Business Innovators with Mark Imperial

Business Innovators Magazine – Spotlight on Exit Planning Advisors

Spotlight on FocusCFO with Michael Stier

As part of their series on Exit Planning, Business Innovators Magazine invited Michael Stier to sit down with Mark Imperial and share his insights on why exit strategy is good business strategy. 

Mark Imperial is a Best Selling Author, Syndicated Business Columnist, and Host of numerous business shows spotlighting leading experts, entrepreneurs, and business celebrities. Mark is also the media and marketing strategist and voice for some of the world’s most famous brands. www.markimperial.com

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In the Loop: A Conversation with Michael Stier

In the Loop

A Conversation with Michael Stier on the Charlotte Area Chamber’s Podcast

FocusCFO’s Michael Stier sat down with Dianne Chase and Michael Orzech for In the Loop, the Charlotte Chamber’s Podcast to chat about taking your business to the next level of growth.

In this 20 minute episode the trio covers a range of great questions like:

  • What are the key indicators that your business is ready for a CFO?
  • Can you afford a CFO?
  • What exactly does a CFO do?
  • How does a fractional CFO work with your COO and existing company culture?
  • How a fractional CFO can help your business reach the next level of growth and achieve sustainable, transferrable value.

Michael Stier is a FocusCFO Area President for the Carolinas and Director of Market Development. He has hands-on C-level executive and entrepreneur with a 35+ year track record of growing companies to scalable and profitable stages, with an industry focus at the intersection of technology and financial services (banking, wealth & asset management). He brings a broad base of expertise across functional areas to guide partners in strategy, entrepreneurship, financial management, M&A, operations / processes / KPIs, data-intensive services, and business development.

Dianne Chase is President and CEO of Chase Media. She is An award winning media, journalism and strategic communications professional with profound expertise in various communication disciplines, most notably crisis communication. Ms. Chase is also an experienced issues and reputation management consultant, media trainer, presenter, and writer.

Michael Orzech is the co-founder and COO of Charlotte Area Chamber of Commerce. The Charlotte Area Chamber of Commerce believes a strong, vital community goes hand-in-hand with a strong, vital business environment. By offering a variety of outstanding business programs, the Charlotte Area Chamber is dedicated to providing something for everyone. Learn More

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Metrics that Matter

Metrics That Matter

How to Identify, Track and Use Data Points

In a volatile couple of years that have seen a global pandemic, supply chain challenges, talent shortages and record inflation, the data we use to benchmark performance and guide our businesses is as vital as ever. But which metrics we use – and how we use them – has changed dramatically.

FocusCFO contributed to a recent Brainyard article, which explores how to identify, track, and use key metrics effectively in this new (and ever-changing) landscape.

As fractional CFOs, our associates often take a strategic bird’s-eye view when identifying and using key metrics. Here are four key areas that we have seen an increasing emphasis on in the past few years:

1. Inflation: Measures of inflation, particularly raw material inflation and how it compares to the selling price of finished goods, have become critical to track in today’s environment.

2. Inventory: Because of ongoing and potential supply chain issues, the days-of-inventory-on-hand metric has become more prominent. Because a just-in-time inventory strategy will likely not work well, metrics around the costs to maintain higher inventory levels, like space, insurance and shrinkage, have also increased in priority.

3. Personnel: A tight labor market means that personnel-related KPIs, like turnover, referral sources and average hourly wage versus budget, are receiving more attention.

4. Profitability: Many businesses, like restaurant groups, are now tracking profit by day of week as well as hours of operation. This allows management to make informed decisions about closing or reducing open hours on certain days.

Additionally, our brain trust of CFOs and Area Presidents noted that EBITDA has taken on a more important role due to the treatment of forgivable PPP loans, which causes distortions in net income. Cash flow from operations is also being prioritized above total cash flow.

To learn more about best practices for developing metrics that drive performance, read the full Brainyard article.

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Understanding Your Business Value with the Exit Planning Institute

Understanding Your Business Value

With the Exit Planning Institute

FocusCFO has contributed to the Exit Planning Institute’s latest white paper, ‘Understanding Your Business Value.’ This white paper breaks down the five stages of value maturity that business owners must undertake to successfully grow and harvest the value in their company to manage it for a lifetime. 

The five stages of value maturity, according to the Exit Planning Institute, are Identify, Protect, Build, Harvest, and Manage.

FocusCFO works closely with businesses in the build stage of value maturity, which takes a long-term, strategic approach. Key elements in the build stage are to increase your cash flow (EBITDA) and to improve your multiple. “Your multiple is the number assigned by the private capital market to the value of your tangible and intangible assets and their associated risks. Intangible assets include Human, Structural, Customer, and Social capital. Improving your intangible capital is critical to building business value,” explains Chris Snider in his book ‘Walking to Destiny.’

This is where a talented CFO comes into play. “We find the best way to help the owner and management teams to recognize the risks in their business is using valuation analysis,” says Michael Stier, a Certified Exit Planning Advisor and FocusCFO Area President for the Carolinas.

 To learn more about each of the five stages of value maturity, head to the EPI’s website to download the latest EPI whitepaper.

 Included in the white paper is the EPI’s Value Maturity Index exercise, which we recommend completing every 90 days to highlight and track the growth of your business value.

Exit Planning Advisors to Help You Build Your Business Value, Michael Stier of the Carolinas explains how a fractional CFO can help
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In Focus: The Holy Grail of Buy-Sell Agreements

In Focus: The Holy Grail of Buy-Sell Agreements

By Michael Stier

In businesses where there are co-owners / partners, having a comprehensive buy-sell agreement in place is a crucial. However, in typical buy-sell agreements, it’s usually much better for a co-owner to exit by death rather than to exit while they are alive. You may wonder why. The simple answer is that death is the only ownership exit event that is funded under most buy-sell agreements.

Reminds me, no surprise, of the iconic ‘Bring out your dead’ scene in the (hilarious) 1975 movie ‘Monty Python and The Holy Grail’. I am sure many of you, like me, have been quoting the lines from this scene (and movie) for decades now. “Bring out your dead I’m not dead! … Well, he will be soon. …. He’s very ill. …. I’m getting better! …. No, you’re not. …. You’ll be stone dead in a moment…. I don’t want to go on the cart! … Oh, don’t be such a baby.”

Key Takeaway

Buy-sell agreements should contain provisions to govern all potential ownership transfer events. Transfers during the lifetime of co-owners are seldom addressed adequately because advisors recommending buy-sell agreements often focus on a transfer at death – and the juicy life insurance policy that goes along with it.  In contrast, a good Exit Planning Advisor will highlight the other common scenarios and encourage owners to review and update their agreements to better address, far in advance, the full spectrum of possible outcomes. Their exit planning advisor will bring in other specialists, as needed, (e.g., CPA and attorney with tax expertise) to craft a comprehensive agreement now to help avoid the heartache and expense of a major dispute down the road. (Or paying 6 pence to an undertaker to cart away your not-quite-dead-yet co-owner 🙂

Consider that the typical boilerplate buy-sell agreement addresses only two ownership transfer scenarios: death of an owner or an owner’s wish to sell to an outside third party. In the case of an owner’s death, there is usually a mandatory sale and purchase at the value stated in the buy-sell agreement and the purchase is funded by life insurance. In the case of an owner wishing to sell his or her ownership to an outside third party, the agreement usually allows the remaining owners to purchase his or her interest at the price offered by the outside party, the price stated in the buy-sell agreement, or the lower of the two. 

What is not adequately addressed is the — more common — situation where one co-owner wants to exit and sell their ownership to other co-owners or the company during their lifetime. The list of potential reasons for their exit include the other of the 5 D’s exit planners speak of often (in addition to Death):  

Disability | Disagreement | Divorce | Dissolution

Exit Planning Advisors that explain these common events to their clients and walk them through theoretical scenarios are more likely to get the owners motivated toreview their current buy-sell agreements.

The typical buy-sell agreement provision (if any) provides an option to the company to purchase an owner’s interest at the value agreed upon in the agreement. The form of payment is a multi-year promissory note. Depending on how valuation is determined in the agreement, the value may favor the buyer or the seller. Additionally, purchasing ownership in this manner creates a double tax on the income produced by the business.

So, what is the best approach to designing a buy-sell agreement to provide for the sale of an owner’s interest to other owners, the company, or key employees? 

A good Exit Planning Advisor will bring in other specialists as needed. In this case, a specialist who understands the tax consequences of such a transaction to the buyer and the seller. The sale needs to be structured to minimize the tax consequences to the departing owner and to the buyer.

If an exit planning advisor is engaged early on, they will look to structure buyout scenarios before any co-owner is contemplating an exit and before any tensions build between the owners. The goal should be to agree on the total net after-tax proceeds a departing owner will receive, and then determine the most tax efficient way to accomplish that. The exit planning advisor and the tax specialist will address with the owners’ considerations such as:

  • Method to establish value of company and value of a departing owner’s interest.
  • Income tax minimization planning such as using the lowest defensible value and making up the difference via tax-deductible payments to the departing owner.
  • Payment terms: cash or terms of promissory note plus… Incremental sale of ownership or wage continuation plan and other recommendations to transfer ownership on a tax- deductible basis.

In the specific case of the disability of a co-owner a recommendation would be to include in buy-sell agreements a disability buy-out provision that is funded with insurance. This is a simple, but partial solution to both the disabled owner and the company. It’s a partial solution because disability buy-out insurance seldom covers the entire value of the acquired ownership interest. The shortfall can be made up by installment payments between the company and the disabled owner.

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, follow us on LinkedIn.

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Michael Stier on the BuilderNuggets Podcast

The BuilderNuggets Podcast

with Michael Stier

Michael Stier discusses the benefits of a fractional CFO (and fractional other titles for that matter) that can help you propel your business forward without having to add someone to your staff full time.

In this episode we dive into the power of having someone like a fractional CFO (and fractional other titles for that matter) that can help you propel your business forward. Guest Michael Stier is an area President for FocusCFO of the Carolinas. FocusCFO is the leading onsite CFO services provider in the Southeast and Midwest, with over 125 professionals providing world-class fractional CFO support.

Show highlights include:

  • How to hire an executive level person to your team when your business isn’t big enough to afford a full time position for this (2:10)
  • Why putting out fires every day in your company makes it impossible to work on your business so it grows (8:53)
  • The one question you must answer if you want to sell your business someday (11:48)
  • Here’s how to tell if your business is ready for a fractional CFO or not (15:27)
  • Why a CFO makes getting bank loans or third-party investments a breeze (15:49)
  • How connecting with a mentor lets you benefit from their biggest money-eating mistakes without making them yourself (21:41)
Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, follow us on LinkedIn.

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