financial planning 2Last week I spoke at the Connecticut Financial Planning Association’s annual conference.  It was an enthusiastic group keenly interested in helping their clients in any way possible.  I was there to speak about how they could be of help to people we most often work with; business owners.  My message to them was that if they are working with owners, they need to be proactive in the business sale process.  They have their ear for far longer than us.  If business brokers are advising owners on exit strategies, then it is usually too late in the game to make sure their wealth strategies are addressed.  Financial planners on the other hand can begin this process far in advance so that owners can make some informed decisions.

If you’ve been reading my blogs (and I know there are one or two of you doing so), you know that I see far too many business owners coming with a misguided notion of what their business is worth.  This is a real problem if they’re counting on it to fund their retirement.

So, as I said at the conference, financial planners can play an important role by doing several things;

  1. Get the owner focused on valuing their business three to five years before they plan to sell it.
  2. Determine if the valuation and terms of sale are adequate for their retirement goals. Often they need to find out what they need and not what they want.  A valuation that is lower than what they hoped for may not spell disaster for their retirement plans.
  3. If it’s not enough, then encourage them to get assistance to improve the operations and prospects for their business if it is not readily apparent to them.  Even small changes sometimes make a big difference in valuation.
  4. Most importantly, set price expectations.  Business brokers will be forever grateful.

Developing an exit strategy should be viewed as a process and financial planners should be the ones to initiate it, which can usually be done by asking an owner one simple question; do you know the value of your business?  Intermediaries like us can provide the answer and generally, this answer will kick off a wide ranging discussion on what needs to be done to allow the owner to develop the best possible exit strategy.