Name: Tim McDaniel, CPA/ABV, ASA, CBA, Principal, Director of Business Valuation Services
Posts by Tim McDaniel, CPA/ABV, ASA, CBA, Principal, Director of Business Valuation Services:
You’re busy serving customers. Managing employees. Overseeing the day-to-day operations of your business. Stepping down as the head of your company may not be on your radar, but sooner or later you’ll need to think about what will happen to your business once you’re out of the picture. We recommend that business owners start thinking about their business succession plan at least five years before planning to implement it. Read the rest of this entry “
If you’re a business owner, did you know that you can significantly increase your net wealth by simply changing the way you look at your business? Read the rest of this entry “
Last year, I was consulting with a client who owned a business that was worth over $20.0 million. He said that one of his advisers told him “Why waste your time and money developing an exit and succession plan? You will be dead and won’t care and let others take care of it after you die.”
I guess that’s a good plan – if you don’t mind the chaos it creates for your family members and if your legacy is not important to you. Read the rest of this entry “
Exit strategies are the options that you have to leave your business. There are only a few exit strategies that Ohio business owners can choose from and each will provide you with a different level of proceeds when you leave. All strategies will require planning and time to implement.
It’s never too soon to start planning your exit. You will eventually leave your business, and it’s better to do so before a life-changing event forces you out. The sooner you plan, the more options you will have. Read the rest of this entry “
One of the most basic individual investment principals is the concept of diversification. As an investor, diversification can protect you from a large drop in your portfolio due to the poor performance of any one investment.
If you own a business, the business value is most likely more than half of their entire net worth. You cannot simply call your investment advisor and quickly sell a part of your business to diversify. It is possible to sell a partial interest in a business, but this is not available to all business owners and requires significant amount of planning.
So, what can you do to protect your net worth from dropping from a large decrease in the value of your business? Read the rest of this entry “
2012 Gift Tax Exemptions and Business Planning
As you go about your day-to-day work within your business, you might not be thinking about what will happen when it’s time for you to leave the company. However, recent changes in the gift tax laws have created a window of opportunity that could allow you to transfer more of your business interests for less tax liability than at any other time in history. Read the rest of this entry “
You’ve worked hard to build your business and probably can’t imagine a time when it won’t be a major part of your life. But, someday, you’ll approach retirement and you’ll want to spend more time enjoying your life and less time balancing your books.
Maybe you’ll want to leave your business to your daughter. Maybe you’ll want to sell it and cash out. Either way, business transition doesn’t just happen. It isn’t serendipitous. You need a “get out of business” or succession plan. Read the rest of this entry “
About 25 percent of businesses fail within the first year, according to Small Business Trends. Only 44 percent survive for four years. What if your business doesn’t make it?
If you don’t have a buy-sell agreement, things could get hairy. Or if you developed one in haste and never update it, the buy-out probably won’t be fair to all parties. The hassles from litigation that result from faulty buy-sell agreements could last for years and negatively impact your business. Read the rest of this entry “
One measure of great business leaders is that their businesses continue to thrive once they leave their positions. Visionary leaders captain the ship today while making plans for someone else to take the helm tomorrow. Proactive succession planning allows businesses to continue their smooth sailing long after the captain abandons ship. Read the rest of this entry “
Lately we’ve been surprised by how many people are thinking about filing a gift tax return without a business valuation. We’ve had a few conversations with people who are under the impression that they don’t need to attach a valuation of their business interest to the gift tax return.
Before you file your return without a valuatio Read the rest of this entry “
When two or more people want to co-own a business, the buy-sell agreement should be one of the first documents that is created. The buy-sell agreement determines what will happen if a co-owner wants to leave the business, retire, sell shares to someone else, dies or goes through a divorce. Read the rest of this entry “
No one enters a relationship wanting to get jilted. It’s true whether you’re entering a business together or a marriage together – and the consequences can be even more painful if you’re doing both at the same time. Read the rest of this entry “
The future of your family business might not be in the front of your mind as you go about your day-to-day routine. But if you have a defined plan that everyone is aware of, you can more effectively prepare for a successful transition when the time comes to put it into place. Read the rest of this entry “
Over the past few weeks, we have discussed steps to follow when you develop a succession plan for your business. First, we made the decision to do a succession plan. We looked at the value of the business. We explored all of the options for transition. And we determined your personal and professional goals and those of your family and key personnel. Now it’s time to set a course of action. Read the rest of this entry “
When you own a family business, it’s easy to get caught up in the day-to-day activities. And it can be easy to put off having those important, strategic discussions with your family about the future of your business. However, communication between you and your family becomes an essential ingredient of a successful business transition. Read the rest of this entry “
Are you actively planning a transition for the business you worked so hard to build? The majority of North American businesses are family-owned, yet just about 30 percent make it to the second generation. Even fewer reach the third generation. As more and more business owners prepare to retire, more and more businesses will face the issue of succession – whether they are prepared or not. This article discusses the third in a series of tips to help family-owned businesses begin the succession planning process. Read the rest of this entry “
In an earlier post we discussed the important step of making the decision to begin the succession planning process. Once you have made the decision to begin the process, knowing the value of your business is the second crucial step in the transition plan. Read the rest of this entry “
The price paid for a product line (or a business) is typically determined by a return on investment (ROI) calculation. The buyer estimates the future benefit stream from the product line and then determines the required rate of return that is needed to entice them to purchase it. The required rate of return is a function of how risky the future benefit stream is. If the future benefit is in doubt or risky, the required rate of return will be higher. There is an inverse relationship between the required rate of return and the value of a product line. Our job as business valuators is to determine what the future benefit stream will be and what is the proper rate of return required for that benefit stream.
Whenever you are considering selling a business or a product line it’s important to get a true value by using a professional business evaluation. Usually the seller does not have any experience selling a product line or a business, and not knowing all the facts could cost tens of thousands of dollars. The buyer may be very sophisticated. There are many complex issues in addition to negotiating a price in a transaction that should be considered, such as the terms of a deal and the purchase price allocation.
The terms include whether the price will be paid in cash or by a note or stock. If there is a note, the question becomes “Will this note be secured?” “Are there conditions required to be met by the seller to be paid?” and “How long will it take to pay back?” Purchase price allocation is critical to any deal. It can be the difference between paying a 15 percent tax rate on your gain or 40 percent tax rate.
As you can see, there are many considerations to selling a product line or business. Don’t attempt to navigate the complex area of business transactions alone.
Step 1 – Making the Decision
How will you transition your business to the next generation when it’s time to leave? If you are like more than 70 percent of family business owners, you’ve put off making this important decision. And without preparation, most family-owned businesses are not successful in making the ownership change when the time comes. This post is the first of six tips we will provide to help family-owned businesses begin the succession planning process. Read the rest of this entry “
Every business strategy should include an exit plan for leaving the business. This can hinge on the owner’s personal financial and estate planning efforts, and a successful transition depends on many factors. Read the rest of this entry “
If you’ve been considering gifting interest in your family-owned business or real estate holdings, you’ll certainly get the most “bang for your buck” right now.
The Great Recession wreaked havoc on business values, making your business worth considerably less than it once was. In our recent business valuations, we’re finding business values far below what they were two or three years ago. This means you can pass more stock in your company now than you could in a healthier economy. Read the rest of this entry “
To answer this question, think about the stocks and bonds you may have invested in. Everyone wants to maximize the value and annual return on their investments. But many owners of closely-held businesses don’t place the same attention and care to determine the value of their businesses or work to improve their return on their largest investment.
Just like your stock portfolio, your business requires tending to help it create greater wealth. And just as you pay a fee of about one percent of your portfolio to an investment advisor to track and value your assets, you should plan the same to invest in the valuation and management of your business value. Typically 50-70 percent of your net work is tied up in your business. If you could double its value, wouldn’t you do it? Other businesses have seen this type of return and you can too. Read the rest of this entry “