Name: Tim McDaniel, CPA/ABV, ASA, CBA, Principal, Director of Valuation and Succession Planning
Posts by Tim McDaniel, CPA/ABV, ASA, CBA, Principal, Director of Valuation and Succession Planning:
Do You Need a Business Prenup?
May 15th, 2012About 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 “
How do you create a succession plan?
April 18th, 2012One 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 “
How do you follow IRS regulations when gifting a business interest?
February 17th, 2012Lately 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 “
How do I keep my succession plan on course?
January 13th, 2011The 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 “
How Does Communication, Timing Impact My Business Succession Plan?
December 13th, 2010Over 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 “
Where does everyone stand in your business succession plan?
December 1st, 2010When 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 “
Succession Planning: Do You Know Your Options?
November 15th, 2010Are 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 “
Have you included a business valuation in your succession plan?
November 5th, 2010In 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 “
how do you evaluate and price a product line for sale?
October 29th, 2010The 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.
How ready are you to transition your business?
October 13th, 2010Step 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 “
