Protect Value
'Protecting the Value of Your Business'
As a business owner, you have worked hard over the years, many times slaving over your business and missing out on important family and personal events because your business demanded it. And you were happy to do it since you are building something special, something very valuable. As the years go by and you begin thinking about your future exit and monetizing that value, you realize that it may very well be the most important transaction for your life.
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What you should also be thinking about is what could happen to reduce the value of your business. What actions and events – or a lack of planning – could cause your most valuable asset to decline in value when you exit. There are three major categories that can dramatically reduce the amount of money you put in your pocket when the time comes to sail into the sunset; Key Employees -Taxes – Risk
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Do You Have Your Dream – Team Locked-in?
As Jim Collins states in his classic 2001 management book Good to Great; get the right people on the bus, get the people in the rights seats, and get the wrong people off the bus. This bus metaphor talks to the talent that you have in your employees. Creativity and innovation come from talented and highly motivated employees. However, protecting the business through its human resource is critical to increasing ultimate business value. Protection of this type of business asset includes well-developed employee benefit programs, a strong employee handbook, team-building techniques, actively developing company culture and communications programs, formal incentive programs, strong employment agreements with non-competes, performance and formula-based compensation and more. Don’t get caught off-guard by not locking in your talent, before you are ready to exit.
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What Are Your Tax Minimization Strategies?
As a business owner who has built a highly successful and profitable business, you are likely subject to a myriad of unwelcome taxes ranging from Income Taxes to Capital Gain Taxes, to Gift Taxes and ultimately, Estate Taxes on your assets (including your business) upon your death. Just supposed there was a way to minimize, defer or potentially eliminate some or all these taxes; would you want to know how?
Through advanced planning techniques involving entity structuring, special types of trusts, customized company benefit plans, valuation discounting techniques and more, you should be able to save a lot of taxes, if you take the time to plan well in advance of a transaction. This is an area that most business owners outright neglect, since they rely on outside advisors like attorneys and CPAs, who may not be very pro-active. This can cost the business owner millions of dollars in unnecessary taxes. Clear Advice Business helps its clients plan for a variety of taxes throughout the business exit planning process. However, beware that it takes time for this type of planning, which means you must begin your tax planning several years before an exit.
How Are You Managing Your Risk?
If you were to list all the risks that you and your business are exposed to, it would be a very long list. Have you made that list? As a business owner, you understand risk and have been willing to take on the liabilities associated to the risk. But have you spent the time to evaluate and quantify that risks associated with your business and your personal ownership of that business?
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Like most business owners, you have bought liability, property, casualty, and life insurance coverage to mitigate the operational risks. Hopefully, you have set-upand periodicallymaintain your corporate governance documents to protect the corporation. And hopefully you have implemented and maintain your company’s Standard Operating Procedures (SOP) manual to protect against employee-related risks. However, when assessing your risk from the perspective of a future business exit, protecting yourself and your business takes on a whole new meaning. Since you seek to actively increase the value of your business asset prior to a transaction, it is imperative that you take the time and allocate the resources to protecting your most valuable asset.