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October 15, 2014 - Blog

Business Valuations

More than Money with Gene Dickison Answers:

“I am half owner of a nine year old business.  My partner is a close friend and we pretty much share all the responsibilities of running the company.  We’ve built a company we’re both very proud to own.  Neither her husband nor my wife are involved in the business – nor would they want to be.  We want to put a plan in place to protect the business in the event something happens to one of us.  Where do we start?”

It depends . . . on whether you have a business worth protecting?

Some businesses are simply jobs with the word owner attached.  In order for a business to have real value, it must have assets (consistent positive cash flow, hard assets, real estate, contracts, patents, goodwill, brand value, etc.) that a third party would be willing to acquire with real money.

So . . . you should start with a business valuation.  A professional business valuation will look at all the aspects of your business – profits/losses; balance sheet of assets and liabilities; growth rates; and much more to determine what value is appropriate.  If you need a referral for a professional business valuation please feel free to contact me.

Once a value is established the next step will be crafting a business succession document.  This document will outline the mechanisms for protecting the business in the event a partner dies, becomes disables, retires, or wishes to leave the business.  A well crafted document will be completely fair to each of you.

With a documented strategy in place your financial advisor can help you plan funding strategies to cover each of these contingencies.

Valuation, documentation, and funding – the three key components to an effective business continuation and succession plan.

Do you own a business? 

Do you have a plan in place to allow the business to continue without you? 

Email Gene@AskMtM.com

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