Saratoga.com logo
Saratoga.com logo
  • Places to Stay
  • Things To Do
  • Food & Drink
  • Events
  • Businesses
  • Travel Guides
Saratoga Business Journal
  • Home
  • New Businesses
  • Business News
  • Business Reports
  • Business Briefs
  • Business Registrations
  • Personnel Briefs
  • Contact Us
Home  »  Legal / Accounting  »  Business Report: Are You Working On Your Business?
Legal / Accounting

Business Report: Are You Working On Your Business?

Posted onFebruary 10, 2020February 10, 2020
Stephen Ferraro is a partner with FAZ Forensics in Saratoga Springs.

by Stephen Ferraro,
CPA/ABV/CFF, MAFF, CVA, CEBC
Business owners need an ongoing planning process to grow, maximize business value and create the most successful business transfers. It’s just as important to work on your business as it is to work in your business.
The process should coordinate business valuation, growth planning and business transfer analysis with personal retirement planning. The ultimate goal…successfully operate, grow and transfer your business on your terms and time frame, while maximizing and protecting your personal wealth.
Maximize Business Value
To determine how fast you can get to where you want to go, you need to know where you are now. That’s why business valuation is so important. As part of the process, you should review the profits and cash flow generated by your business so you can understand the range of values the market will place on your business as it is today and in the future.
You should assess your value drivers—those factors that enhance the inherent value of your business—and discuss strategies that allow you to maximize business value. The process should focus on key areas such as growth, recurring revenue, product differentiation, customer diversification, financial, sales and marketing, customer satisfaction, human resources and more. You should have a customized and evolving road map to maximize the value of your business.
Mental Readiness & Owner
Dependence
When will you be ready to leave your business? Mental readiness for a transition is a critical factor for nearly every business owner who wants to continue with their business, but still protect their illiquid wealth. You need to know what the business really means to you—personally—and what you are going to do with your time after the transition.
The key indicator of this mental readiness is usually how involved you are in the day-to-day operations of the business. These are critical questions to answer so that you can think clearly through the transfer process and design a plan to meet your goals. You need to focus on how ready you are to leave, as well as how dependent the business is on you. What’s your owner dependency index?
Personal Value Gap
In order to answer the question “can I afford to transfer my business?” You must know your personal financial situation. In other words, is there enough money saved outside the business to provide financial freedom.
In the case of most owners the majority of your wealth is locked in your business. You need to understand the following:
What you currently have saved outside the business.
What other sources of income are available to you today and in the future.
What your lifestyle expenses are today and are expected to be in the future.
What the difference is between what you have for assets and income versus what you need for personal living expenses. This is called your Personal Value Gap.
The Personal Value Gap analysis provides an overview of your current financial situation as it relates to being financially free from your business. As part of this process you should discuss and review the following:
Your existing lifestyle and how much the business pays for personal expenses.
Your current savings, investments, and savings habits, as well as, your current and projected sources of income (such as real estate, social security, pension income, etc.).
Your comfort level with projecting certain estimates of return on investments and growth of your liquid assets to complete the Personal Value Gap calculation.
Transfer Options Analysis
As you move through the process you will continually explore when, as well as how you would like to transfer your business. This also leads towards identifying the transfer option(s) that are most likely suitable for you to begin to build your transfer strategy around.
Each business owner can identify transfer alternatives available that fit your respective situation. You should examine all the options available to determine which one is the best fit for helping you to achieve your overall goals. This may include one, or a combination of, the following transfer options:
Sale of the business to an outside party/strategic buyer; private equity group recapitalization; employee stock ownership plan (ESOP); management buyout (MBO), and gifting program
The various transfer options may have different business values associated with them. In order to evaluate the outcome from each of the options, you should understand the “range of values” that exists for your business. The estimated range of values for the transfer of a business could include the following different values:
“Fair market value” through the establishment of an ESOP, MBO or gifting program; “investment value” an investor (such as private equity) may pay for your business; and “synergistic or strategic value” a competitor may pay for your business
Ongoing Process
Employing an ongoing business planning process of working on the business will give you peace of mind in having known you have done the hard part, namely making the commitment to move ahead and invest in protecting your most valuable asset and being the best prepared to make the largest financial and emotional decision of your life.

Previous Article Business Report: Attorneys Are Important In Real Estate Deals
Next Article Outsourcing Accounting Services Can Be A Benefit To Some Small Business Owners
Subscribe to Our Newsletter
View the Latest Virtual Edition

Categories

  • 50-Plus
  • Banking
  • Banking / Asset Managment
  • Building Trades
  • Business Briefs
  • Business News
  • Business Registrations
  • Business Reports
  • Commercial / Residential Real Estate
  • Community Services
  • Construction
  • Construction Planning
  • Corporate Tax / Business Planning
  • Cyber / Tech
  • Dining Guide
  • Economic Development
  • Economic Outlook 2016
  • Economic Outlook 2017
  • Economic Outlook 2018
  • Economic Outlook 2019
  • Economic Outlook 2020
  • Economic Outlook 2022
  • Economic Outlook 2023
  • Education/ Training/ Personal Development
  • Entrepreneurial Women
  • Entrepreneurship
  • Environment / Development
  • Financial Planning / Investments
  • Fitness / Nutrition
  • Health / Community Services
  • Health & Fitness
  • Health & Wellness
  • Healthcare
  • Holiday Guide
  • Holiday Shopping
  • Home / Energy
  • Home / Insurance
  • Home & Real Esate
  • Insurance / Employee Benefits
  • Insurance / Medical Services
  • Legal / Accounting
  • Meet The Chef
  • New Businesses
  • Non-Profit
  • Office / Computer / New Media
  • Office / HR / Employment
  • Office/ Technology/ E-Commerce
  • Outlook 2021
  • Personnel Briefs
  • Retirement Planning
  • Senior Living / Retirement
  • Summer Construction
  • Uncategorized
  • Wellness
  • Women In Business
  • Workplace / Security / Legal
  • Year-End Tax Planning

Archives

  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
Connect With Us

Follow, like and subscribe to Saratoga.com on social media

Account Sign In Submit An Event
Saratoga.com logo
  • Home
  • Places To Stay
  • Things To Do
  • Food & Drink
  • Events
  • Real Estate
  • Businesses
  • Guides
  • Contact Us
  • Blogs
  • Sweepstakes
  • Advertising
Visit Saratoga.com For Everything Saratoga
Full-Service Internet Marketing: Search Engine Optimization, Website Design and Development by Mannix Marketing, Inc.
Mannix Marketing, Inc. is headquartered near Saratoga Springs in Glens Falls, New York
Saratoga.com All Rights Reserved © 2023
Disclaimer & Privacy Policy / Terms of Use / Copyright Policies

We strive to insure accuracy on Saratoga.com however accuracy cannot be guaranteed. Information is subject to change.
Please alert us if there is any inaccurate information here.

Having trouble using this site? Accessibility is our goal, please contact us with site improvements.