We're not big on predictions, but we think we're on solid ground with these two statements: First, 2012 will not go unmentioned in either the history or economic textbooks. Second, being able "to tell your grandkids you survived" is a small consolation as you consider the challenges you and your company face as we endure this recession/"recovery".

We've given much thought to those challenges lately and we have several ideas about helping you and your company to stay on track to achieve your exit goals. A summary of those ideas is provided in this letter, however, I look forward to the time when you and I can sit down and create a "survive and thrive" strategy designed to meet your unique goals.

I. If you suspect that the current downturn means that you will have to work years beyond your target departure date or that your business is at risk, let's analyze areas where you may be vulnerable, your goals, and various ways to reach those goals.

II. The time to preserve the value of your most important asset - your company - is now. Let's look at how we can help minimize tax exposure and how we can protect your company from unexpected risks - for example, the departure of a key employee.  We can examine ways to protect your trade secrets, customer lists, vendor relationships and referrals sources.

III. Let's analyze whether "pulling back" is your best option. Is this the time to cut back or commit additional resources to marketing? Could your company benefit from hiring the top-notch talent that is available in today's tough job market? Do economies of scale justify one or more strategic acquisitions?

IV. This may be the perfect time to acquire smaller, less adaptable, less capitalized or less well-managed competitors.  This is a buyer's market and acquisiitons can help set you up for a longer term exit plan.

V. Another way to increase business value is to design incentive plans for your management team that reward long-term employment and provide short-term incentive to increase your bottom line.  We have many ideas about structuring incentive plans so that they support your goals in a changing business environment, pay for themselves and make your business more valuable.

VI. Let's examine M&A current conditions - in the Middle Market. The M&A market for multi-billion dollar companies is tenuous, but the market for well-prepared and top-performing companies in the $5 million to $150 million range is healthy. While we aren't seeing the multiples we did during the boom part of the cycle, there is financing available for solid transactions in this marketplace. If you and your company are ready to sell, let's look beyond the hysteria to the facts: Private Equity Groups have hundreds of billions of dollars available to acquire operating companies. These PEGs are looking for profitable companies in the $5 million to $150 million range. Let's collect and evaluate your industry's market data before eliminating this option.

VII. If your company is worth less than $5 million, let's look at your alternatives. Do you want to ride out the current storm or consider an earlier-than-planned departure? With local bank financing still available for good acquisitions, is your company a potential target? Also, bear in mind the availability of obtaining financing under the Small Business Administration's "7(a) loan guaranty program" if conventional financing is not available to the buyer. This program can be used to acquire businesses, with loans of up to $2,000,000.  The bottom line is that financing, especially for "smaller" companies may be more available than you thought. If that is indeed the case, does it affect your decision to sell or stay? If you choose to sell, how do we get top dollar for your company?

VIII. If you have planned an ownership transfer to your children, we need to look at the timetable. Assuming your children are nearing an appropriate age, now is the perfect time to begin that shift.  The success of this type of transfer depends less on the value of the company than on the amount of money you receive. Given the close attention the IRS pays to any difference in the reported value of the company and the amount children pay, we must carefully structure this transfer.

IX. If transferring your company to your employees is your preferred exit route, this is an optimal time to begin that transfer. If you decide to bonus your key employees with stock, you can do so without affecting cash flow. You can bonus that stock so that you retain control until you receive full value for your company as you simultaneously motivate key employees to stay with the business.

As a business owner you have a number of arrows in your quiver and don't need to stand impassively on the sidelines during a time of economic volatility. Unlike the "average" investor, you aren't limited to the single strategy of pulling dwindling assets out of the market. Even if the general economy suffers, your business profitability need not. Let's look at your alternatives and get to work.

Please give us a call to continue the conversation about which strategy will help you to reach your exit objectives.

Sincerely,

Maurie Cashman, President