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The 3 Imperatives

1. Operating Efficiency

  • Are you making money beyond a reasonable salary?
  • Can someone replace you without materially detracting from the value of the business?
  • Are you driving EBITDA upwards?

2. Compensation

What is the appropriate salary? (While everyone wants to lower taxes, the value of the company is largely defined by excess free cash flow.)  Consider redirect excess cash towards:

  • Real estate
  • Pension/Profit sharing plans
  • Deferred compensation plans
  • Acquisitions
  • Captive Insurance Plans

3. The Exit Strategy

  • Who is going to buy you?
  • If it is a family member or key employee, do they have the money?
  • When are you selling (or “when do you want” to sell)?
  • What is the net number you need to end up with to support the lifestyle goal(s) and other capital requirements you desire?
  • And what does the “Buyer” perceive you are worth?

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