What if Your Company Value is “Off?”

As a business owner, planning for retirement involves careful consideration of all your assets, including what can realistically be expected when you ultimately sell.

Unfortunately, far too many Owners have a wait and see approach, or worse, they guess based on the CPA’s number.? (it’s supposed to be low so you lower you tax bill – remember?)

One critical aspect of this planning is ensuring an accurate valuation of your business long before you think about selling.

An inaccurate valuation can lead to various problems, such as underestimating or overestimating retirement savings, incorrect asset allocation, inaccurate estate planning, and potential sale issues.

To avoid these pitfalls, follow this checklist for action:

1. Start Early:?? The longer you have to make adjustments the better the outcome is.? Remember that there are 5 areas that a Buyer looks at in deciding whether to make an offer:

1.????? The Financials

2.????? The People

3.????? The Customers

4.????? The Systems

5.????? The Social Capital

All 5 areas need to be best-in-class.? Remember too that only 18% of the small businesses that go to market sell.

You may need some runway to get the number you need and want,

2. Gather Financial Information: Provide the valuator with comprehensive financial information about your business, including financial statements, tax returns, and cash flow projections. This information is essential for an accurate valuation.

3. Consider the Purpose of the Valuation: Clearly define the purpose of the valuation, whether it's for retirement planning, estate planning, or potential sale. The purpose will dictate the valuation method used and the level of detail required.

4. Evaluate Market Conditions: Consider current market conditions and industry trends that may impact your business's value. A valuator can provide insights into these factors and how they affect the valuation.

5. Review Valuation Methodology: Understand the valuation methodology used by the valuator and ensure it aligns with your business's characteristics and industry standards. Common valuation methods include income approach, market approach, and asset-based approach.

6. Update Valuation Regularly: Business values can change over time due to various factors, such as market conditions, financial performance, and industry trends. Regularly update your business valuation to ensure it remains accurate for retirement planning purposes.

7. Consult with your Financial Advisor: Discuss the implications of the valuation with your financial advisor to understand how it impacts your overall retirement plan. They can provide guidance on asset allocation, investment strategies, and estate planning based on the valuation.

By following this checklist, you can ensure an accurate business valuation for retirement planning, avoiding common pitfalls and making informed decisions about your retirement assets.

If you would like to know your company’s value, or if you have other concerns, please schedule a time for us to talk about it HERE