571 Ashley Micciche:

When we’re busy building our businesses, often the last thing we think about is the day we’re … going to leave it behind. Do you have an exit plan?  Most entrepreneurs don’t and today we’re going to learn why that’s a big mistake.

MELINDA

I’m Melinda Wittstock and today on Wings of Inspired Business we meet an inspiring entrepreneur who specializes in helping business owners design, build, and implement custom-designed exit plans so they can secure their final and most important business decision – a lucrative exit from their business

Ashley Micciche (“Mitch-uh-kay”) is the CEO of True North Retirement Advisors, an independent financial advisory firm managing over $250 million in client assets, and Ashley is on a mission to transition 300 small business owners successfully into retirement in the next 10 years

We’re going to dig deep into succession planning, valuation growth, and much more, so I can’t wait to introduce you to Ashley! First…

We all put our heart and souls into growing our businesses and as we do, it’s all too easy to overlook how we are growing the valuation of our companies so that when it comes time to move on, all that effort pays off in growing your personal wealth.

Most founders don’t have a clear intention about their succession plan or the sale of their business, and financial expert Ashley Micciche (“Mitch-uh-kay”) says that’s a big mistake. Ashley helps business owners ensure they are making the right decisions to ensure a lucrative exit.

You won’t want to miss this, so let’s put on our wings with the inspiring Ashley Micciche (“Mitch-uh-kay”).

Melinda Wittstock:         Ashley, welcome to Wings.

Ashley Micciche:              Thank you, Melinda, for having me, I’m excited to be here.

Melinda Wittstock:         Me too. What was the spark that got you into helping business owners really plan for the exit of their companies?

Ashley Micciche:              Yeah, that’s a great question. About 11 years ago, I started working with my first 401(k) plan. That was my specialty as a financial advisor, is consulting on the small business 401(k) plan. So I started working with quite a few small business owners here locally, I’m based just outside of Portland, Oregon. I found that by and large, a lot of these business owners, they were in their 50s, early 60s, very close to retirement and had a good amount of their net worth tied up in their business, and were just clueless about how to even get started on exiting their business, and having that be a part of their retirement plan as well. Even just figuring out basic things like my timeline and who I want to transfer my business to, and all of that, they hadn’t really thought about it or had pushed it aside.

Then about seven years ago, one of my clients had a heart attack very suddenly and died. I watched his business crumble over the next three years or so. They ended up selling the business to a competitor on the East Coast for pennies on the dollar. He had a lot of long-term employees who were very close to retirement, they got laid off. I don’t know if you know anybody who has been laid off very close to retirement, but it’s very hard to find employment after that. It was just this catastrophic trickle down effect to everyone, including his family. So his wife, she had been a school teacher and was retired and she came in to run the business after he died. So if you can imagine when your spouse dies, you’re grieving, it’s so chaotic. Then she’s having to run the business and keep it afloat, having no experience at all doing so.

So that was really, really difficult. I realized through that that there were certain things that that owner could have done to plan for the unexpected. It’s just planning for his exit to even if he hadn’t died. I started to have more and more conversations with my business owner clients about this, and that was the door that opened the way to going in this direction, and do it. Working specifically with business owners and helping them create and implement a plan to exit their business. I still do 401(k) plans and I still work with business owners on their investments and personal financial decisions. But you can’t talk about retirement with business owners without dealing with the elephant in the room, which is their business.

Melinda Wittstock:         Yeah. Succession planning obviously is one aspect of this, but how do you get the value out of your business that you’ve worked in for many years to create? Most founders don’t think about that, but the fact is the exit’s going to happen with you or without you.

Ashley Micciche:              Yeah. Exactly.

Melinda Wittstock:         We may as well be thinking about what’s the valuation growth? What’s the price you would want to sell it for? All of that. So how do you work with people at say, whatever stage they’re in at their business to clue them in to the fact that they really should be doing this?

Ashley Micciche:              Right. Melinda, you hit the nail on the head because valuation and understanding what your business is worth is the very first thing that all business owners should do. Even if they’re not ready to exit, but if they’re just thinking of moving in that direction. Because if you know the value of your business, then you know, let’s say you need X, right? In order to exit your business, you need a specific value in order to do that. Because the worst thing you could do is go through this entire process of exiting your business, and then once you do sell it or transfer it to somebody else, you don’t have enough money financially to go to the next stage of life. So we need to make sure that the business can provide what you need, and if it can’t, then we need to work on either growing that or saving more on the personal side to close that gap.

So understanding what your business is worth is something that business owners should do from the very beginning. But especially as they get closer, I would say within five to 10 years of wanting to exit is really that very important, critical time where business owners really need to figure out what their business is worth. Because then one of two things will happen either it’s worth what you need it to be worth, and then you can take additional steps to make progress on your exit. Or it’s not worth what you need it to be worth, and then we can shift gears a little bit and say, “Okay, well, what do we need to do to grow the value of the business to set it up so that it can be worth what it needs to be in five, 10 years whenever we need to exit.” So business owners really, that is the critical first step, and it’s very hard to do any other exit planning until you have a good feel for what is my business worth today.

Melinda Wittstock:         Yeah. Also, what’s driving the valuation? It’s easy to think about it in terms of just revenue and earnings. But often there are other things that are driving the valuation of your business. It could be your IP, it could be your culture, it could be your social impact mission, it could be a whole bunch of different things… depending on who the likely acquirer actually is. Because the value is in the eye of the beholder.

Ashley Micciche:              Right. Yeah. Actually, for a lot of small business owners, they’re not necessarily looking at a third party sale, although that’s the most common type of transaction that occurs in an exit is a third-party sale. But there are quite a few family run businesses, I’m working with several clients right now who are planning to transfer the business either to a family member who’s been working in the business, like a child, or other business partners, or other key employees that they want to provide that ownership with.

Melinda Wittstock:         Yeah. That’s more like succession planning.

Ashley Micciche:              Right. Yeah. So the key though is for really early on, different decisions get made based on what that path looks like and who that ideal successor is. Whether that’s selling to an outside third party or some type of internal succession. That’s why knowing the value is so important because usually if you are wanting to transfer a gift part of the business, you want the business to be worth less, right? If you’re transferring to a family member. Then if you’re transferring to the third party, you’re trying to get maximum value.

Melinda Wittstock:         Exactly. Well, I’ve seen a lot of women create businesses that are utterly dependent on them. The branding is them, the doing is them, say they even reach the eight figures with that kind of a business, then they’re tired of it. They don’t want to do it anymore, but they haven’t created an asset. They’ve created a really good cash flow business, but there’s no asset to sell.

Ashley Micciche:              Yeah. That is a big challenge for a lot of business owners. If the business revolves around you and the business is basically you, I heard someone say one time that you don’t have a business, you have a you.

Melinda Wittstock:         Right.

Ashley Micciche:              So it does make it very, very challenging, but there are steps that owners can take. Well, first of all, you have to ask yourself, am I okay with that? Because exit planning doesn’t necessarily have to end in a transaction. So I’ve watched business owners just decide to retire and walk away from that business. If that’s what you want to do, then that’s fine, but you have to look at it and say, “Okay, well, is there something here that I can create value from and sell that or transfer that? Can I bring somebody up who I can replicate and doing the kind of work that I’m doing?” I think most people, they don’t want to walk away from their business, they want their business to live on. They want to create this legacy around their business, and there’s nothing wrong with wanting that. So it’s just a matter of deciding, do I want that? And what does that look like? Then what do I need to do?

Who do I need to bring in? How can I train that person or those people? How do I develop processes and procedures? A lot of it, especially with service-based businesses or consulting type businesses. If you can develop processes and specific ways that those standard operating procedures of ways of doing things in the business, then it’s much easier to bring in other people and train them, and groom them to take over. Also it’s a lot less risky for your business, because if you lose a person, if they leave or go somewhere else, then you still have the operating procedures. It didn’t rely on you or that other person to get the work done.

Melinda Wittstock:         Yeah, absolutely. I mean, that’s vital to have those systems in place. It just makes for a better business, it just runs more efficiently, you attract better talent, you get more out of the talent, all of that, which all speaks to the valuation of the business.

Ashley Micciche:              The other thing I would say about that, Melinda is that, if someone is planning, it’s just them and they don’t want to transfer the business, and that’s their exit strategy, that’s fine. But they better have insurance to protect that income stream, and they better be saving quite a bit outside of the business and socking away that income that they’re getting. Because if that stops because they become disabled, or they die like that client I have, then that can be catastrophic. So you have to think through these things and say, “Okay, well, if I could no longer work in my business tomorrow, or if I died, what would happen? Not just to my business, what would happen to my family?”

Melinda Wittstock:         Right. So there’s a whole bunch of different ways. It really depends on the business you’re creating. It’s one path to create the fast scaling technology company where you’re creating it essentially to be able to exit, and that’s going to be the income that you make. That’s a different calculus from say, more of a lifestyle business, more of a practice or whatever that you may want to run for a long time. So in that latter case, you really have to be thinking about, just like you say, making sure that you’re putting away enough money if you’re not going to get the bump of the high exit paycheck at the end. So many people go into this, especially women without having thought any of that through. It’s so important at the beginning to really have an intention around what you want.

Ashley Micciche:              Exactly.

Melinda Wittstock:         Also knowing that your needs and wants will probably change over time as well. So what are the first things like, say someone at that startup stage, they’re starting their business, what do you advise them to do? I mean, is it important for them to just know their number? I mean, what kind of financial gain, first of all, do they want out of the business?

Ashley Micciche:              Right. It goes, the Simon Sinek, Start With Why, why are you doing this? What do you want in five years, 10 years? Are you still involved in the business? How far down the road are you still involved in the business? But yeah, you’re exactly right. I mean, people start businesses for a variety of reasons. So just knowing yourself and knowing how long you want to work. If the business is successful, do you want to continue to work until you die? I have plenty of clients who would, they would love to be able to continue working as long as they’re able to, for as long as they’re able to. Then I know other clients who want to retire at 40. So you make very different decisions depending on those goals and what your timeline looks like.

But it is a challenge in the beginning to start with the end in mind. But that’s something that is so critical to do, because if you can think ahead, if you can have this long-term focus and you’re going to make better decisions about what you do and those steps you take along the way. Especially if you want to sell the business, maximize value over time, you’re going to do everything you can to keep expenses low, and have the right people in the right places, and have those standard operating procedures, and do all of those right things that running a business versus just having a business that revolves around you, or is you. So there’s two very different sets of decisions there. But alongside that too, I would say one of the things that a lot of business owners can and should do that they often don’t do is some of the legal things.

Like if you go into business with somebody else and you have a partner, you’d be surprised by how many businesses don’t even have a buy-sell agreement, or if they do, it’s not signed, or they don’t know where it is. So just having those basic legal protections in place, having your employees sign an employment agreement. Some of those just basic things, where you’re taking your business seriously, and you’re protecting yourself so that if things don’t go as planned down the road, if things don’t work out with you and your business partner from the outset, then you’re not going to lose the business over it.

Melinda Wittstock:         Yeah. Also, hedging your risk a bit as well. So say for instance, in a fast growth startup. So 90% of them fail. But assuming that you’re in the 10%, and you’re going to have a big exit. Having all the agreements and share structure of the business in order, so you don’t get diluted down if you’re taking investments. I think of something like Twitter, IPO-ing and their founders, some of them getting nothing, right? Because of just not being smart about that at the beginning. So if it doesn’t succeed, are you taking enough out of the business? Are you paying yourself enough? Are you investing enough in savings, and retirement, and all that stuff? So what’s the best hedge in that case?

Ashley Micciche:              Yeah. I always ask business owner clients in the very beginning, do you need to sell your business in order to retire? Do you need some sort of financial payout from it, or do you want to? Those are two different things. Ideally, for comfort and financial security, the business would be just gravy, but that’s not the case for a lot of business owners. They need their business to provide some sort of value at their exit. But if not, then there are plenty of other avenues and being smart with, especially if you have a successful cashflow business that’s providing a good income stream for you, not spending it all, taking a substantial part of what you’re making every year and socking that away. Saving it in a 401(k), paying down your house early.

I have a friend of mine who’s a business owner. He’s in his mid forties. He just paid off his mortgage this summer, and those types of things where you’re setting your future self up and your family up for success, and not having to rely so much on this income stream down the road. Now he has a lot more options because he doesn’t have this house payment every month. So there are plenty of things business owners can do. The beauty of business owners when it comes to saving for retirement outside of the business is that you have so many more options, there’s 401(k) plans, and cash balance plans, and all of these options that the average American doesn’t have access to, but a business owner does. You’d be shocked how much you can save, and put aside, and get a tax deduction for doing that within your business, when you use that to save for retirement.

Melinda Wittstock:         Right, exactly. So what are the most important things to have in place? Because when you’re in a startup situation, it’s very, like all hands on deck. You have so many things to do. You’re trying to figure out your first customers, you’re trying to figure out your pricing, your product market fit, your marketing, you’re hiring, you’re doing so many things. So often these sorts of things fall by the wayside. Like just even financial modeling, let alone the legal agreements. Of course money is tight at that early stage of a startup as well. So what is the absolute bare bones that you have to have in place? Then how can you grow and scale and get more sophisticated over time?

Ashley Micciche:              Yeah, I think that there’s a lot of commonality between what’s good advice for just the regular average American and for a business star, which is having cash on hand. So you’re not having to live off of credit cards, or take out a home equity line of credit on your house just to pay your bills in those start-up stages. So anything that business owners can do to minimize their personal expenses, and try to go into business with cash on hand so that they have this long runway that allows them a lot more flexibility versus if they go into it with debt and no cash. It’s really troubling now because in the United States, I think the latest statistic is that 40% of Americans could not cover a $400 emergency without putting it on a credit card.

So it’s even worse when you’re a business owner, because if you get into a situation where you’re really strained financially, and the business is not. You’re not having the success that you hope, you’re not having the growth that you hoped, because you do not have the cash available to live, it could force you to close your business and then go back to working in a different job.

Melinda Wittstock:         Right. Yeah. So that’s super important. In terms of how you pay yourself, what’s the best way? So how much you can be taking a draw from the company, or putting yourself on payroll, or a combination of both? What’s the best way to go about that in terms of making sure you’re being paid properly.

Ashley Micciche:              It really varies from business to business, and how the business is set up, and the business structure. Yeah, I see people do it completely differently. I see a lot of business owners who pay themselves last, and I say, that’s probably not what you want to do, because then you end up staying in that cycle and being a slave to your business. Everything happens except you get paid less. There was a author, Mike Michalowicz, wrote the book Profit First, and I read that book when it first came out. I really loved it because it’s accessible for all business owners, even if you’re not financially savvy, it’s a good read because it reframes how you think about paying yourself in the business. Which is advice is basically to pay yourself first, and to make sure that your businesses is profitable. I saw someone implement that system and go from barely making ends meet in their business to now they have half a million dollars of cash in the bank. That was a two year time period that that happened because they just reframed how they pay themselves.

Melinda Wittstock:         So this can be all very intimidating for a lot of people, right? Because people think that they have to have some sort of advanced degree to understand all this stuff, right? So how does one get past the mindset issue or the intimidation? Or what’s a way for people to get more confidence about all these topics?

Ashley Micciche:              It can be very intimidating and overwhelming. We’re not taught a lot of this stuff in school. Most people are not taught basic financials things, like how to balance a checkbook or how to understand incoming cashflow, and expenses, and all of that. In order to run a business, you got to have a good handle on your finances, but the good news is you can usually outsource that to a bookkeeper. Then going back to when it comes to valuing your business, I think that can be a very intimidating process for a lot of people because it just seems like, oh, it’s going to be very expensive. It’s going to take a long time. I’m going to have to get all of this financial data going back for years and years. That used to be the case, but that’s not any more because there’s technology out there now that allows you with just very basic information.

You could value your business and get a very good, accurate value if you just know your current revenue, or what your revenue projected is for the year, and your profit or your pre-tax income. Those two metrics, and then given the industry that you’re in, get you 90% of the way to figuring out what your business is worth. So it doesn’t have to be a complicated or intimidating process, and it’s 100% free. We use a database that is very robust, there’s 50 million businesses in this database. So if you enter these, just a couple of metrics, you’ll be able to figure out a good, a good estimate of value with very little information and you don’t need to come through your books and records in detail. Most business owners have a somewhat decent handle of what their revenue is or what that’s going to be for the year and then what their income is as well.

Melinda Wittstock:         Ashley, there’s so much that we could talk about. I want to make sure that know how to find you and work with you because this is so important for people to get the right information at the start, or wherever they are at their business, make sure that they’re planning so that all the blood, sweat, and tears they put into their business is not lost. What’s the best way for people to find you and work with you?

Ashley Micciche:              If you go to truenorthra.com/valuemybusiness, you can get a checklist that will allow you to help you gather all the necessary pieces of information. But again, you just need those two pieces, revenue pre-tax income. Then you can take that and enter it into the software tool that we make available to anybody who wants to use it. So you get free access to the business valuation software tool. Within five minutes, you can figure out what your business is worth. So I highly recommend that your listeners go there. It’s free, there’s no strings attached. They’ll be able to see instantly the value of their business, and then that can be the seed for either future business growth, and doing some planning there, or starting to think about their exit more. All of my contact information, it can be found on that website as well.

Melinda Wittstock:         Wonderful. Well, thank you so much, Ashley, for putting your wings on and flying with us.

Ashley Micciche:              Thank you so much, Melinda. It was a lot of fun to be here with you today.

Ashley Micciche
Subscribe to Wings!
 
Listen to learn the secrets, strategies, practical tips and epiphanies of women entrepreneurs who’ve “been there, built that” so you too can manifest the confidence, capital and connections to soar to success!
Instantly get Melinda’s Wings Success Formula
Review on iTunes and win the chance for a VIP Day with Melinda
Subscribe to Wings!
 
Listen to learn the secrets, strategies, practical tips and epiphanies of women entrepreneurs who’ve “been there, built that” so you too can manifest the confidence, capital and connections to soar to success!
Instantly get Melinda’s Wings Success Formula
Review on iTunes and win the chance for a VIP Day with Melinda
Subscribe to 10X Together!
 
Listen to learn from top entrepreneur couples how they juggle the business of love … with the love of business. 
Instantly get Melinda’s Mindset Mojo Money Manifesto
Review on iTunes and win the chance for a VIP Day with Melinda
Subscribe to Wings!
 
Listen to learn the secrets, strategies, practical tips and epiphanies of women entrepreneurs who’ve “been there, built that” so you too can manifest the confidence, capital and connections to soar to success!
Instantly get Melinda’s Wings Success Formula
Review on iTunes and win the chance for a VIP Day with Melinda