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One of the most critical decisions you can make as a business owner is selling, transferring the operations of your business or buying out your partner’s share. This is a significant investment of your time and money and there are critical decisions you must make.
In order to realize the real value of a firm when it's time to "cash out", it is necessary to make a few tough decisions about succession planning. As in most business situations, people who wait until they're desperate for cash will usually have a hard time getting full value out of their investment. Is there someone to manage the business after you retire, or is a sale imminent? If you have management in place, are they family members? When owner/operators pass their business along to family members, they often face the difficult problem of juggling assets fairly between family members who stay in the business and heirs who pursue other professions.
An employee stock ownership plan (ESOP) may be worth considering, insuring business continuity but allowing the employees to buy the company gradually from the owner.
From the perspective of maintaining the value of the business and of making an easier break from a company in which the owner has invested his life, he or she might wisely establish a role during retirement, for example, as a consultant or salaried director. In that capacity, he or she would still be able to contribute to the business, and be giving the new management time to get its balance.
Succession planning is something few business owners really want to talk about. It's easy for business operators to say how much they should bid for a job or what products they should carry, but who should run the business after they leave is much tougher. Because every business poses such a unique set of difficult problems for an owner/operator wanting to convert assets into retirement income, good planning should start early, with the help of an expert.
Often during a regular annual review of the business, a company's financial adviser will raise the question of retirement planning. And, even though each new year places a host of "must dos" in front of every business owner, the arrival of retirement age is as inevitable as taxation. It's for that reason, every business owner needs to make retirement planning - and at least an annual review of an existing plan - the Number One "must do" at the start of every year.
Central Bank wants to be your financial adviser during this process. The number one decision is the selling price. We can help with this decision, by using various business valuation methods. Your accountant and estate advisor will also partner in this decision.
Business Valuation Methods include:
~Adjusted book value
~Gross revenue multiplier
~Capitalized adjusted earnings
~Discounted future earnings
~Cash flow method
Contact any loan officer to discuss your options at (573) 634-1181 or stop in our office on the second floor at 238 Madison Street.
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