How To Prepare Your Small Business For A Profitable Sale

When you started your own business, you probably didn't give much consideration to selling it. However, with statistics showing that 80% of a small business owner’s net worth is tied up in their company, preparing your business for a profitable sale should be on your radar.

Whether you plan to sell your business outright or transfer to partners or family members, here are some steps you should take to protect your assets:

Know what your business is worth. Getting a professional valuation of your business is key to a profitable sale. Be sure that whoever values your business has expertise valuing businesses in your industry.

Build your business as an investment. The eventual buyer for your business is looking for a good investment, one that will continue to pay long after you are gone. Build your business as an investment by having a diversified management team that has some skin in the game, so they will stay on after the sale. Having a business that provides recurring revenue is also more attractive to buyers, so be sure your growth strategies are built on a solid foundation.

Have written plans and processes. If your business plan exists only in your head, this is a sign to buyers to beware. Be sure your plans and processes are well documented so that new ownership can step in and run the business seamlessly.

Take taxes into consideration. When determining the best time to sell your business, take taxes into consideration. Funding a retirement plan for employees and other tax saving strategies should be employed to shelter assets from taxation.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.  

According to a recent study by the Investor Protection Trust and Investor Protection Institute, the top three ways that the elderly could be financially exploited are:

• Theft of funds or property by family members

• Theft of funds or property by caregivers

• Financial scams by strangers

It is estimated that one in nine seniors has been a victim of financial abuse in the past year, so what can you do to protect elderly parents from financial fraud?  Here are some tips:

Seek out a financial abuse prevention seminar in your local area.  Many senior centers and organizations provide these programs, so choose one and go with your parent(s) as an opportunity to do something social with them.

Put your parents’ finances on auto-pilot by enrolling them in direct deposit for Social Security, pension, retirement and investment income.  Set up automatic bill pay for as many bills as possible, and help them pay their bills online.

Check in with them frequently and ask them directly if they have been solicited by anyone who visited or called.  If you live nearby, visit in person.

Some experts advise those with elderly parents who become incapable of handling investments to invest a portion of their retirement income into a low-cost, immediate-fixed or inflation-adjusted annuity from a reputable insurance company.  This will provide a guaranteed lifetime income that cannot be lost to fraud or abuse.

If a parent’s savings are still in their former employer’s 401(k) plan, consider keeping it there.  These plans are strictly regulated for the exclusive benefit of employees, and may yield the best investment deal possible.

If you’d like to learn more about estate planning, call LawWriter’s office today to schedule a time for us to sit down and talk. 

While there are some good reasons why parents and adult children consider joint ownership of assets, there are also some potential unintended consequences, including:

Divorce:  If a parent adds an adult child as joint owner on bank or investment accounts and that adult child becomes party to a divorce action, the child’s ex spouse may claim the joint assets as part of the marital estate.

Creditors:  If an adult child is the joint owner of a parent’s accounts and has a lot of debt or files for bankruptcy, that child’s creditors can try to lay claim to the assets.

Temptation:  If an adult child has financial problems, they may be tempted to “borrow” from a parent’s account to satisfy debts.

Inheritance:  If the parent dies and the adult child is the surviving joint owner of assets, he or she doesn’t have to share with siblings, no matter what the parent may have intended.

Basic estate planning tools – including wills, living trusts and powers of attorney – can accomplish the same goals as joint ownership without the risk of unintended consequences.  LawWriter can recommend which estate planning strategies will work best for your family and circumstances.

If you’d like to learn more about family estate planning, call our office today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article. 

A review of online legal service websites in the September issue of Consumer Reports magazine found that most of these sites do not offer the flexibility small business owners need in crafting important legal documents.  While you may save a few hundred dollars by using a DIY legal site, you could pay thousands later to correct a legal issue that has been handled improperly.

There are several legal issues that small business owners face where using an experienced lawyer is always the right choice, including:

• Business structure formation

• Human resources issues and compliance with state and federal regulations

• Contract negotiations and agreements

• Partnership agreements

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.  

1. Begin planning early to ensure management continuity and maintain the value already built up in the business.

2. Identify one or more individuals who have a passion for the business, and don’t base the decision solely on family relationships.

3. Make the decision on a successor early enough to enable the business owner to transition the takeover slowly and to train the successor properly.

4. Get a valuation of the business.  Due to the unsure economy, many small businesses have trouble getting access to outside capital, making it difficult to diversify ownership.

5. Get help from an attorney who specializes in small business law and estate planning to be sure you understand the tax implications of agreements commonly used in business succession planning.

Onshoring (the opposite of offshoring) involves outsourcing work domestically.  The decision of many companies to move back to the U.S. is attractive because the dissolving differential in labor rates between the U.S. and countries such as India no longer offsets the costs that companies bear in risk management, supervision, transportation, and customer satisfaction when moving offshore.  Therefore, many companies are sending their work to small towns in the U.S. or to virtual America where the costs are low.

For example, the Los Angeles Times reports that Dell, Inc. once at the cutting edge of overseas outsourcing, opened a call center in Twin Falls, Idaho after customers complained about foreign workers' English-language skills.   Another company, California-based Northrop, Inc. saved about 40% by basing its technical support in Corsicana, Texas rather than in Los Angeles – achieving savings similar to those realized by sending the jobs overseas.   "We're getting very high quality and a dedicated workforce," said Thomas Shelman, President of Northrop's Information Technology Defense Group.   Similarly, consulting firm Accenture is building a document-processing center on an Indian reservation in Oregon.  "We're responding to the tremendous demand among Accenture clients for outsourcing services performed by professionals within the U.S.," said Randy Willis, a senior Accenture executive.  Many companies are recognizing that for projects that require a higher degree of expertise, American onshore providers offer a better deal.   For these reasons, many companies are reevaluating their decision to ship projects overseas, opting instead for U.S. based outsourcing companies.

There is, perhaps, no field more suitable for Onshoring than legal work.  The skill, knowledge, and experience of U.S. attorneys working on American soil is very attractive to companies looking to outsource. The costs are kept low because the work is done in small-town America or by internet-based companies; yet the skills of the U.S.-based attorneys are high.   Chicago-based McDermott, Will & Emery just got into trouble by using an outsourcing company that did not understand the nature of privileged documents.  Using U.S. attorneys who understand the nuances and complexities of U.S. legal arguments serves to ease the mind of the company who is outsourcing its legal work.  Furthermore, in the unlikely event of a problem, it is extremely beneficial to Onshore the work because the laws of the United States will be enforced.

For all of these reasons, Onshoring, the new LPO kid on the block, is here to stay.

A partner is hitting on me!  What should I do?

I have 2 memos due on Friday and another partner who has a reputation for being an offer killer just gave me an emergency project. What should I do?

I'm supposed to write a brief on informed consent, and I have no idea what that is.  Help me Professor Simon!

These questions always take me back to my days as a Summer Associate at a big Denver firm where I saw numerous fellow Summers making blunder after blunder on their way to a no offer Summer.  One Summer Associate blew off the end of the Summer shin dig at the big partner's Cherry Creek mansion to fly to San Diego to attend her boyfriend's firm's end of Summer party instead.  Huh?  Another Summer Associate feigned illness because his memo was due and he attended the Joe Jackson concert at Red Rocks the night before instead of finishing the assignment. Doh!

That is why today I offer Summer Associates all over the world this bit of advice:

1.  First and foremost, you must do great work.  This cannot be emphasized enough. Your offer for permanent employment starts and ends here.  No matter how charming you are or how many asses you kiss, I am sorry to tell you that you will never receive an offer of full-time employment if your work is sub-par.  The competition for these jobs is fierce, so you must fully understand the project, research the hell out of it (without spending too much of the client's money on Westlaw or Lexis), and present a beautifully written product.  If you do not do this, you will not receive an offer.

2.  Closely related to # 1 is the fact that, in order to do great work, you must understand the nature of the beast, and this is where most Summer associates fail.  You must understand exactly what the partner is asking you to do.  You have to ask questions, because most partners often assume that law students have much greater knowledge and experience than they actually have.  They forget that you have had a total of 4 semesters of law school and may never ever have had a class on Securities Regulation, the actual assignment you are being asked to give an opinion on.  It's up to you to figure it out.  

3.  Attend all Summer Associates social events that you are invited to.  Do not let work interfere with these social commitments even if there is a looming deadline.  Find a way to make it happen. Believe me, the partners are evaluating you as much on this level as they are on the work level.  They are asking themselves:  Is this a person who has the social skills to attract business and who can entertain clients?  This is a skill that is so important because there are a lot of legal minds who can do the work.  The greatest skill set is doing great work but also having a great personality so that clients will want you to do their work, and that is what partners are evaluating during these social outings.

4.  You must get to know at least one influential partner, closely.  When decision time comes in the board room, you will need  someone to go to bat for you.

5.  Don''t be a whiner.  This is a job.  If you haven't figured it out yet, the practice of law is difficult, let's face it.   Part of the rigor of law school, the Summer Associate program, and the bar exam is to weed out those who do not handle stress well.  Those who can manage stress well will reap great rewards.

These five tips will help all Summer Associates who follow them.  But if you think you need someone to personally guide you through your Summer program — if you think you need more focused, customized, personalized help and feedback to get where you need to be to get the offer from the law firm you're visiting this Summer — well, luckily, that is what I do during my Summer.  I love to help students during this transition period because my experience uniquely positions me to help you start doing many of the things you probably don't even know you should be doing.

If this is you, I invite you to have a look though all the experience I believe has uniquely prepared me in my role this Summer as your guide.  If you're ready to make sure you're doing everything you can to get the offer you want, e-mail me or call me at (312) 321-6477.  I only take a limited number of Summer Associates I think that I might be able to help, so let's see if we can partner to get you the offer.

Has your legal budget gone untamed and crept up year after year into an unmanageable and unpredictable mess?  Did it start out as one small vine and grow to look like the outfield walls of a certain beloved Chicago landmark?

Many corporations and law firms are using Legal Process Outsourcing (LPO) to transfer services typically handled internally to outside contractors where the costs are lower.  Specialists can always do tasks more efficiently because streamlined systems are in place and repetition of tasks leads to expertise.  In the past, law firms had all of the bargaining power and clients were faced with a take it or leave it situation.  However, due to the current economic climate and extreme competition, clients now can dictate how their legal services are delivered.  

So how exactly does your corporation or law firm unbundle its legal services?  You start by breaking down the legal services your corporation or law firm requires into separate identifiable tasks such as overall strategy, document review, contract drafting, research, brief writing, etc.  Tasks such as designing legal strategy, legal research, and document review are all separate undertakings that should be unbundled for maximum cost effectiveness while still maintaining quality results.

Under the unbundling method, the big law partner serves as the director or coach, setting strategy and giving direction.  Then, the position players, such as the document review team and the legal research and writing team, perform their individual and discrete tasks under the direction and guidance of the strategy lawyer and corporate client.  Using this team approach results in the greatest level of expertise and the greatest cost savings to the client.

Once the discrete legal tasks are identified, there are three ways to unbundle these legal services:

1.  If your corporation is doing all of the discrete legal tasks in-house, break down the tasks into separate assignments and outsource them to specialists.  This can result in great savings by eliminating unnecessary in-house legal staff; 

2.  If your corporation is using big law firms, you can outsource by using the "Mexican Wave" approach.  Under this method, the corporation chooses the law firm and service providers to partner together to create the best quality product for the lowest price to the corporation.  There is a certain synergy between the participating organizations and all must have a cultural fit with the corporation; 

3.  If you are a law firm, you can also outsource some of the discrete legal tasks, such as document review and legal research, to outsourcing specialists.  Not only will this result in maximum savings to your clients and win you their undying devotion, you can also make a profit on the work of the specialists per ABA formal Op. 08-451.

Unbundling is easy once the discrete legal tasks are identified and the high-quality legal service providers are selected.  This will put you on the path to eliminating toxic Legal Waste at your corporation or law firm in no time.  

Next up:  Outsourcing legal services to U.S. based providers is the new wave. 

Unbundling legal services is necessary because legal fees have hit the summit at a time when companies are being forced to take a closer look at the bottom line.  Traditional law firms are guilty of gluttony because their legal rates have gone up 75% during a “great” recession when most companies are cutting operating costs and employees. These law firms compete with each other for high hourly rates, skyscraper office space, and revenue expectations that have become more a function of firms comparing themselves to each other for bragging rights rather than reflective of value of work done for their clients. This unjustified boasting swirls into a tornado of big law firm revenue expectations that must be fed by every client, whether or not the work truly justifies it.

Because of this Legal Waste, a shift is occurring in the way companies think about legal service.  Several commentators have referred to legal services as a "bundle of twigs" that can be separated and broken down or decomposed into individualized tasks. 

The                                                                              doesn't read the             

The                                                                              doesn't play the

The                                                                              doesn't throw the

and the                                                                        doesn't design the

So why are corporations paying big firms to do it all at exorbitant prices?  Specialists can always do the job more efficiently and better than generalists trying to cover all bases.

Companies are now in the driver's seat and can dictate how their legal services are delivered.  Companies want legal costs to be predictable, and they want such costs to be decreased while at the same time maintaining quality or even increasing the quality of the legal work because the various tasks are now being performed by specialists at each step of the way.  The time to unbundle legal services is now in order to remain competitive for the future.

Next up:  How to unbundle.