Exiting Your Business? Why You Need the Right Business Advisor
Most business owners aren’t prepared to sell or leave their businesses, but the right business advisor can help fill in the gaps
So, you’ve decided to sell your business. Whether you’re planning to finally retire, start a brand-new venture, or pursue something else entirely, the decision to sell is arguably one of the biggest decisions you’ll ever make. As such, it requires a thoughtful exit strategy.
As you may have already realized, exiting your business is a multi-step process that requires careful planning. There are many moving parts to consider, including drawing up the paperwork, selecting the right successor, and selling your business tax-efficiently. You can go about it on your own, but working with a business advisor can smooth the process, provide needed direction, and give you the peace of mind that you’re making the most of your sale.
How an advisor can help you
If you’ve never worked with a business advisor, you might be wondering how they can help you. An advisor’s role can vary depending on the company’s growth stage and unique goals, but during the exit planning process, the advisor acts as the “quarterback” of your team. They help you make the tough calls as you determine when to make your exit and what the contingencies are if your initial plan doesn’t happen.
Here are a couple of specific ways an advisor can aid you before your exit:
Developing a continuity/succession plan. Many business owners plan on leaving their legacy to a qualified successor within their organization. This person might be a business partner, family member, or trusted team member.
According to a 2018 report, however, 58 percent of small business owners have no succession plan. An advisor can help you draft an exit strategy that addresses the buy/sell agreements of your business, as well as create a solid succession plan that covers how you will mentor your successor before you leave. Ironing out these details in a documented form will allow everyone involved in your company, including its pending owner, to have a clear understanding of their role in the transition.
Retirement preparation. Have you thought about how you will live once you exit your business? An advisor can help you plan for retirement by assessing your business’s finances and making personalized recommendations. The sooner you start working with an advisor, the more time you have to reach your exit funding goal.
What to look for in an advisor
If you’ve never worked with a business advisor, the thought of allowing someone you don’t know to help you coordinate such an important decision can be daunting. This hesitation is understandable, especially since there are plenty of “advisors” who don’t get into details nor always work in the best interests of their clients. Rather than guide them carefully through the process, they rush owners into making hasty—and sometimes regret-filled—decisions.
When choosing an advisor, consider the following factors.
Experience. You want to work with a business advisor that knows the ropes. Before committing to a partner, ask them about their experience with helping owners exit businesses. Have they helped owners pass their company on to the next generation? Have they worked with a business in your industry? These questions are all relevant to gauging an advisor’s experience and expertise.
A dedicated Team. While advisors have a wealth of knowledge to share, they might not be able to answer your every question. That’s why many business advisors work with a dedicated team of lawyers, financial advisors, and other professionals on a regular basis. By offering access to experts, advisors not only provide their clients with elevated service but further establish their own credibility.
Shared Values. Trust and transparency are key attributes of a successful advisor-client relationship. To ensure they will have a fruitful partnership, both parties must confirm that their values are aligned and they have the same goals in mind.
Making the most of your exit
A study from Massachusetts Mutual Life Insurance Company revealed that 70 percent of business owners think frequently or often about their business’s value. When it comes time to sell or pass on your business, you’ll want to ensure that you know what it is—and that this valuation is as high as possible.
Many advisors use the Value Builder System, a statistically proven methodology that helps businesses increase their values, to help their clients increase the value of their businesses. The brainchild of John Warrilow, author of Built to Sell: Creating a Business That Can Thrive Without You, the VBS is an ideal tool for company owners to take advantage of when attracting buyers.
Based on their Value Builder Score, the core of the system, companies can achieve a comprehensive assessment of their business’s “sellability.” From there, their advisors can help them make the necessary changes and improvements to move forward smartly.
Exiting your business can be a confusing and even overwhelming process. To make sure the transition is as seamless and lucrative as possible, the right advisor goes a long way.
Provident CPA & Business Advisors helps successful professionals, entrepreneurs, and investors get more out of their business and work less. Typically, our clients reduce their taxes by 20 percent or more and create tax-free wealth for life. Contact us for expert advice on tax planning as well as our business advisory services, and discover how we help businesses exceed expectations.
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