Apple Growth Partners

Why Your Succession Plan Needs a Valuation Partner

by Bethany Dria, Senior Associate, Business Valuation

Bethany Dria

Business owners preparing a succession plan should consider the five W’s: who will take over the business, when will you retire, what will happen to the company, where will the company be regarding growth, customers, and innovation when you decide to retire, and why, which is simple… to enjoy your hard-earned time in retirement or pass on your legacy to the next generation. However, an effective succession plan also consists of a how – how can you thoroughly plan for an all-encompassing succession plan? Partnering with a business valuation expert results in collaboration with an unbiased third-party professional that can adequately value your business and ownership model. Adding a valuation expert to your team creates a well-rounded group of advisors helping you reach your ultimate end game.

What does a business valuation professional do?

Business valuation experts are credentialed valuation professionals that perform independent fair market value opinions for business owners, trustees or attorneys. Acting as an autonomous third-party advisor for business owners, valuation experts can help the client realize the full value of company ownership and provide communication and education on the value factors. Valuation experts offer more accurate and reliable conclusions of a business’ value than relying on set formulas, which tend to neglect major contributing factors to the value. Even if an owner intends to keep the business in the family, having an appraisal of the company can help with gifting to the next generation, and provide the next owner with an independent assessment of how the business compares to similar companies in an industry.

How can a business valuation professional help my succession plan?

To get the most from their ownership, proprietors need to understand the fair market value of their business. Valuation professionals will remove any bias or pre-conceived perceptions about your business or industry and respond with a truly independent assessment. Business owners pour their blood, sweat, and tears into their business and are often “too deep in the forest to see the trees.” Valuation experts are trained to conduct difficult conversations and ask the hard questions, allowing the business owner to remove the understandable emotion from the process. For example, a business valuation professional can assess the compensation structure of the leadership team or family members to estimate financial impacts once ownership transfers. In addition, a business valuation professional is trained and can provide real-world transaction experience, whether that transaction is between un-related parties or family members.

Isn’t my accountant my business valuation expert?

Accountants may be trained to help facilitate succession plans but are likely not trained in the specifics of business valuation. Consider a valuation specialist to be another key team member in your corner of advisors. Apple Growth Partners’ business valuation group can help you create a thorough succession plan consisting of an accurate assessment of your business’ value. AGP’s valuation team keeps a pulse on the market, performing valuations regularly and focusing on the valuation industry through current new studies focused on the motivations of buyers & sellers in negotiated transactions, updated business regulations (such as the impact on valuation from the Tax Reform Act), and developing valuation principles. At AGP, the business valuation group is experienced in courtroom testimony and dealings with the IRS and Department of Labor. We have extensive real-world transaction experience to help owners through the process of transferring their legacy to either the next generation or next owner. If you’d like to discuss your business’ value to plan your end game, contact me today to get started.