You’ve built a business. As you think about how long you want to work, most business owners want to know: what do I have here? How much is this business worth?
This situation is honestly one of my favorite ‘triggers’ for preparing a business valuation.
We have all seen the statistics of the massive numbers of baby boomers nearing retirement and whether they sell, gift, or shut down and the repercussions to our economy.
If you are wondering what your business is worth, a business broker may be able to provide a high-level, summary valuation based on demand for businesses like yours in today’s market.
However, you may want or need a more in-depth, objective business valuation such as those I prepare that include a detailed financial analysis of the past five years of income statements and balance sheets, and common-size and industry peer group analysis to identify trends and anomalies. The financial analysis includes development of a forecast of potential future income statements and balance sheets that is helpful for buyers and potential lenders to understand why the acquisition is affordable. The analysis also highlights areas that contribute to value and where improvements can increase value.
Should I gift ownership in my business?
Today’s tax incentives are favorable to gifting shares of one’s business to the next generation as the federal estate and gift tax lifetime exemption for individuals is $15 million ($30 million for couples) as of January 1 of this year with an annual gift tax exemption of $19,000. This presents a significant opportunity for gift and estate tax planning. Many estate and tax advisors remind their clients that the next administration may change the gift and estate tax exemptions which could significantly alter the tax benefits of gifting shares of your business.
If gifting fractional shares or entire ownership of your business, you will want to have a business valuation prepared to serve as the cost basis for the new shareholders. The same applies if you are considering moving ownership of fractional shares into a trust for trust and estate planning strategies.
What is my business worth?
If, as a business owner, this question is top of mind, we welcome the opportunity to prepare a business valuation that would support choosing to gift shares of your business and would provide the peace of mind of a thorough valuation that would serve as the basis for evaluating a sale.
I regularly work as part of a team of professional advisors to provide key inputs into your exit planning process. Team members typically include your accountant, financial advisor or wealth manager, corporate attorney, business broker, and trust and estate attorney. I have prepared thousands of business valuations for many underlying needs including tax planning, selling, 409A valuations, and shareholder disputes. The situation I find most satisfying is helping a business owner make an informed decision regarding what is next as they seek to maximize the value of all their years of hard work while evaluating gifting to the next generation or selling.
You deserve to know the value of what you have built.
When Values Matter.
