Owners, who are contemplating a business transition but it’s still a few years off, have a fantastic opportunity right now to enhance their business and personal value and pave the way for a smoother transition process.
Here are some action steps to take right now.
Step #1 – Develop a personal plan and document your financial plan. You don’t need to figure out exactly what you want to do with your free time but you do need to start thinking about it. You should connect with a CFP® and develop a written cash flow budget tied to your targeted retirement lifestyle. You should also develop an accurate net worth statement and an up-to-date estate plan. Having your financial house organized in this manner enhances value.
Step #2 – Your business is one of your largest and most valuable assets. You need to know the realistic value. What is someone really willing to pay to buy your business. A business assessment will be invaluable in identifying the strengths and weaknesses within your business and their impact on the value. This will allow you to identify and manage risks and enhance value.
Step #3 – Buyers of a business will want to see 3-5 years of audited or compiled/reviewed financial statements. Small businesses struggle with this. It is very important that every owner clean up their internal and external financial reporting. Engage your current CPA to assist with this or consider upgrading if he/she is not up to the task. Sloppy financial reporting is a value killer.
Step #4 – If you really want to get the most bang for buck from your business, you need to consider building a strong professional advisor team. Initially, this team should consist of a good CPA, good attorneys and an experienced CFP® planner. Strong communication is the key to success. Consider utilizing the CFP® as the quarterback of the team to coordinate communications. Specialty advisors can be added as the planning needs develop.