The 360 Group - Morgan Stanley Locator

The 360 Group
at Morgan Stanley
Wealth management and succession planning
for successful business owners
Your Needs Are Different
From Other People
You’re a business owner and chances are, that business is your passion. In fact,
you probably spend so much time running your business that you have little
left over for other pursuits. And yet, if you’re like most of our clients, passion
isn’t the only characteristic that separates you from everyone else.
Your attitude toward personal finance may well be another distinguishing
characteristic. For many business owners, the line between their individual and
corporate balance sheets is not always clear. Business owners may not allocate
assets to stocks, bonds and other asset classes like other people, but plough
whatever assets they accumulate back into their companies. As a result, their
businesses may often constitute the lion’s share of their overall asset allocation.
At the 360 Group, we offer
a different approach — an approach designed
with your needs in mind.
We’ve helped successful
business owners:
Develop a succession strategy to help meet their personal
financial objectives, as well as their hopes for the business.
Understand their options for creating liquidity
and transitioning out of their business in the future.
View the business through the eyes of an acquirer
and understand the key drivers that maximize value.
Understand the costs associated with various options, and
develop a road map that details the next steps and outlines
the transition process.
Implement and manage an income replacement strategy
designed to maintain a desired lifestyle and create a legacy
for the next generation.
The 360 Group
3
How We Work With You
Clients often come to us well before they are actually ready to implement
a succession strategy and that’s to their benefit. With the luxury of time,
you can think about what you really want and surmount any barriers
standing between you and your ultimate objectives. Our process typically
consists of the following steps:
1
A 360-Degree View
Filling Your Value Gap
The National Federation of Independent Business reports that only 30% of all businesses
put on the market for sale are actually sold.1
Clearly, the pressure is on for business owners who wish to position their businesses for
future sale so they can move on to the next
phase of their life with confidence.
By quantifying your value gap, we now
have a target to aim for, a sum by which your
business must grow to provide you with the
proceeds necessary for funding your lifestyle.
The question is, how should that gap be filled.
Through an analysis we call “Six Rooms of the
House,” we determine how your business measures up to the Key Value Drivers that lead
to dynamic growth and make your business
attractive to potential acquirers. Our process
evaluates strengths, identifies opportunities
and articulates the risks that may give acquirers cause for concern. We also analyze your
emotional readiness. In other words, are you
prepared to leave your business behind or
would you rather transition out of it over a period of time? What about your valued employees — would they be adversely affected by the
sale of your business and is that an issue you
wish to address?
Depending on your answers, we present alternatives for you to consider, some of which
might result in a higher potential sale price,
others of which might reduce your proceeds
but provide you with greater comfort.
3
4
5
Selecting Your Strategy
Morgan Stanley
Preparing Your
Business for Sale
We’ve found that once business owners are
aware of challenges that could affect the value
of their business, they often come up with viable solutions. For especially complex issues,
however, we offer the ability to introduce you
to specialists in disciplines as diverse as marketing, operations, human resources and financials.
Our objective is to maximize the attractiveness
of your business, identify what drives growth
and focus your attentions accordingly. In addition, we will work closely with your investment banker to conduct an analysis of the
environment, so you can determine who your
potential buyers are, what they are looking
for and what value drivers can enhance your
business’ sellability.
The Key Value Drivers
that lead to growth
and attractive
acquisition include:
high customer
net promoter
score
Where do you want to be when you’re no
longer running your business? How much
will your desired lifestyle cost and will you
be able to afford it?
Through extensive discussions and analysis, we create a comprehensive wealth management plan with tangible steps to help
achieve your goals. Central to our analysis is
a valuation of your business and a determination of what we call “the value gap,” the
amount you will require to maintain your
desired lifestyle.
Selling your business to a strategic buyer may
be only one alternative available to you. Depending on your unique circumstances, you
might want to consider such alternative strategies as a manager buyout, partial sale to a private equity group, Employee Stock Ownership
Plan (ESOP) or even an IPO. If you’re contemplating the transfer of your business to a family member, we will help you work through the
planning issues that might be standing in your
way, from whether that family member is ready
to assume control, to how other family members will react and what you can do to assure
equal treatment.
4
2
Key Value
Drivers
Managing Your Transition
Now that the value gap identified earlier in
the process has been filled, it’s critical to
help develop a comprehensive wealth management strategy that provides you with
sufficient income to maintain your lifestyle
and enables you to grow and maintain the
wealth that your business created. We design and implement a customized asset allocation based on your risk tolerance, time
horizon and long-term objectives. We then
monitor your progress carefully to determine whether adjustments to your strategy
are necessary. Finally, we can help you create an effective estate plan that minimizes
tax erosion and transfers wealth to heirs in
accordance with your wishes and without
undue turmoil.
well defined
new business
development
process
consistent
financial
performance
strong
management
team
diversified
customer base
recurring
revenue model
competitive
advantage
and barriers
to entry
documented
and s.m.a.r.t
processes
(specific, measurable,
actionable, repeatable
and teachable)
By implementing Key Value Drivers, you may be able to increase
the multiple you receive for your business.
4 Million
Profit × 6 =
4 Million
Profit × 5 =
$20MM
An increase in multiple from
5x to 6x creates $4 Million of
additional value in this example.
$24MM
Relatively small increases in the multiple can have substantial impact on your company’s value.
The 360 Group
5
How Does
Your Business
Stack Up?
Through our Six Rooms of the
House analysis, we help explore
every aspect of your business
to identify strengths and possible
areas for improvement.
What is your strategy for
generating leads and turning
them into new customers?
Is your strategy repeatable
or does it rely on the talents
of specific individuals?
Most companies leave far too
much of the sales process up
to the individual sales people.
Yet to create the Ultimate
Sales Machine, you must work
as a team, utilizing everyone’s
brainpower to drill down,
perfect, and procedurize each
aspect of the sales process.
– Chet Holmes, Author of
The Ultimate Sales Machine
What distinguishes
your product or service
from those offered by At Apple we come at
your competitors? everything asking, “How
easy is this going to be
What product or service
for the user? How great
does your company
is it going to be for the
sell that you are most
user?”… Everybody says,
passionate about?
“Oh, the user is the most
important thing,” but
nobody else really does it. – Steve Jobs
How do you keep your
customers coming back?
Do you have a repeatable
service model?
We see our customers as
invited guests to a party,
and we are the hosts. It’s our
job everyday to make every
important aspect of the
customer experience a little
bit better.
– Jeff Bezos, CEO Amazon
Six Rooms of the House
New Business
Development
Operations
Products
and Services
Financial and
Legal Issues
Customer
Experience
Organizational
Development
What business activities
impede your ability to grow?
Could you increase your sales
without increasing expenses?
Organize around business
functions, not people. Build
systems within each business
function. Let systems run the
business and people run the
systems. People come and
go but the systems
remain constant.
– Michael Gerber, Author
The E-Myth Revisited
What do your numbers
say? Are you able to
measure progress or
lack of it in key areas?
Are you looking at
the right data?
Many small businesses would
rather face an angry barbarian
horde than tackle their cash flow
statement or price a new product.
– Nicole Fende, Author
How to be a Finance Rock Star
6
Morgan Stanley
Do you have the right people
in the right seats?
Have you done what you can
to lock in key employees?
The single biggest way to impact an
organization is to focus on leadership
development. There is almost no limit
to the potential of an organization
that recruits good people, raises
them up as leaders and continually
develops them.
– John Maxwell
The Four Phases
of Exit Planning
Growing
All businesses should begin with the end in mind.
You may be a young company, but actions taken in
the early stages can have a significant impact on the
success of a transition down the road.
Thinking
At some point you’ll begin to realize that an exit is
not that far away. Perhaps it’s 5 to 10 years away, but
the implementation and attention to key value drivers
at this stage is critical.
Planning
As you approach a point where exiting is closer
on the horizon, developing a well thought out exit
plan and financial plan will be critical for you and
your family’s future.
Executing
The transition process can be stressful, emotional and
complicated. Working with the right Financial Advisor who
will help you assemble a team of professionals and help you
manage the process is critical to the success of the transition.
8
Morgan Stanley
A 360-Degree Difference
Real Estate
Commodities
The 360 Group was established to help meet the specific needsStocks
of
Cash
Estate
business owners contemplating an exit fromRealtheir
company within the next
Commodities
Bonds
5 to 10 years. As a result, we tend to approach
your challenges differently.
...And Your Exit Strategy
You have multiple options for exiting your business. Choosing the right one depends on your financial
and mental readiness. The chart below illustrates several possible options available to you:
Stocks
Cash
Bonds
Commodities
Cash
Bonds
Real Estate
Your Allocation Reflects Who You Are...
Which of the following sample allocations
Commodities
Cash
most Stocks
closely
Commodities
Cash
Bonds
Stocks
Real Estate
resembles your own?
Real Estate
Business
Stocks
Commodities
Bonds
Stocks
Cash
Bonds
Commodities
Cash
Bonds
Business
Your business
may not be
a public equity
an exchange, but
Commodities
Real Estate
Cash
constitutes a highly illiquid and concentrated
position. As a result, it should be included in
Business
Bonds
your overall
asset allocation, especially if it represents a substantial portion of your net
Stocks
Retirement
worth. In addition, your overall portfolio should College
be managed with consideration for
the
Planning
Funding
unique risks your business presents. Business
Investment Management
So Does Your Financial Plan...
Investment
Management
Retirement
Investment Management
Planning
Retirement
Planning
EstateInvestment
Planning
Management
Tax Planning
Retirement
Planning
Estate
Business
Planning
Succession
Cash Management
Tax Planning
Retirement
Planning
Investment Management
For Illustrative Purposes Only.
Planning for business owners typically encompasses more disciplines than planning for employees,
even highly
Cash Management
Investment
compensated
ones.
Again,
our
approach
addresses
business-related,
as
well
as
personal
wealth-related
issues.
Investment Management
Business
Retirement
Management
Planning
10
Morgan Stanley
Investment
EstateManagement
Planning
Rich and Ready to Go
ESOP, Manager Buyout,
Leveraged Recapitalization
Gifting, Philanthropy,
Outright Sale, ESOP
Stay and Grow
Get Me Out at the
Highest Price
Tax Planning
Retirement
Planning
Sale
For Illustrative Purposes Only.
Retirement
Planning
it is private
equity that
College
Funding
traded
on
Stocks
College
Funding
Well Off but Choose to Work
ESOP, Private Equity
Recapitalization
Real Estate
College
Funding
Financial Readiness
Real Estate
Succession
Mental Readiness
You gain access to business experts
Not just us. Business experts specializing in disciplines as diverse as marketing, finance and leadership skills. Every
quarter, we conduct a think tank that features an outside expert and discussion with other successful business owners.
You may benefit from contact with your peers and best thinking from speakers who can provide you with important
insights into the issues that affect you most.
We help coach your advisory team
Successful business owners generally require the guidance of more than one professional as they position their
business for succession and plan their retirement and estate. You might consider interviewing one or more attorneys
with specialized experience, an accountant who may or may not be the same CPA who prepares your corporate tax
returns and an investment banker and/or third-party appraiser to analyze your business and value it appropriately.
As your Financial Advisors, we understand the total context of your overall finances and the linkages between your
personal objectives and business ambitions. As a result, we can help your other advisors understand your priorities
and make certain they are reflected in your succession and wealth management strategies.
Chart above © 2008 John M. Leonetti, Exiting Your Business, Protecting Your Wealth.
The Transaction of a Lifetime
Exiting the business you’ve built and nurtured over the years is not
a simple task, either financially or emotionally. Diligent planning is
critical and so is the support of an interdisciplinary team with the
experience to help you articulate and achieve your objectives, whether
you choose to transfer your business to existing family members or
sell it to existing management or a third party.
The 360 Group at Morgan Stanley can play an important role in
developing and executing your succession planning and overall wealth
management strategy. As successful businesspeople, we understand
the interplay between decisions you make for your business and
the impact they can have on your future financial security.
12
Morgan Stanley
Meet the Professionals
Jesse Giordano, CFP®
Family Wealth Director
Financial Advisor
Lee Korn
Born into a family of business owners,
Jesse understands the passions that
drive entrepreneurs and the concerns
that keep them up at night. He established The 360 Group with Lee Korn
to help meet the specialized needs of
business owners, including helping them
create and implement successful exit
strategies. Jesse has dedicated himself
to developing the skills necessary to
serve this complex market, earning
the prestigious industry designation of
CERTIFIED FINANCIAL PLANNERTM
and Morgan Stanley’s exclusive Family
Wealth Director designation.
A graduate of SUNY Cortland with
an MBA from Pace University, Jesse
joined Morgan Stanley in 2008 after
beginning his career at Merrill Lynch.
He is active in his community, volunteering with the Leukemia and Lymphoma
Society and the American Cancer Society.
In addition, he is a proud member of
The Lions Club.
Lee brings more than 17 years of experience to the service of our clients.
He began his career as a commercial
banker helping successful business
owners raise capital for acquisition
and expansion. Later he joined Edward
Jones where he broadened his focus to
include personal wealth management.
At a Morgan Stanley predecessor firm,
he established The 360 Group with Jesse
Giordano to provide his clients with a
more integrated and comprehensive approach that encompasses every aspect
of their finances.
Lee is one of the few Morgan Stanley
Financial Advisors to earn the firm’s
prestigious Family Wealth Director
designation. He was also named one
of the top 1000 US Financial Advisors
by Barron’s* in 2009.
Active in his community, Lee has
volunteered extensively with special needs organizations and has
raised funds to provide scholarships
for autistic children.
Family Wealth Director
Financial Advisor
Joe Filosa, CFP®
Financial Advisor
Joe plays a major role in the development of financial plans for our clients
and the evaluation of the investment
managers we hire. His tireless efforts
help us create strategies that work in
concert with each other and implement
those strategies.
Joe joined Morgan Stanley while
still a student at Baruch University.
His fascination with financial markets
began even earlier and he is delighted
to be able to apply his passion in the
service of our clients.
Joe graduated from Baruch with
a BBA and subsequently earned the
prestigious CERTIFIED FINANCIAL
PLANNERTM designation. He currently
serves as Treasurer of the Board of Directors at another of his alma maters,
St. Elizabeth’s Academy in Ozone Park.
*Source: Barron’s “Top 1,000 Advisors,” February 20, 2012, as identified by Barron’s magazine, using quantitative and qualitative criteria and
selected from a pool of over 4,000 nominations. Advisors in the Top 1,000 Financial Advisors have a minimum of seven years of financial
services experience. Qualitative factors include, but are not limited to, compliance record, interviews with senior management, and philanthropic work. Investment performance is not a criterion. The rating may not be representative of any one client’s experience and is not
indicative of the financial advisor’s future performance. Neither Morgan Stanley Smith Barney LLC nor its Financial Advisors pay a fee to
Barron’s in exchange for the rating. Barron’s is a registered trademark of Dow Jones & Company, L.P. All rights reserved.
The 360 Group
15
The 360 Group
1010 Northern Boulevard
Suite 214, Great Neck, New York 11021
516-773-7212
 / Main
877-710-3944 / Toll-Free 516-773-7283 / fax
www.morganstanleyfa.com/360group
1
Peter Siegel, Selling a Small Business — 12 Crucial Steps, http://www.nfib.com/business-resources/business-resources-item?cmsid=35825.
The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates.
All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase
or sale of any security. Past performance is no guarantee of future results.
Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax
or legal advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed
on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and
estate planning and other legal matters.
© 2013 Morgan Stanley Smith Barney LLC. Member SIPC.
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