a corporate culture to begin with, maybe there was no culture and the business to begin with. Right, which is cashflow machine for them. So those are the four main reasons that business owners regret after that. And my mission is really to help them get in front of those regrets and be proactive, to plan to have options and so then when they come to the point to exit better yet they don’t even think about exit but the house you know, just think about the business like a house right? You build a house so attractive, the buyers are knocking on the doors, wouldn’t that be even more beautiful? To offer you something that is higher than you thought you could have gotten right? Then maybe you will be happy to exit and then you will have the money to do whatever fun you know, charitable volunteer spending time with family,

george grombacher 13:29
start a soccer team, whatever.

Speaker 2 13:32
Your soccer team or become a Gulfport

george grombacher 13:37
whatever it might be, yeah. So how do you help business owners to develop what that vision or what the purpose of their business really is?

Speaker 2 13:49
Yeah, I’m seeing that all it all started with life planning. So it’s not just financial planning is my planning phase. So I took a course on my plan is really looking at the client values in their lives, how they envision the life if they had abundance, because a lot of business owner have a scarcity mindset, or you really have to think about what if you had abundance, right? If what if money was not an issue? How would you live your life, and yet at the same time to help them recognize that everybody is mortal, so you could die tomorrow, so you have to plan for the best, but also prepare for the worst, right? So you have to bring in that emotion. So through the life planning process, we really tap into the emotion of the owners. The second is it’s extremely important to involve the family members even though they’re not involved in the business. Most business owners have family stored there is this nine personality or there’s families too. We’re independent mogul VIP accumulator gamblers. Are the phobic like different money means different things to different people, the research has shown that most business owners have family steward that means that they’ve gone into the business to take care of their loved ones. And yet, after they’ve gotten into their business, they become so busy, and they probably spend more time with their suppliers and clients and employees and with the family. One of the thing to help them plan for their life is bring true to them. Who do we really care about? And what do you want for them? And what do they want for themselves? And what do they want from you? Maybe they just want more time with you. They want you to be more present, right? So getting a family involved and having a life planning conversation, that is very important. And then the next piece is crunch numbers. How many business owners have this number in their head and say, Oh, if I have this much I am set? I’m that’s it. Right? But they forgot did that? What if you need long term care? What if you want to set up a 529? Plan for your grandchildren? What if you have to take care of your elderly parents? Or what do you have charitable intent, right? So everything all the assumption had to be discussed, and the numbers have to be crunched, so that you have a target number to run your business on. And again, I call this the Inside Out approach and look at your self first up a family first, then use your business as an engine to fuel yourself and fuel your business. Because you only have one of you only have hopefully only one family, but you could have multiple businesses be. So I think that is that just having downtime and having that conversation with the family, particularly spouse is extremely important and writing them down. Write a personal goals down.

george grombacher 16:50
That makes a lot of sense. It’s such a simple thing. But it’s so hard for human beings to think about and write down goals. Why is that so hard?

Speaker 2 17:00
I know, I know. I would I would bet if you ask business owners are write down their goals. Nine of the 10 are business goals. They can easily tell you oh, I want this revenue. I want this kind of growth. I want this many employees, you know, I want these many clients. But a lot of business owners don’t spend time writing them the personal goals. I want this much time from vacation. You know, I want this much personal wealth

Speaker 2 17:36
but for some reason, they just don’t spend time writing down the personal goal. As much as the business.

george grombacher 17:44
Yeah, I think it’s like it’s fascinating. Have you let it take thank you so much for coming on. Where can people learn more about you? And how can they engage with you?

Speaker 2 17:55
I think the easiest they are on LinkedIn and the researchers find me on LinkedIn, I know my name, I usually have to spell my name is viol et ta and then T RPL. UK. And so they can find me on LinkedIn and if the type they type their name, I am probably the only name My website is my name to type their name and probably finding my website to

george grombacher 18:21
excellent well if you enjoyed as much as I did show Violetta, your appreciation and share today’s show with a friend who also appreciates good ideas. Find her on LinkedIn and again it’s V i OLETTATRPEL. UK and then you can go to our website which is her name.com. And if these things had been on your mind, which they probably have because they’re on all of our minds, just send it take a little action and get in touch with her and start this life credit planning process because the sooner you do it the better. Thanks good. Violetta.

Speaker 2 18:56
Yeah, are fine, Amy financial planner. I was at any CRP they will be able to at least have that conversation with Yep. Thanks again Violetta. All right, thank you.

george grombacher 19:11
And until next time, remember, do your part by doing your best

Transcribed by https://otter.ai

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