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FAQS

Questions Frequently Asked by Business Owners

We work with a wide range of enterprises, operations and organizational structures. While each industry and operation is unique, many of the questions remain the same. Many of these questions require detailed analysis to answer but we’ve offered a bit of brief insight here. If you don’t find the answer you’re looking for here, contact us and we can arrange a time to discuss.

What are some potential exit strategies available to business owners?

There are as many potential exit strategies available to business owners as there are businesses in operation. We explore and evaluate the myriad options, from selling to investors, private equity firms or competitors to mergers, strategic alliances or employee stock ownership plans (ESOPs), accounting for personal goals, legacy planning, estates, family considerations, market conditions and the overall financial health of the business before recommending any potential or optimal exit strategy.

What are some of the key factors influencing business valuation?

Business valuations are complex calculations, considerations of numerous factors ranging from your management and support teams to cash-flow, financial performance, comparative competitors, market conditions, growth potential, risk profiles and overarching industry trends. It’s a process tailored to the intricacies of each business, requiring expertise and insight.

How can I maximize my business's value in preparation for a potential sale?

Maximizing your business value, transforming your business into a great enterprise is what we do at ROI Cubed. If you’re preparing for or considering a sale, contact us to enlist our deep valuation expertise and experience.

What is the importance of intellectual property in the valuation of my business?

Intellectual property is a blanket term that covers intangible assets that are owned and legally protected from outside use without consent. It can consist of trademarks, patents, brands, data, trade-secrets and more and can be far more valuable than tangible assets. The value of intellectual property, or IP, comes from the rights the owner of the asset has to exclude competitors from using the assets. Intellectual property can generate economic benefit or enhance the value of other associated assets. The value of your intellectual property represents potential economic benefit and can be used directly, sold or licensed to a third party or reducing the threat of substitutes. There are a number of different ways to evaluate your intellectual property, from cost-based valuations to market or economic benefit valuations. If your IP rights are fully developed and functioning, your intellectual property can play a significant role in the overall valuation of your business.

What are the initial steps for the M&A process? How do I start the process?

If you are considering a merger or acquisition, you may already have a clear idea of what you are hoping to accomplish with the merger or acquisition. This is your first or initial step. Once you have a strategy or goal in mind, you should develop a profile of the ideal merger or acquisition and start considering potential target organizations. From there, the planning and valuations will happen. The process varies, whether you are looking to scale, diversify, gain market share or enter a new market. ROI cubed can help you with every step of the M&A process, including the initial goal setting and strategy creation.

How do I identify suitable acquisition targets for my business?

While the business reasons for acquisitions are numerous and strategic, the suitability of acquisition targets is critical to an effective and, ultimately, profitable acquisition. Discussing your acquisition goals with an M&A strategist and advisor early in the process can help you define and best determine suitable acquisitions targets aligned with your strategic business goals and objectives.

How do I find potential buyers for my business?

Just like anything these days, you can find what you need on the internet, including buyers for your business. While the internet is a great resource for finding everything from appliances to exotic cheeses, it’s probably best to consult a business broker, an M&A strategist or business operations specialist to find qualified buyers potentially interested and able to buy your business. You’ve worked hard to build your business. Relying on proven expertise and a track record of success to evaluate, value and uncover potential buyers will ensure that your hard work pays off at the time of sale.

How do I assess the potential synergy of merging business entities?

Synergy takes many forms. The end goal of any synergistic business acquisition or merger is a combined entity or enterprise that is ultimately greater (more streamlined, more profitable or more scalable) than each of the merging organizations individually. Assessing potential synergies takes insight, objective analysis and clarity around operations, leadership, business objectives and more. If you’re considering a merger or acquisition and would like support in assessing potential synergies of an organizational merger, reach out. We’d be happy to help provide clarity, understanding and perspective on your merger or acquisition.

What are the benefits of implementing an ESOP for my business?

The benefits of implementing an ESOP are myriad. ESOPs, Employee Stock Ownership Plans, can provide clear tax advantages for you and your business. ESOPs can promote cash flow to accommodate growth and align workforce culture, while supporting retirement savings for employees and community job preservation. They serve to preserve your legacy and maintain the ongoing concern of your organization. From a business optimization standpoint, Employee Stock Ownership Plans contribute to the sustained longevity of your operation while providing a clear path for a profitable business exit. If you’re considering the option of offering employee shares, contact our ESOP specialist for a consultation.

How does an ESOP plan affect company culture and employee engagement?

Employee Stock Ownership Plans or ESOPs can enhance performance and improve retention of key employees, contributing to the sustained longevity of your operation. Placing ownership into the hands of employees reduces turnover and provides extra incentive to communicate, perform and motivate teams towards new levels of excellence, facilitating trust and fostering engagement. Allocating shares of company stock to employees motivates success and can require little or no out-of-pocket contributions from these employees. The overall benefit and sense of security afforded by employee ownership can radically transform the performance of an operation and create a culture of accountability and innovation that drives growth. Learn more about how ESOPs can enhance your company culture, schedule a consultation or sign up for our newsletter.

What are the tax implications of establishing an ESOP?

By definition, an ESOP is a trust forming part of a stock bonus, pension or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries. Employee stock ownership plans can provide numerous tax advantages particularly if the organization is an S-Corp or a C-Corp prior to issuance of the employee share ownership options. An ESOP-owned S corporation, for example, may not be subject to federal income taxes. A thorough understanding of the overall tax benefits and implications of an ESOP should be established before initiating any employee stock ownership plan.

What are some common challenges associated with ESOP implementation, and how can they be overcome?

Implementing an ESOP can be as challenging and complex as it is beneficial. From valuation and corporate structure to the costs, timing and accounting complexities, it is important to have clear goals, expectations and understanding to successfully implement an ESOP. Our ESOP specialists can assist you in determining whether an ESOP is a solution that aligns with your business goals, timelines and objectives. Contact our growth and operations specialists today for a discussion on the complexities and common challenges of implementing an employee share ownership plan in your enterprise.

How does estate planning factor in a business succession plan?

Business succession planning and estate planning are not the same, but they are closely interrelated, particularly for business owners. While estate planning is associated with an individual’s personal estate, this estate does include ownership interest in any closely held businesses. From minimizing tax burdens to avoiding probate, careful and incorporated estate and succession planning serves to preserve your legacy, provide operational continuity, ensure family harmony and streamline the transfer of assets, including business assets, to beneficiaries.