Giving a New Business Owner a Clearer View of the Road Ahead
Industry
Wealth Management & Financial Planning
Challenge
An existing planning client had started a business and was considering an exit in five to ten years. With about seven months of financial data, Stephen Stavrou needed a useful view of the business that could sit alongside the owner’s personal plan without presenting it as a settled or static valuation.
Results
Stephen generated a RISR report from the available P&L and balance sheet and found that the preliminary valuation range was close to the owner’s own estimate. From here, they had a natural foundation to review succession and exit planning, buy-sell documents, and future goals for the business.
“And when I actually walked through this with the business owner, they were impressed because the valuation range was actually pretty close to like what they estimated their valuation to be.”
Stephen Stavrou
Wealth Management Advisor, Fifth Avenue Financial
About Fifth Avenue Financial
Fifth Avenue Financial is a MassMutual firm based in New York City, with financial professionals serving clients across the United States. The firm focuses on financial protection, retirement planning, and planning for the sale of a business.
The Challenge
Stephen Stavrou was already helping a client with personal planning and an employee 401(k) when the owner started a business. The company had only about seven months of financial history, but the owner was considering an exit in five to ten years and recognized key-person and succession concerns.
Stavrou wanted to look at the business on its own terms, then connect that view to the owner’s longer-term financial goals. Even with a newer business, an early estimate can provide useful guideposts while the owner and advisor continue to add data, adjust the plan and refine their assumptions.
The Solution
Stavrou entered the available P&L and balance-sheet information into RISR and reviewed the resulting analysis with the owner. Walking through the report together let them compare the preliminary value range with the owner’s expectations and discuss succession and exit material in light of concerns the owner already had.
Stavrou said the owner was impressed by the report, which gave them a strong starting point for conversations about business continuity, future goals, and how the business might fit into the owner’s personal financial plan. The estimate can be easily revisited and updated as the business develops and more financial history becomes available.
The Results
Stephen was already helping the client with personal planning and an employee 401(k). Bringing the business into that conversation gave them a starting point to consider how its value, retirement savings, and a potential exit might fit together. That interest extends beyond this case: 89% of business owners surveyed want financial advice that considers both business and personal needs, as featured in RISR’s Trends & Insights.
An exit five to ten years away still leaves important questions to work through today: what the owner wants from the business, which risks need attention, and how those answers may change as the company grows. Starting early gives the owner and advisor the best opportunity to plan for an exit and create a successful outcome together.
The owner walkthrough focused on three areas:
Stavrou reviewed a RISR business report with the owner using the available financial statements.
Stavrou compared the preliminary valuation range with the owner’s own estimate and found that the two were close.
Stavrou discussed succession and exit considerations tied to the owner’s longer-term goals.