By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®, AWMA®
Navigating the vast sea of financial management and business transition can be a daunting task. As a wealth manager at Century Management, I've spent my career helping high-income-earning business owners and executives navigate the complexities of wealth and business transition.
My father, Arnold Van Den Berg, a renowned investor and a Holocaust survivor, instilled in me an ethos of hard work, sacrifice, and empathy for others. I've dedicated my career to embodying these values, helping business owners and their families secure their financial futures.
More than Half of Business are Sold Unexpectedly
The surprising reality is that more than half of businesses are sold in an unexpected manner. This fact often catches owners unprepared, potentially leaving them in sub-optimal situations, both financially and emotionally. It's important to be ready for an exit, even if you're not planning one right now. Here, I'll be discussing the essential items to work on to help ensure you're prepared for an unexpected business sale.
Understand Your Business’s Worth
The first step in being prepared for a potential business sale is understanding the value of your business. This involves much more than just reviewing your financial statements or revenue trends. You need to consider both tangible and intangible factors, including market position, brand recognition, customer loyalty, and growth potential. Hiring a professional business evaluator can provide a comprehensive, unbiased perspective.
Develop a Succession Plan
Even if selling isn't your immediate goal, a succession plan is crucial. It prepares your company for a seamless transition, minimizing disruption to operations, employees, and customers. It also reassures potential buyers of the continuity and longevity of the business, potentially enhancing its market value.
Optimize Your Financials
Potential buyers will scrutinize your financial statements. Start working on optimizing them now, identifying areas of inefficiency or unnecessary expense. Improving your financial health not only makes your business more attractive to buyers but also enhances your bottom line in the meantime.
Foster a Strong Management Team
A capable, reliable management team is attractive to prospective buyers. It indicates that the business can continue to thrive even after the transition. Invest time in developing your team's skills and capabilities, ensuring they can handle the responsibilities of running the business.
Review Legal and Regulatory Compliance
Ensure that all legal and regulatory requirements are in order. Non-compliance could derail a sale, result in costly penalties, or decrease your business's value. This includes having appropriate licenses, following employment laws, and maintaining up-to-date records and contracts.
Build a Diverse Customer Base
A diverse customer base helps demonstrate the stability and potential for growth in your business. It shows that the business isn't overly reliant on a single client or market, which is an appealing factor to potential buyers.
Being prepared for an unexpected business sale is more than just a safety measure. It's an approach that, when implemented correctly, can help improve the current operations of your business, boost its value, and secure your financial future. Even if you're not planning to sell, this readiness can offer you options, flexibility, and peace of mind.
At Century Management, we understand small businesses because we are one. We're committed to providing personalized wealth management strategies and helping business owners navigate complexities and secure their financial futures. We're here to help you on this journey.
In the end, securing your future is about more than just financial stability. It's about peace of mind, knowing you have the resources and support to navigate life's unexpected turns. It's about securing your legacy, ensuring the business you've worked hard to build can continue to thrive. It's about taking control of your destiny, making proactive decisions, and being prepared for whatever comes your way.
Remember, the unexpected doesn't have to mean the undesirable. With the right preparation, it can lead to new opportunities and greater financial freedom. Your future is in your hands. Let's make the most of it.
Century Management ("CM") is an independently registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario. Forward-looking statements are not guaranteed. Past performance is not indicative of future results. The discussions and viewpoints featured are not intended to be investment advice. A full description of our Firm’s business practices, including our Firm’s investment management services, wealth plans and advisory fees, are supplied in our Form ADV Part 2A and/or Form CRS, which are available upon request or at www.centman.com. CM-2023-05-30