Navigating with True North Value Planning as a Team Sport
As a former small college basketball player, I understand the value of each member of a team. In the same way, the process of understanding, managing, and maximizing the shareholder value of your business requires a team of advisors with the fiduciary role for the business owner’s best interests.
Assembling an Advisor Team
Value planning is not just for business owners that are contemplating a sale. Instead, this type of planning is important for all business owners as a best practice. Here is the list of advisors that should be a part of your team:
- Corporate Legal - Businesses should have a law firm they trust to help them with normal course corporate matters such as operating agreements, leases, customer contracts, etc.
- Estate Planning Legal – As a separate discipline, business owners who have built significant wealth within and outside of their business need to seek assistance in protecting that wealth as part of future generational transfer or philanthropy. Complex trust agreements such as irrevocable trust, charitable remainder trust, and generation skipping trust are just some examples.
- Accounting & Tax – It is common for business owners to get advice on accounting and tax matters. Businesses need a careful tax plan for the current year, especially for highly profitable businesses, and for long-term planning. We are often surprised when advising a business on a sale that very often owners have no idea of their tax basis. This is an important part of value planning and should be resourced accordingly.
- Wealth Advisor – The value of assets already invested and the value of currently illiquid assets like your business or property should all be factored into your personal financial plan. Your wealth advisor or financial planner must understand the value of your business and can often be a coordinator in bringing together all the advisors mentioned above. Again, we have been surprised how many times in our 24 years of advising owners we run into a situation where a business owner is poised to sell a business for tens of millions of dollars, yet the owner does not have a wealth advisor or financial planner.
- Commercial Banker – Many business owners use their commercial banker as an advisor and confidant, so if that is the case, such an individual can be a valuable member of the team.
- Capital Markets Advisor – Your company is a unique asset. Its market value is a product of current company performance, the current state of the capital markets, the relative attractiveness of the respective business sector, customer concentration, and many other factors. Investment banking firms like True North can provide this perspective and help create a framework for an annual refresh of the current market value. The goal of value planning is to make strategic, financial, and operational decisions in the short term to increase shareholder value in the long term.
If you would like to discuss with True North the potential of us joining your team as your capital markets advisor, please let us know. The market assessment component we provide as part of the overall plan is typically a complementary service. We have a myriad of businesses for which we have or are providing an annual update to their market value.
The end result of this value planning should be a written plan, usually residing with your lawyer or wealth advisor. The format varies, but the plan should most certainly include a summary of the work products from each member of your team.
In all parts of life there is no substitute for good planning, and given your business is likely to represent the preponderance of your net worth, this type of planning should be essential. Let us know if we can help you get started.
Chris Goeglein is the Founder and Managing Principal of True North. Chris is an experienced strategist, advisor to senior executives, and change agent. Under his leadership, True North has become one of the most active investment banking firms in Indiana.
