Our Client’s Personal Balance Sheet – Optimizing Business Value

A few thoughts for financial advisors…

Business Value as a Benchmark for Growth

When you put together your client’s balance sheet of personal and business assets for planning purposes, the value of their business is so often the biggest number – their most valuable asset by far.

But, what do we do with that number?

Most often, it is a quick snapshot because there is not an urgent need for a costly, full-blown valuation. It can be very far off from the real market value, depending on how it was calculated and in what depth.

It doesn’t give the owner a true picture.

The Implications:

• If the number is inflated, it is going to negatively impact the timing of exit-readiness. They will need one, two or three more years to get to where they need to be.
• It can lead to some level of complacency: They see the value and get comfortable, especially if they are doing relatively well and taking home a nice salary.
• When we simply use some kind of industry multiple, it can cause further problems. Some owners now have it in their head that whenever they decide to sell their business they will get that multiple – regardless of the state of the business, the industry, the economy.

Complacency in that value is like investing money and never making adjustments to optimize the portfolio to take into account changes in the economy, their lives/needs, goals, etc. “It will just take care of itself.”

How do we get beyond this to assist the owner in using that value as a basis and benchmark for a well-planned growth strategy and action plan?

As you roll up your sleeves to optimize and protect their financial future, they need to roll up their sleeves to optimize and protect their business value so that their liquidity event provides what they need. You are very closely managing their finances and risk with specific goals in mind. Make sure they are that focused on building their business – and transferrable business value – as part of their exit planning and transition!

Whatever the methodology, we all need to look at current value as a starting point, as a benchmark to work from, toward a future exit value!

David Shavzin, CMC
[email protected]

The Value Track
Succession Planning / Exit Planning, Building Transferable Value for Sale
Atlanta, Georgia
Our BLOG // LinkedIn // www.GetOnTheValueTrack.com

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