I like this acronym. It stands for:
- Compilation
- Review
- Audit
- Valuation
- Estate Planning
On of the most confusing aspects of buying, selling, or passing ownership of a company is the worth of the company. In a recent study, the National Center for the Middle Market, determined that establishing value was a challenge for buyers, sellers, those seeking financial investors, and determining long-term financial needs based on personal assets invested in companies.
As an M&A Coach, I recommend that my clients begin to prepare for the future by having a compilation done internally. Then, a regular internal review, and audit. If owners require these steps to be taken regularly throughout the company’s lifespan, there will be adequate documentation for future valuations. This will also provide the owner with documentation to refer to if, and when, that unsolicited offer comes in.
Another step often overlooked: compilation, reviews, and audits allow the family and/or partners to take that information to personal accountants and estate planners to create a realistic financial needs assessment. This allows those owners to quickly assess the offer’s compatibility with his/her own financial needs.
I have a colleague, Jay Cowan, who owns Business Owner Exit Strategies. Jay is an expert in determining whether or not owners have the documentation to avoid nasty surprises during the M&A process, or in governance transitions. Jay has discovered unsigned partnership agreements. Or agreements signed in the very beginning of the company’s life that valued the organization for 100K, and never updated to reflect the current valuation.
For additional takes insights on estate planning, listen to the first two episodes of my podcast, Catalytic Conversations, found in iTunes, Google Play and Anchor. The first features Christin Bonomonte, CDFA, financial planner & advisor with The Main Street Group. Christin has worked with business owners who underestimate their own financial needs and overestimate their company’s value in the marketplace. She stresses
The second episode features Kevin McCarthy. Kevin is a financial planner with Virginia Asset Management. Kevin was a two-time business owner, Navy SEAL, and shares his experiences with an emphasis on navigating pivot points. Catalytic Conversation with Kevin McCarthy.
