Colorado Business Exchange

07/21/2023

Addressing Disagreements Among Co-Owners

When you co-own a business, you likely don’t go into it thinking, “One day, we may loathe each other.” But over time, goals, ambitions, and the economy itself can change, creating strife among co-owners. And it becomes hard, if not impossible, to solve major disagreements when you’re in the midst of a disagreement with co-owners.
Today, we’ll look at a process that can help you prepare yourself, your co-owners, and your business for potential disagreements.

1. Get Out In Front Of It
The best time to plan for how you’ll approach a major disagreement is before you have the disagreement.
For example, say you equally co-own a business with two other partners. You have the same general goals and ideas for what you want the business to achieve.
This is a good time to begin planning for events that may cause disagreements in the future. When you’re all on the same page, it can be easier to remain clear-headed about disagreements that could crop up.
For instance, you might propose a scenario where a co-owner wants to cash out of the business early to start their own business. You and your Advisor Team can begin to lay ground rules for what that might look like, such as inserting a non-compete provision in your Buy-Sell Agreement.
The goal of staying ahead of a potential dispute is to make such decisions while you’re in a collaborative mind-set. You don’t have to try to solve every single disagreement you may have.

2. Keep Your Buy-Sell Agreement Current
When disagreements arise among co-owners, a common strategy is a buyout. In some cases, your Buy-Sell Agreement may state the conditions of a buyout, such as a Texas Shootout provision.
In a Texas Shootout provision, one co-owner may offer to buy out another co-owner. If the second refuses the buyout, then the second co-owner must offer to buy out the first co-owner at the same price, terms, and conditions of the original offer, with the goal of leaving just one co-owner in charge.
However, an outdated Buy-Sell Agreement can cause all sorts of issues with such a scenario. Inapplicable business valuations, a change in financial security requirements, and countless other calculations could cause issues.
Keeping your Buy-Sell Agreement current could help make implementing a solution for a co-ownership disagreement run more smoothly (e.g., less litigation).

3. If All Else Fails, You May Need To Cut Bait And Start Over
In some cases, when a co-ownership situation is untenable and no one is willing to work toward a solution, business dissolution could be an option.
For many business owners, this solution is unthinkable, especially if the business has grown in value over the years. It can be time consuming, expensive, and make achieving your financial goals much more challenging.
While this option is generally a last resort, it’s not always a necessity. With proper planning, you can better position yourself to avoid reaching this worst-case scenario.

Conclusion
Addressing disagreements among co-owners is generally easier if you plan for them before they reach the boiling point. It may even be possible to position yourself to engage co-owners on disagreements with help from a professional and objective Advisor Team. However, as with implementing solutions to disagreements, it’s generally easier to do so through proactive planning than reactive actions.

We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339

06/21/2023

Controlling the Uncontrollable Parts of Ownership
A common tragedy for business owners is facing a life-changing event, such as a sudden death or illness that devastates the business, without a plan. While these events may seem uncontrollable in the moment, the good news is that with foresight and planning, you can regain control over what seems uncontrollable.
Let’s look at a short fictional but representative account to see the different consequences between proactive vs. reactive planning.
He Was Gone Before He Was Gone
Geoff Starr and his father, Bud, thought they had planned for everything. They survived lockdowns, supply-chain interruptions, and several weather events that had put their competitors on the brink of failure.
But recently, Geoff noticed that Bud’s decision-making seemed off. Bud was often agitated and mean, which was out of character for him. He had trouble remembering long-time clients and, on several occasions, mixed up major client orders that Geoff only caught at the last minute.
Bud refused to see a doctor and demanded that he remain in charge of his business responsibilities. His newfound meanness had driven important managers to the point of quitting.
After his wife found him shivering on their patio in the dead of winter, he was rushed to the hospital to be treated for hypothermia.
Over the next few months, Bud’s doctors confirmed he was suffering from dementia.
Geoff realized that he needed to transfer Bud’s ownership in the business so the business could continue to operate and provide Bud and his family the financial support they needed for his care.
Sadly, Bud’s Buy-Sell Agreement indicated that a transfer of ownership could execute only at his death.
Being Ready Before You Need To Be
It’s common for business owners to create Buy-Sell Agreements early in the business and never update them again. This is what happened to the Starrs.
An outdated Buy-Sell Agreement can have unintended consequences. In Geoff’s case, there was nothing he could do with his father’s ownership until his father died, which defeated the purpose.
What could the Starrs have done differently, and what might you do to avoid a fate like this?
1. Create a Business Continuity Plan
A Business Continuity Plan gives your family, your business, and your advisors guidance about what they should do if an unexpected event occurs.
For instance, your Business Continuity Plan can offer strategies for first contacts and actions to take following the owner’s unexpected departure, use of proceeds schedules, and management responsibilities.
Providing guidance when you can’t actually provide it yourself can bring relief to your family and those who rely on you.
2. Retain Key Employees
When something happens to a business owner, it can cause key employees to worry or consider leaving. In Bud’s case, his managers became so fed up with his meanness that they considered quitting. This would have horrible consequences for the Starrs, because without the business running at full steam, Bud’s care would decline.
To stay in control in this regard, you might consider establishing Stay Bonuses in your business planning. Stay Bonuses incentivize key employees (often financially) to stay at the business following unexpected events that affect the business owner.
It’s often true that your company will need to be financially strong to offer Stay Bonuses. By strengthening your company to allow for this scenario before you need to, you may find opportunities that benefit your company even if nothing ever happens to you.
3. Avoid Assuming It Won’t Happen To You
No one wants to think about bad things happening to them. It’s difficult and scary to be sure. While you don’t need to dwell on everything that could go wrong, it’s important to be reasonably prepared for things that may go wrong.
You might even use the idea of an unfortunate event befalling you as motivation to control it as much as possible. Planning to address events that are realistic and potentially harmful to your company can introduce you to the strategies to overcome them, which, in turn, could further strengthen your business.
Conclusion
Controlling the uncontrollable parts of ownership is more attainable with a plan.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339

07/20/2022

Recurring Revenue!

Fort Collins, CO:This well-established company in the fast growing Northern Colorado market, provides comprehensive landscape maintenance, landscape installation, and snow removal service at commercial properties. Their customers include: property management companies, HOA’s, apartment complexes, ...

07/20/2022

3 Value Drivers You Can Start Installing Right Now

An important aspect of growing a successful business Is creating transferable value. Transferable value is what your business is worth to someone else without you at the helm. Whether you plan to retire or die at your desk, transferable value is what increases business value. To create transferable value, you’ll need to install several Value Drivers. Here are three important Value Drivers that you can start installing right now.

1. Next-level management: The Mother of All Value Drivers
A next-level management team is the most important Value Driver of all. This is the team that takes the business to new heights and executes on your vision. Without it, it’s extremely difficult to create transferable value.
A common mistake business owners make is assuming that whoever takes over their business when they leave will bring their own management team with them. That’s usually not the case, as potential buyers prefer businesses with strong management teams already in place.
It’s imperative that you begin building a next-level management team regardless of to whom you want to sell it or when you plan to leave. To do so, you’ll need to take a few steps.
1. Determine whether your current managers can take the business to the next level.
2. If they can’t, you may need to look outside the business for these managers.
a. This doesn’t mean you must fire your current managers.
3. Once you find next-level managers, create strong incentive plans that encourage them to achieve ambitious goals that contribute to your vision of a successful future.
A next-level management team often determines whether your plans for a successful future become reality or not.

2. Operating systems demonstrated to increase cash flow sustainability
It’s nice when the business operates well while you’re running it. It’s even better when the business operates well regardless of whether you’re in the office or Aruba. A strong way to position your business for success—with or without you—is by creating operating systems that are proven to increase cash flow sustainability.
Operating systems include things like marketing and sales, accounting, production, and CRM systems. As your business grows, you’ll likely have less time to consider how each of these systems functions. Nonetheless, these systems must be able to provide consistent performance and meet or exceed stakeholder expectations.
In short, if operations always run through you, then your business can only grow based on the time and resources you personally have. With operating systems that your next-level managers can successfully choose, use, and control, you have a better chance of growing your business beyond your personal bandwidth.

3. A solid, diversified customer base
As in many aspects of life, diversification is key to risk reduction. A diverse customer base is imperative to growing the value of your business. That’s especially true if a handful of larger customers work with your business because they like you personally.
When businesses rely on just a few large accounts, their transferable value can suffer greatly. One major reason is that a large account may not want to work with anyone but the owner. In cases like these, the owner must always have a presence to keep the account. As we’ve discussed, this can reduce your control over your future.
Creating a solid, diversified customer base typically requires next-level managers with the talent, skill, and foresight to identify and attract new clients. Once those teams have enticed those customers to do business, strong operating systems play a crucial role in retaining those customers.
And in the longer term, a diversified customer base shows insiders and outsiders that the company is strong and isn’t likely to be devastated by normal retention churn. This can further increase business value, as next-level managers and key employees are more likely to stay with companies that consistently exceed customer and employee expectations.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339

02/17/2022

Why Specific Goals Should Also Be Fuzzy
A longstanding credo for successful business planning is make specific goals. However, there is such a thing as being overly specific in your goals to the detriment of other things that matter to you. Let’s look at how adding fuzziness to specific goals can make your business planning strategies more fulfilling.
Analytics vs. Eye Test
In the world of sports, there’s often great debate between the value of analytics versus the eye test. Analytics often provide hard, quantitative evidence of performance, while the eye test relies on intuitive, qualitative evidence about performance.
Business planning is similar. For example, the analytics might tell you to send your top salesperson to close an important deal because she has good closing numbers. But the eye test—your raw observations and intuition—might tell you to send a junior salesperson because she has demonstrated a special rapport with the customer’s decision makers.
Focusing solely on either analytics or the eye test can lead to unintended consequences.
Consequences of Being Too Specific or Fuzzy
Say you have specific goals that include selling your business to a third party within five years for $50 million. You do everything you can to achieve it, only to find that you had to lay off most of your workforce, including your business-active children. Doing something like this could damage your legacy or worse, leave you very wealthy but very lonely.
Similarly, if you only focus on the eye test, you may create goals that are too fuzzy to achieve. For example, you may personally like and have faith in an executive you hired soon after starting your business because she has great raw talent. But as years pass, that executive doesn’t develop that talent into a systematic and repeatable method for success. Having blind faith that that executive will improve can make it much more difficult to achieve your specific goals.
In short, focusing only on one kind of goal over another can lead to dissatisfaction, disappointment, and a business plan that doesn’t do what you want it to.
Resolving the Differences
The key is to marry your specific goals with an element of fuzziness. For example, it’s wise to have a specific timeline for achieving goals to avoid 11th-hour rushes. But equally important is considering how you achieve those goals with the people and processes that make your business run.
One way to begin this process is to ask two important questions.
1. What do I need to achieve success?
2. What do I need to feel like a success?
In business planning, financial independence is a measure of achieving success. However, the second question is a continuance of that idea that asks, “At what cost?”
Trying to combine the quantitative measurements of success with the qualitative measure of what makes you feel like a success might create conflicting goals. That’s OK.
It’s OK because it’s up to your and your most trusted advisors to determine the best way to resolve any conflicting goals. This is why it’s important to not be afraid to have goals that don’t seem to line up.
Perhaps an effective way to develop and implement a strong plan for a successful future of your business (and your ownership of it) might be:
1. Write your goals down, especially if you have conflicting goals
2. Share your goals with your trusted advisors to keep them top of mind
3. In every planning meeting, ask your advisors, “What do you think is the best way for me to achieve these conflicting goals?
Planning isn’t about having all the answers—it’s about finding the answers to provide you with the most fulfilling future for yourself, both personally and professionally. Thinking through both specific and fuzzy issues can help provide you with context and texture in your plan, making it more dimensional, and improving the chances that you’ll be happy with your outcomes.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest.
Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
Circular 230 Disclosure: Pursuant to recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code or; (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

01/20/2022

The Common Element Among Unique and Successful Businesses
Successful business owners may face a conundrum as they pursue success. “Though my competitors do something similar, they don’t do it the way I do it. So, how do I know the right way to achieve success, especially if I don’t do things their way?”
It’s a bit of a paradox: How can you build and enhance your company’s unique qualities while adhering to commonly followed best practices? The key is having a planning process. Here are some of the things you should consider to position your unique business to achieve generally agreed-upon standards of success.
Your Unique Goals
Though all businesses are unique, one common element that successful businesses have is setting goals. Without goals, businesses are aimless, which makes it practically impossible to determine whether they’re successful.
On the other hand, a common feature of goal-setting is the ability to change them. A goal you have now may change five years later. Successful business owners have the ability to pivot.
While setting goals and changing them when necessary are commonalities among successful businesses and owners, it’s the kinds of goals that speak to each business’ uniqueness. As you build your company’s success story, you’re finding the combination of specific goals that make your company unique.
Leveraging Your Resources
A potentially more obvious example of uniqueness among business owners is the resources they have outside the business. You’ve likely heard the story of the business owner who pours everything they can into their business. And there are business owners who sweep out all of the profits their business creates and use them to build an unrelated enterprise or asset.
Regardless of the outside resources you have, a common element of business success is leveraging what you have to create what you need.
With proper planning, it’s more likely that you’ll accurately assess what you have. That can allow you to determine the actions to take to leverage those resources into what you need to achieve your goals.
Becoming Inconsequential
If you create a business that provides for your family but that would fold if you are not at the helm, have you created a successful business?
Many business owners define success as the ability to leave the business when I want, to the person or group I want, for the money I need to live a fulfilling life. This necessarily implies that unless the business can run without you, it may not be successful.
This applies whether you intend to leave your business during your lifetime or at death.
If you plan to leave during your lifetime, you may not want to work for whomever you sell to. Creating a business that doesn’t rely on you can position you to avoid this fate. In turn, this can allow you to leave your business on your terms, rather than someone else’s.
If you plan to work until you die, you’ll likely have people who rely on your business, such as family or employees. Having a plan to allow the business to continue running if you were to die or become incapacitated unexpectedly is crucial to supporting them in your absence.
Although each business has a unique reliance on their owner, one thing is common: Unless the business is ready for a future without you, it can be difficult to achieve your goals, such as financial security, a comfortable financial situation for family, or charitable goals.
Choosing Your Successor
Whether you hope to transition ownership to a third party, an employee, or a family member, one thing applies to all business owners—the time to take the steps to achieve that goal is while you own the business and well before your ideal transition date.
Owners who methodically build their business with an intention to create success for their desired successor owner make decisions today with that future in mind. Developing systems, product lines, customer relationships, and team members that best suit a transfer to the target successor are all deliberate choices you can make.
In short, having an idea for whom you want to succeed you can give you more control over the company’s future. It helps you plan and execute with your intended successor in mind.
Planning: A Common Bond in Successful Companies
All owners and companies are unique. It's the consistency of a planning process that can address your uniqueness within the general context of success. You may have unique goals to achieve to define your success. But it’s hard to guide your success if you submit your future to fate over planning.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest.
Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
Circular 230 Disclosure: Pursuant to recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code or; (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

10/20/2021

Protecting Yourself Against Employee Risk
Successful business owners constantly strive for growth. And when everything’s humming along, it can be easy to think the good times will last forever. However, it’s crucial to protect yourself, your company, and your future against employee risk throughout your growth and planning.
While it’s likely that many of your employees are good people working in good faith, just one error or bad-faith employee can ruin years of planning. Today, we’ll walk through a few ways to mitigate employee risk and the consequences of succeeding and failing in doing so.
Protecting Against Bad-Faith Employees
Key employees are those who consistently exceed expectations and tangibly affect company performance. You likely know how important it is to keep key employees on your team for the sake of your long-term success. But it’s just as important to prevent key employees from wielding their power against you.
For example, a key employee might understand how important they are to the company and take advantage of it. One key employee working in bad faith can purposely sabotage your plans to get ahead for themselves.
In the worst cases, they may attempt to blackmail you if they know you need them to achieve your goals. For instance, if they find out you intend to sell your business on the condition that they stay, they may demand a slice of the sale price as a condition for staying, putting you in an impossible bind.
Protecting against these possibilities is paramount to your long-term success. You might consider implementing non-compete and non-solicitation agreements for your employees to prevent such issues from the outset, to the extent they are available for your company and the employee in question. That way, if an employee leaves on poor terms, you position yourself to take legal action against bad-faith actors.
You may also consider implementing more checks and balances in the critical functions inside your business. Having two different employees involved in essential tasks such as collecting accounts receivable, vendor contracts, or preparing financial statements can reduce an employee’s temptation to engage in self-dealing or theft.
Retaining Great Employees
Even in less extreme circumstances, a key employee who threatens to leave can do irreparable harm to your planning. For instance, a key employee may tell you they received an offer from a company outside your industry. While that key employee may not intend to harm your business, simply leaving your company could harm it. They may also unwittingly position clients they brought on to leave.
In such cases—where a key employee might find a place to work that’s a better fit for them—you might consider retaining them with a strong incentive plan.
With the right kind of incentive plan, you might reduce the likelihood of key employees leaving for greener pastures. However, the “right” incentive plan depends on what your key employees want. While some may have interest in ownership, others just want more money. Likewise, you must make sure that what the key employee wants can ultimately contribute to your success.
In short, key employees are both a benefit and a risk. A strong incentive plan is one of the most direct and effective ways to increase the benefits they provide while decreasing the risk they’ll try to leave for something better.
Repositioning Ineffective Employees
Even the best-intentioned employees can slow or stop your planning. For instance, you may have employees who always bring a can-do attitude but simply don’t have the skills to help you achieve your goals.
It’s important for you to find ways to have the best people making the biggest decisions for your company. That means avoiding the temptation to install people with the right attitude in positions that aren’t the right fit.
For example, you may have a sales manager who’s really nice and likeable, but who merely hits quotas every month when you need someone who can outperform those quotas. Relying on that person to drive sales performance may not be appropriate for your longer-term business goals, no matter how nice that person is.
Instead, you’d likely want to consider finding the right person—whether internal or external—to drive the results you need to achieve your goals. You can still find a more appropriate role for the nice, average performer. But simply installing people in positions that can affect your success because they’re likeable can be an act of planning self-sabotage.
Planning Impacts Employee Risk
Planning can help you leverage your team’s best qualities, and reduce the risk associated with some of the more negative aspects of human nature. Looking for ways that you can do both, through planning, can give you peace of mind and an advantage in a competitive world.
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
Call me for a copy of our white paper about the inevitability of a business owner's exit. 970-224-3339

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest.
Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
Circular 230 Disclosure: Pursuant to recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code or; (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.