Often, business owners work their entire lives and put all of their efforts and assets into their businesses. They rely on it to fund their retirement, at least in large part. I have worked with business owners for many years assisting them in the sale and acquisition of businesses, and one thing I have found in most cases is that business owners THINK they know the value of their business, but most often they are overestimating its value, based on “country club valuations”—i.e. a value based on what somebody they know told them they received when they sold their business. This is highly unreliable, because many times these owners may be exaggerating, or perhaps their business is a different type that is valued differently than their own, or it may be much more profitable than the comparable business, or it may simply be better prepared for the sale than its competitor.
I have seen all too often that a business owner relies on the business to fund his/her retirement, and when I value the business, it is worth far less than what was expected. At this point, the owner is ill, burned out, older or for some reason can no longer wait to sell, and they can’t take extra time to improve the business so it can yield a greater sales price. It is sad and all too common. A business is only worth what someone will pay for it. This is why I am so passionate about working with our clients well in advance of the time that they expect to sell. An owner who values their business five years or more before they plan to sell has a baseline number and can use this as a basis for their personal financial planning to determine what additional funds they may want to put aside to help fund their retirement. Also, if the value is not what they feel they need to retire, we can discuss ways to improve value and get them to their goal. The old saying “those who fail to plan, plan to fail” is so very true when it comes to business owners relying on the sale of their business to fund their retirement. It is too important to leave to chance.
Our process is inexpensive and well worth the time and effort, to provide goal setting, suggestions for improving value and financial peace.
February 16, 2022
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