In this episode Mark Tepper with Strategic Wealth Partners shares his book Walk Away Wealthy. This book is the perfect fit for entrepreneurs or business owners looking for an exit strategy for their business plan. This is a book that is specific to building wealth for entrepreneurs and will focus on both the liquid and the illiquid investments. As an entrepreneur this is really the only book you need to read on wealth management.
This is a book that is specific to building wealth for entrepreneurs. It will focus on both the liquid and the illiquid investments and as an entrepreneur this is really the only book you need to read on wealth management because it covers both sides of the equation.
I would recommend reading it from beginning to end. It’s broken up in to three different sections and chronologically set up to be read that way.
Planning is a process, not an event. The longer you wait to get started, the less money you’re ultimately going to get for your business. Begin your financial and exit plan as soon as possible and continue to revise it along the way.
There are three main sections in the book; building value, monetizing value and preserving value. We have twelve different secrets that you need to know if you really want to have the most financially successful life as an entrepreneur.
Secret #1 is creating your exit plan before you need it. What this chapter talks about is there is a misconception that you don’t need to focus on your exit plan until you are ready to sell and the fact is you should begin working on your exit plan the day you start your company. Even if you are a startup you need to start focusing on what you are eventually going to get out of that business. The only reason you should be going into a business is to hopefully one day sell it at a substantial profit.
Secret #2 is knowing the value of your business. One of the biggest issues that entrepreneurs have is they are emotionally attached to their businesses and because of that they over value their company. We talk about how evaluations are calculated and how to go about determining your valuation without costing an arm and leg.
Secret #3 is value is more than cash flow. Earning is important but there are two parts of the valuation equation which is earnings times a multiple. The multiple is going to be determined based on how risky a company is in the eyes of the acquirer. The most risky the company appears to be, the lower the multiple, therefore the company is not worth as much. The less risky it is, the higher the multiple. This chapter focuses on how to increase the multiple.
Secret #4 is how to make yourself expendable and it talks about how to remove yourself from the operations of the business. You need to build a business that can stand on its own and we talk about how to do that.
We then hop into the monetizing section of the book and the first secret there is selling is your best exit option. If you are looking for the best financial reward, the best way you can go about doing that is by selling to a third party. We talk about how complicated that process can be but we also try to explain it so that there’s no curve balls if and when you do decide to go through that process.
The next secret in that section is if you can’t or won’t sell, consider an internal transfer. An internal transfer would be possibly selling to your family members, your key employee or your management team. Unfortunately, if you decide to go that path, you are not going to get the same financial payday. We are going to tell you how to go about doing that in the most efficient manner possible.
The next secret is to never sell your business yourself. In our experience a good investment banker is worth their weight in gold. They are typically able to get you significantly more money than what their commission cost you. What we do in this section is we talk about how complicated the process can be, how you can screw it up if you try to do it alone and we map out exactly how investment bankers get paid. There is more to a good deal than a sale price. This chapter is all about what are the other terms of the deal that you need to pay close attention to.
The last section of the book is preserving value. The first secret there is having a financial adviser create your personal financial plan. What we focus on is to do it now, don’t wait until after the sale. The next secret is plan for the unexpected and make sure you are covered if anything happens. The secret after that is to not bet your retirement on starting another successful business. We talk about ways to protect you from starting another business, losing all your money and then having to go and find a job because that puts you in a pretty awful situation.
The last secret is to find something to fill the void after your liquidity event. Identify what it is that you’re really passionate about prior to selling your business and pursue those passions after.
There is a term that I refer to that kind of summarizes the purpose of the book and that term is irreversible financial mistake.
“Once you sell your business you can’t give the money back and start growing it again, it’s a done deal; it’s time for you to move on.”
I own a wealth management firm called Strategic Wealth Partners based out of Cleveland Ohio. Our focus is on working with entrepreneurs and taking care of their wealth management needs.
I am married and have three kids who are seven, almost five and almost three.
The majority of my clients are entrepreneurs and entrepreneurs tend to have very unique wealth management situations. Entrepreneurs need to focus on building and growing both their liquid investments but also their illiquid wealth, growing that is just as important, if not more. What we found is on average about 80% of entrepreneurs net worth is tied up in his or her illiquid business. And additionally most entrepreneurs are only going to sale that business one time and that is going to be the most significant financial event of their life. We really wanted to put together a book that looked at both sides of the wealth management equation.
The E-Myth by Michael Gerber
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Download the full transcript here
Relevant advice and tips: 7 Important Things You Need To Know When Selling Your Business
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