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5 Reasons Why Entrepreneurs Need a Business Valuation

  October 30, 2018  |    #Make Money

Why a business valuation for LGBTQ entrepreneurs can build generational wealth

One thing the LGBTQ community lacks is a strategy for building generational wealth. To do that and to make sure our small businesses last longer than we do, LGBTQ small businesses must a perform business valuation.

MassMutual on Queer Money

Business valuation for entrepreneurs

If you’re a small business owner, you likely spend most days consumed with working in your business. But have you taken the time to work on your business? Have you thought about what might happen to your business when you retire? If you understand the value of your business, you can sell the brand or pass it on to friends and family, building generational wealth – something the queer community lacks.

Doesn’t that sound better than simply letting your life’s work dissolve when you step away?

Learn more about business valuation for small businesses:

To make informed decisions about when and how to exit your business and assure it’s on your terms, you must understand the true value of your business. - Tracy Shaw of MassMutualClick To Tweet

Tray Shaw of Massachusetts Mutual Life Insurance Company discusses business valuation

Tracy Shaw is the AVP of Business and Market Development at MassMutual. Tracy’s been working in financial services since 1993, joining the MassMutual team eight years ago. Tracy earned her MBA from Western Connecticut State University, and she is an expert in the realm of business valuation and succession planning.

Tracy joins Queer Money™ to explain the fundamentals of business valuations, discussing how it guides retirement and estate planning, how often it should be updated, and what factors to consider in conducting a business valuation. Tracy describes how a buy-sell agreement provides a safety net for business owners and why it’s best to fund the buy-sell agreement with a life insurance product. Tracy also offers insight on succession planning, addressing how an NGLCC diverse supplier certification might impact your decision-making.

Listen in to learn how business valuation and succession planning can create generational wealth in the queer community and learn about the free tools MassMutual has to offer small business owners!

Topics covered about business valuation

5 reasons to perform a business valuation

  • Retirement planning
  • Business sale or merger, requiring buy/sell agreements
  • Succession planning
  • Inheritance
  • Building generational wealth

The fundamentals of a business valuation

  • Gives a sense of the health of a business
  • ‘What’s it worth?’

Why business owners neglect business valuation

  • Harder to work ON vs. IN business
  • Drive value AND mitigate risk

When you would need a business valuation

  • Think of business like 401(k)
  • Succession, retirement and estate planning

The fundamentals of a buy-sell agreement

  • A safety net for the business, business owners
  • Sell or buy a share from each other or heirs
  • Best to fund with an insurance product

The five ways a person might exit their business

  • Death, disabled, divorce, depart or disqualification
  • All but disqualification trigger buy-sell agreement

The statistics around doing your own valuation

  • 1 in 4 business owners valued on own
  • 6 in 10 get it wrong by as much as 59%
  • Don’t consider intangibles (e.g.: human, social capital)

Who can help you with a business valuation

  • Accountant and attorney
  • A financial advisor helps optimize the value

How often to update your business valuation

  • Change in value, ownership or family situation
  • No less than every three years

The fundamentals of a succession plan

  • Essential to the continuation, the legacy of business
  • Allows person taking over to prepare
  • Consider diverse supplier certification (i.e.: NGLCC)
  • Business-first family OR family-first business

How the business valuation helps you get business lending

  • Should be on par with the amount you’re borrowing
  • Assets to secure lending without imposing on business

The benefits of life insurance

  • Use proceeds to buyout deceased partner
  • Replace income in case of injury or illness

What to consider in making a business valuation

  • Equipment, market comparables and hindsight financials
  • Intangibles and income replacement value

The resources MassMutual provides small business owners

  • Financial advisors + free tools (e.g.: CoreValues)
  • Volunteer mentorship program through SCORE

Tracy’s top advice for small business owners

  1. Understand your options + leverage professionals
  2. Know the value of the business, revisit every three years
  3. Select and prepare the right successor

Connect with MassMutual

Resources about business valuation

It’s important to note that this information isn’t intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.

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