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The 10 Questions Every Financial Advisor Should Ask  Business Owners

The 10 Questions Every Financial Advisor Should Ask Business Owners

| August 13, 2018
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Over the years, it’s been my experience that most business owners are not asking themselves critical questions as they develop their exit strategy. For those of you who own your own business, a well-constructed exit plan will ensure a smoother and more profitable transition. If you have not created a formal exit plan, these 10 questions are essential for you:

1. What is your business worth? This is the logical starting point of any Exit Plan. Depending on your objectives you may need the following tool of the industry:
a.) A "Business Value Estimator" for financial and estate planning purposes prepared by your Financial Advisor, or

b.) A "Marketability Assessment" if you are considering a sale of your business in the near future prepared by Equity Strategies Group, or 

c.) A formal business valuation for gift, estate, or buy/sell agreement purposes

2. Who will you sell your business to? Will you sell your business to an outside buyer, to an employee who has shown major leadership skills, or pass it on to family members? As your financial advisor, I can walk you through the advantages and disadvantages of each option.

3. What will your financial needs and sources of income after you exit? It’s important to know how much money you’ll need for years to come post-retirement. We can perform a cash flow or "Value Gap" Analysis to see if you will have enough.

4. Does your financial independence depend on the proceeds from the sale of your business?What are your other income sources?  If you are relying on significant proceeds from your business sale, the way the transaction is structured and selling price is an important conversation to have now.

5. What are you doing now to maximize your business value? Corporate strategic planning can have a significant impact on increasing the proceeds from the sale of your business. It’s important to focus on "value drivers".

6. Do you have a leadership succession plan in place? Even after you leave the company, if the business will still be dependent on you to succeed, you may have to stay involved with the business for an extended period of time.

7. Have you considered the timing of your business exit? Many tax and financial planning issues depend on the timing of your exit. For example, the robust M&A climate we are in now may not continue for much longer.

8. How up-to-date is your Estate Plan? If you haven't addressed these issues recently, it may result in giving the IRS more than you necessary.  Worst case, it could result in the forced liquidation of your business, real estate, and other assets to pay taxes. Tax reform has helped in these circumstances, and as your Financial Advisor, I can show you how to properly take advantage of increased exclusions and exemptions.

9. How skilled and experienced is your current team of business advisors? If you're like most business owners you have a collection of advisors, such as a CPA and attorney, each with their own specialty and agenda.  There is usually no one charged with integrating all the advice from your advisors into one comprehensive business exit plan. As your Financial Advisor, I can help by pulling your team together and providing access to the right M&A and Investment Bankers through an Exit Planning process.

10. Do you really intend to exit your business without professional help? This is a common mistake that business owners make, but I caution you that any mistakes you make, no matter how unintentional, will have significant long-term consequences. Pulling together an experienced professional Exit Planning team, including an Investment Banker, will make a big difference.

Working with an advisor who knows the ins and outs of Exit Planning will not only make the process much easier for you, but it will give you peace of mind knowing that you are treating your business with the care and respect that it deserves.

I hope that these essential questions will motivate and educate you to develop a successful exit plan that will reward you for the many years of hard work you dedicated to the business. Please give me a call if you have additional questions, I am looking forward to our conversation.

 

Questions found from Daniel A. Prisciotta

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