Succession Planning

October 8, 2024

What a Formal Valuation Reveals About Your Closely Held Business

Effective strategic planning for the closely held business owner should begin with a formal valuation.
The information gathered and considered in a business appraisal provides insights into the business overlooked in day-to-day operations.
Valuation studies provide an insight into the potential value of the business and roadmap to to becoming a ‘best in class’ enterprise.

You own a business. You’re deeply familiar with your company’s day-to-day operations, challenges, and triumphs. You have invested your time, energy, and resources into its success.

You may have a rough estimate of what it is worth, guided by your years of experience, what you know of your industry, what you hear on the grapevine and your gut instincts. (Stastics tell us that more often than not, your beliefs are pretty inaccuate.) Money_Coin_Stack_On_White_Background_original_1746958-1024x683

Valuation: the First Step to a Successful Strategic Plan

The business owner who really wants to understand the value of a business and make informed decisions, you need an objective, data-driven analysis. This is where a formal business valuation is usually indispensable.

A formal valuation tells you the value today, of course. But to the the owners of the business, it is, or should be, much more than that number. A formal valuation conducted by a Certified Valuation Analyst (CVA) or other qualified professional is a full diagnostic exam for your business. It yields information you won’t get anywhere else.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner. I have worked with the owners of closely held businesses throughout my career.

Contact me if you have questions about valuing your business, developing an exit plan, or implementing the legal bulletproofing necessary to protect your investment.

Here’s an example. A valuation focuses on comparisons to other similarly situation companies. Here is a snippet of analysis of key financial data from a calclulation report. It compares the performance of the company being valued with its competitors in the same industry in key areas using a percentage-based analysis.

RMA-Study-copy

A good, formal valuation drills down into a company’s financial and operational health, revealing insights that might otherwise remain hidden. This particular report tells us that this business is lagging on its ability to generate gross profits and that in other areas it is the middle of the pack.

Exceptional value in a business isn’t driven by mediocrity, and if and when the owners of this business try to find a buyer, these numbers will be reflected in a business that either cannot be sold or that is being sold at a much lower value than it could have brought.

September 30, 2024

Protect the Intagible Assets of a Closely Held Business with Bulletproofing

by Jay R. McDaniel, Esq.

Intangible assets are typically the most valuable possession of a closely held business, but often are poorly protected.
Risk mitigation through a business bulletproofing process can protect those assets from being misappropriated.
Intangible assets include customer relationships and intellectual property.

I sometimes ask closely held business owners if they lock the doors to their business when they leave. The answer is ‘of course.’ I may push further. Do you have an alarm system? What about at home?

No surprises here. Everyone locks the door. Most have alarms. My follow-up question is ‘for what?’ The answer, again, is obvious. We lock doors to prevent thieves from stealing our stuff. Then why do so many of us do nothing to stop thieves from stealing what is commonly the most valuable asset of our businesses? Risk Mitigation through Business Buletproofing

Bulletproofed Businesses are Protected Against Theft of Intangible Assets

So many closely held business owners protect themselves against the theft of office equipment, but leave the doors wide open and invite thieves to help themselves to their most valuable property—those intangible assets that drive sales and efficiency.

The value of these assets is rarely reflected on our company’s balance sheet. Instead, the value is found in the knowledge and skills of our employees, the relationships we have with customers, and the reputation we have built in the market.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner. I have worked with the owners of closely held businesses throughout my career.

Contact me if you have questions about valuing your business, developing an exit plan, or implementing the legal bulletproofing necessary to protect your investment.

Many closely held business owners have no clear idea of the value of their intangible assets and are badly misinformed about what can be protected and how that is done. I am surprised how often my clients think they there is nothing they can do, and how little importance they give to writing down what they have. Continue reading

September 23, 2024

Five Reasons Why Exit and Succession Planning is Not Optional

by Jay R. McDaniel, Esq.

The Need to Exit Our Closely Held Business is Non-negotiable. We all leave, eventually.
Exit and succession planning protects our business, our employees, and our families.
The effects of most business disasters are avoidable.

“Hope is not a strategy.” Vince Lombardi

If you own a business, you know that ‘winging it’” is not much of a business plan; it’s a recipe for disaster. Exit and succession planning isn’t a luxury; it’s a necessity. It’s not about if you’ll exit your business, but how and when. Lombardi during his career went from assistant coach at St. Cecilia’s High School in Englewood, New Jersey, to leading the Green Packers to two Superbowl victories. Lombardi always had a plan. He wasn’t talking about guiding a closely held business, but the thinking fits. And here is why.

1. The Inescapable Reality: The Grim Reaper is Undefeated

Let’s start with the cold, hard truth of mortality. No matter how invincible we feel today, there will come a time when we will no longer lead our business. We know that to be the truth. We are all leaving the job. Planning helps us avoid the potential that we leave feet first.

In much the same way, we know that we need the income from our business to support our lifestyle and the people that matter to us. Yet, if we are like most closely held business owners, we are all in on the company and the business is the largest single asset we own — in many cases, 75% of our net worth.

I am a lawyer, a certified valuation analyst, and a certified exit and succession planner. I have worked with the owners of closely held businesses throughout my career.

Contact me if you have questions about valuing your business, developing an exit plan, or implementing the legal bulletproofing necessary to protect your investment.

We might envision a graceful retirement, maybe golden years on a beach somewhere. Or maybe from our status as entrepreneur emeritus, watching approvingly as the next generation carries on our legacy. It’s fuzzy and warm. But without a plan, the chances of that happening are like winning the lottery.

Without a well-defined exit plan, our business faces a chaotic and uncertain future. Our families and our employees, could be forced to make hasty, ill-informed decisions about the fate of the company.

Effective strategic planning for the closely held business owner should begin with a formal valuation.

The information gathered and considered in a business appraisal provides insights into the business overlooked in day-to-day operations.

Valuation studies provide an insight into the potential value of the business and roadmap to to becoming a ‘best in class’ enterprise.

Valuation: the First Step to a Successful Strategic Plan

Intangible assets are typically the most valuable possession of a closely held business, but often are poorly protected.

Risk mitigation through a business bulletproofing process can protect those assets from being misappropriated.

Intangible assets include customer relationships and intellectual property.

Bulletproofed Businesses are Protected Against Theft of Intangible Assets

The Need to Exit Our Closely Held Business is Non-negotiable. We all leave, eventually.

Exit and succession planning protects our business, our employees, and our families.

The effects of most business disasters are avoidable.

1. The Inescapable Reality: The Grim Reaper is Undefeated