The Role of Valuation and Financial Planning in Exiting Your Business

You’ve invested time, energy, and money into your business, for many years, now what? The next step could be to pass your business to the next generation or offer it for sale. Either way, it is essential that your exit causes minimal disruption to the daily operations of your business. In order to make sure the transition goes smoothly, you’ll need to create a detailed business exit plan.

Developing an exit planning strategy is more complex than most people realize. As you start the planning process, it’s essential to understand the importance of an accurate business valuation. This stage will help to create a comprehensive exit planning strategy and set your business up for success.

Why Does a Valuation Matter?

A business owner planning an exit strategy involves plenty of goals and objectives. One of the most important objectives is your business valuation. Investing in this critical step can give you a clear picture of your business’s worth. This helps to avoid complications during the sales process.

A business valuation prevents selling the business at too low of a price. Alternatively, if you overprice your business, you may limit the number of qualified buyers.

Ideally, during the early stages of succession planning, you receive a business valuation or an opinion of value. That way, you and your advisors will have time to strategize and implement ways to increase your business’s worth.

The valuation process takes some time, and though proper business valuations are highly detailed, mistakes happen. In many cases, business owners don’t understand the value of their business. Certified Valuation Analysts (CVA) commonly find missing information leading to higher and more accurate business valuation.

Therefore, if your intention is to sell your business in the future, it is crucial to allocate enough time for a CVA to complete the valuation process. If you run into an error or another unforeseen issue, you’ll want time to correct it before selling.

Why Do You Need Financial Planning?

A Certified Financial Planner (CFP) can be an indispensable part of your business’ exit strategy team, especially in the years leading up to your exit.

To maximize the amount of money you get to keep after the transaction, you need a detailed tax and financial plan. A personal financial planner with CFP credentials can help maximize the proceeds from the sale or transition of your business. This will also help to fill your individual wealth gap. Having a Certified Public Accountant (CPA) on your exit strategy team is a great idea.

Here are a few ways they can help:

  • Handling business taxes (and personal taxes related to the sale of your business)
  • Maximizing your business’s cash flow
  • Create an investment strategy for the proceeds
  • Monitor and advise on how well the investment is meeting your retirement goals

If you want to ensure that your business runs optimally before you make the sale, you might also consider using business transition coaching services.

Nevertheless, if you add a CVA, CFP, and CPA to your exit strategy team, you’ll set quantifiable goals for your post-retirement income. Additionally, you will ensure your personal financial goals align with your business goals.

Your financial advisor can help you review your retirement savings. They can also provide insight into the potential profits from selling your business. From there, they’ll help you create a strategy to ensure a comfortable retirement.

A business services company, like Vesta, can also help you manage your income and assets. They provide accounting and wealth management services. After making a sale, they can help you manage your income and assets.

Let Us Help You Create an Exit Strategy

Coordinating the details of business succession planning can be complicated especially if you’re the one running that business. We also understand that your business is a crucial investment that impacts individuals within and outside of your organization.

That’s where Vesta comes in offering accounting, wealth, strategy, and planning services to help guide business owners in the right direction. We’re your one-stop solution for business valuation, business strategy, and financial planning.

When you work with us, you’ll have the opportunity to connect with a Certified Exit Planning Advisor (CEPA). Our experts can help you develop a seamless small business transition plan. Contact us today to see what we can achieve together!

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