Although it usually represents their largest asset with often limited marketability, most business owners do not have any formal plan for the ultimate transition of their privately held business. Whatever the timeframe – next year or ten years from now – we work with business owners to plan for and create successful transitions. We coordinate business valuation, business growth consulting and business transition planning with personal financial, tax and estate planning. Our process provides education, timely information, document reviews, advisory team assessments, business transfer options analysis, and a series of recommendations that identify weaknesses and blind spots that need to be addressed to maximize value and successfully operate your privately held business and protect personal wealth.
Strategic Business Valuation
To determine how fast you can get to where you want to go, you need to know where you are now. That’s why a baseline business valuation is so important. We offer a comprehensive, efficient and strategic growth-focused business valuation process intended to determine business value and maximize it. Our process includes the following:
1) Baseline Business Valuation – We perform a comprehensive analysis and provide a 30-page report of what your business is worth today based on four distinct and useful estimates of fair market value including asset value, equity value, enterprise value and liquidation value.
2) Key Performance Indicators (KPIs) – The report also includes a KPI analysis based on company-specific data compared to industry-specific averages associated with millions of other businesses. These KPIs, commonly used by private equity groups, are useful measures of the overall financial and operational health and growth of your business and they should be checked regularly in order to identify meaningful trends or “red flags” which may require corrective action.
3) Business Value Driver Assessment – We evaluate 18 market-based and operational drivers of your company’s value with a strategic focus on how you can grow the company, reduce company- specific risk, and maximize business value. The assessment can be followed up with a Deep Dive “mini-retreat” analysis to develop an actionable and detailed strategic plan for your success.
4) Ownership Dependency Assessment – The level of owner dependency is key factor in the ultimate transfer of a business. We perform an assessment that lets you know how dependent the business is on your individual efforts in the following 8 key areas: owner involvement, internal operations, strategy and planning, governance and ownership, financial matters, performance management, sales and business development, and company culture.
5) Transition Readiness Assessment – Transition planning is simply strategic planning. We provide a measurement of how you rank on our proprietary chart for your financial and mental readiness for a future business transition.
Personal Financial Planning
The process for setting a plan, in almost any endeavor, begins with the end in mind – or what goals you would like to achieve. To reach your personal financial goals it is equally important to know where you currently are.
In order to answer the question “What’s the best way to transition my business?” we need to know your personal financial situation. In other words, what assets and income do you have outside the business to help with financial freedom. In the case of most owners (~85%) the majority of their wealth is locked in their private business. We want to understand the following:
- What you currently have for assets outside the business.
- What other sources of income are available to you today (and in the future).
- What your lifestyle expenses are today and are expected to be in the future.
- What the difference is between what you have for assets and income versus what you need for personal living expenses – we call this your Personal Value Gap.
Our personal financial planning analysis will provide us with an overview of your current financial situation as it relates to being financially free from your business. As part of this process we may discuss and review the following:
1) Current Financial Position – We assess your net worth and review asset ownership.
2) Cash Flow Analysis – We determine your current annual spending and project your annual spending in your next chapter of life.
3) Retirement Analysis – We create a financial model to determine what your spending could reasonably be to ensure you don’t outlive your assets.
4) Life and Disability Insurance Analysis – Review of existing personal insurance coverages.
5) Investment Planning – We analyze your current investment holdings, including asset class representation, expenses, cash position, and review of style consistency across all accounts including company 401k plan. Advice on types of investments and asset allocation strategies.
6) Estate Planning – We review existing estate planning documents. Recommend techniques to meet estate preservation and transfer objectives and minimize potential estate taxes.
Based on our review, we provide an analysis of your current situation and specific recommendations which will seek to address your financial goals. Where appropriate, we will include financial illustrations and projections for greater understanding of the potential outcomes of financial alternatives.
Predictable Growth and Value
You want to grow your company, but you’ve hit a wall. Or maybe you’re trying to make your company easier to run but can’t see how. If this sounds familiar, you’re like 81% of business owners (source: CoreValue Research).
The difference between companies that are growing and those that are not is the strength of their growth and equity value drivers. We offer a proven process for changing your business so that it will deliver sustainable growth, while also making it easier to run and more valuable.
The process is built on an 18 value driver methodology born at MIT that defines best practices. It helps all senior executives, including business leaders seeking to recover from the COVID crisis, those looking to make their business easier to run, those looking to drive growth and equity value, those looking to transition to their next chapter and those preparing for M&A. In short, the process applies to all companies and all industries.
Business Owners and CEOs who implement these types of best practices are growing revenues
by an average of 21.63% per year.
Our clients rely on our expertise to become effective at creating predictable profits and cash flow. They then have a launchpad for driving predictable revenue growth, and most importantly, for creating predictable equity value to fund their family’s wealth. Our process helps by prioritizing where to most effectively and efficiently focus their time and resources to create a growing, valuable business engine. Our analysis identifies your potential return on investment (ROI) from strengthening each of the following 18 market and operational drivers of business value:
| Market/External Value Drivers | Operational/Internal Value Drivers |
| 1) Growth | 1) Company Overview |
| 2) Large Potential Market | 2) Financial |
| 3) Dominant Market Share | 3) Sales and Marketing |
| 4) Recurring Revenue | 4) Operations |
| 5) Barriers to Entry | 5) Customer Satisfaction |
| 6) Product Differentiation | 6) Senior Management |
| 7) Brand | 7) Human Resources |
| 8) Margin Advantage | 8) Legal |
| 9) Customer Diversification | 9) Innovation |
The life’s work and dreams of owners are in the business they have built and over 85% of owners are dependent on the value of their business for a successful transition. Our process helps ensure success by creating predictable cash flow as a launchpad for enhanced revenue growth and maximum equity value.
Transfer Options Analysis
As we move through the process we will continually explore how and when you would like to transition your business. This also leads towards identifying the transfer option(s) that are most likely suitable for you to begin to build your transition strategy around. For each business owner we can identify transfer alternatives available that fit the respective situation. Our process will examine all the options available to determine which one is the best fit for helping you to achieve your overall goals. This may include one, or a combination of, the following transfer options:
- Sale of the Business to an Outside Party
- Private Equity Group Recapitalization
- Employee Stock Ownership Plan (ESOP)
- Management Buyout (MBO)
- Gifting Program
The various transfer options may have different business values associated with them. In order to evaluate the outcome from each of the options, you should understand the “Range of Values” that exists for your privately held business. The estimated range of values for the transfer of a business could include the following different values:
- “Fair Market Value” through the establishment of an ESOP or gifting program
- “Investment Value” an investor (such as private equity) may pay for your business
- “Synergistic Value” a competitor may pay for your business
Mental Readiness / Owner Dependency
Are you ready to leave your business? Mental readiness for a transition is a critical factor for nearly every business owner who wants to continue with their business, but still protect their illiquid wealth. You need to know what the business really means to you – personally – and what you are going to do with your time after the transition. The key indicator of this mental readiness is usually how involved you are in the day-to-day operations within the business. These are critical questions to answer so that you can think clearly through the transition process and design a plan to meet your goals. We will focus on how ready you are to leave and how dependent the business is on you in 8 key areas…. the Owner Dependency Index.
Income Tax and Estate Planning
Income tax planning and estate planning are key parts of any transition strategy. Without effective planning—done well in advance—you run the risk of entering your next chapter of life with less wealth than you anticipated. Your tax situation will depend on your transition plan for your business. You need to estimate the “after-tax” proceeds that could be achieved from each applicable transfer option. With a clear understanding of your objectives, we can take you through your options and help you create a plan that minimizes immediate and future tax liabilities for all key parties.
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From our work together you can expect the following:
1) A unique process to organize your thinking and educate you about transition options.
2) Customization of the transition options for your business and personal situation.
3) Assessments of the risk indicators and value drivers in your business to assist in creating solutions and action plans that help you meet your goals.
4) Organization of your vital planning documents and decisions that need to be made.
5) Clarity that gives you direction and confidence to make decisions, knowing that they have been fully vetted through our analysis and conversations together.
6) A roadmap to maximize business value and advance your business transition, including recommendations and strategies that apply to your situation.
7) Time savings on consolidating your planning and focusing your mind on achieving a certain outcome through this process, including introductions to experienced service providers where needed to complement our planning engagement and potential execution of the plan on your terms and timeframe.
8) Peace of mind in having done the hard part of your transition planning, namely making the commitment to move ahead and invest in protecting your most valuable asset and being better prepared to make the largest financial and emotional decision of your life.
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