For many business owners, the company represents their largest asset and the engine behind their family’s financial future. Yet it may also be the asset in their portfolio with the least certainty around its value, liquidity, and eventual exit.

That creates both a challenge and an opportunity for the wealth advisor.

When you build a retirement plan for a business owner, one of the most important questions is deceptively simple: What is the business actually worth, and will that value produce enough after-tax proceeds to fund the owner’s goals?

Those are questions worth answering years before the owner intends to sell.

Exit planning is wealth planning

Good exit planning starts by bringing three areas into alignment: business readiness, financial readiness, and personal readiness. That is the same framework we use when assessing whether an owner is truly prepared for a transition.

From the wealth advisor’s perspective, this matters because an assumed business value can create a false sense of financial security. An M&A advisor can provide a market-based view of value and help identify the issues that buyers are likely to reward or discount, such as customer concentration, recurring revenue, management depth, growth, profitability, and owner dependency.

Sunbelt Business Advisors / True North M&A's exit-planning guidance similarly emphasizes aligning personal and financial goals with business value and understanding what the market may realistically support.

Sometimes that analysis produces an important answer: Don't sell yet.

We've seen exactly that. In one case, after reviewing a valuation with the owner and his wealth advisor, it became clear that a sale would not meet the owner's financial objectives. Instead of taking the company to market, the advisory team developed a growth plan. After several years of working toward those goals, the business ultimately sold for roughly five times its original valuation.

That's exit planning doing its job.

An M&A advisor brings the marketplace into the planning conversation

The wealth advisor understands what the owner needs from the business. The M&A advisor helps determine what the market may actually pay for it. Those perspectives belong in the same conversation.

An experienced M&A advisor can help establish an initial value range, identify value drivers, monitor buyer activity, and market multiples, improve exit readiness and, when the time is right, create a confidential competitive process rather than simply responding to the first unsolicited offer. Your own client process already incorporates personal, business and financial readiness assessments along with examination of ten value drivers.

The competitive-process piece can become particularly important as transaction size grows. The IBBA recently reported that deals below $500,000 commonly received only one or two offers, while 87% of deals above $5 million received at least three offers and 33% attracted ten or more.

More qualified buyers can mean more than negotiating leverage. It gives the owner alternatives around price, terms, culture, employees, legacy, and the future of the business.

Start before your client is ready to sell

The best introduction to an M&A advisor usually isn’t, “My client wants to sell." It’s,“My client owns a significant business, and we want to understand what it's worth, what could increase its value, and how it fits into the family's long-term wealth plan."

That conversation can happen years before a transaction. For a wealth advisor, that is the real opportunity. You aren't simply helping a client invest the proceeds from a business sale. You're helping the owner prepare the asset that may eventually create those proceeds.

Bring the exit planner, CPA, attorney and M&A advisor into the conversation early. Determine where the owner is today, where they need to be and what needs to change to close the gap. The goal isn't necessarily to sell sooner.It's to make sure that when your client eventually exits, they have choices and can do it on their terms.

Andy Schwandt
651-894-4173

aschwandt@sunbeltmidwest.com