What is Your Company Worth Today and Why Does it Matter?

By Generational Equity


A few weeks ago, Axial, a leading website connecting capital providers with business owners, published a well written piece covering several key questions business owners need to ask of themselves about their net worth BEFORE closing a transaction with any buyer.

Entitled “8 Questions to Answer About Your Personal Wealth Before Transacting,” the article walks you through some important concepts that every business owner should carefully consider before closing a deal with a buyer.

Written by Andrew Cardone, a partner with Bestwick Cardone Group, a wealth management group within Bank of America/Merrill Lynch, Mr. Cardone does a great job of highlighting some key questions business owners need to address, including:

  • Have I conducted a goals-based analysis with an advisor?
  • When was the last time I reviewed my investment portfolio’s exposures?
  • Am I effectively managing my personal cash to achieve the highest yield possible?
  • Is my business maximizing 401K, pension, and other vehicles to shelter my income?
  • When was the last time I reviewed my estate plan with an advisor?
  • When was the last time I discussed my investment plan with my family and an advisor?
  • What are my philanthropic intentions, and have I discussed these with an advisor?
  • Am I properly insured?

Although each of these is important, based on our experience, the ones I have highlighted above are generally the ones that our clients tend to neglect the most. In fact, far too few have sat down with a wealth manager and created a future financial plan at all. Because of this we encourage our clients to create a relationship with a wealth management team long before the deal is closed. It is simply too vital and important to know how much invested capital you will need to reach your financial goals post close.

But as important as each of these is, one key item is not listed above and perhaps is the most important part of any wealth management discussion: How can you plan what you will need to live on for the rest of your life post sale if you have no idea what your company is worth in today’s market?

Simply put, you can’t.

So, even if you are proactive and meet with your wealth management team to create a plan, if you are like most business owners, most (if not all) of your personal net worth is tied up in one highly illiquid asset: your business. Without a good idea of what that asset is worth today, you can’t create a plan that is accurate or has the substance you need going forward.

This is what sets the Generational Equity system apart and makes us so successful. We conduct a complete and thorough evaluation of every client who signs up with us. This 60-day to 90-day step is vital for us and for our clients because it allows us to conduct financial due diligence on the business, recast the financials, and determine the current business enterprise value. For our clients, it is equally important because it gives them a solid idea of what the company is worth, which is vital for both estate planning AND determining if the deal is optimal for the owner.

Here are some folks talking about how critical our evaluation was to a successful conclusion of their transaction:

The last link above highlights another added benefit of our professional evaluation: based on our findings, we will provide you with a tangible Roadmap for Enhancing Value. Through these financial metrics, based on up to two dozen various ratios and industry norms, we will objectively view your business as a buyer will. The strategies we provide our clients often allow them to enter our hold-and-grow program and return a few years later with a much more “salable” business, with an enhanced valuation.

Again, before you can actually have a productive meeting with your wealth manager, you need to know what your business will generate for you upon its sale. If you are at a point in your life, and your company’s development, that you need to know what it is worth, then you need to attend a Generational Equity exit planning conference. While there you will learn about the various methods that can be used to value a company, and the upside and downside of each method. You will also be able to learn more about our exit planning services including our evaluation team and deal making success.

To learn more about how you can attend a conference near you, search for an executive conference, fill out a contact form or call us at 972-232-1121 and ask to speak with one of our senior business advisors.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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