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Why Your Business Needs an Annual Financial Check-up

Don’t you feel good after you go to the doctor, or the dentist? Even though people put this stuff off there is a certain satisfaction and peacefulness that comes with knowing you have done it and you are ok for a while.  You can get rid of some of the irrational worries (or maybe that is just me).  

Working with many closely held businesses I can tell you the methods used for the annual financial check up are varied and equally avoided with many business owners. Many people handle their financial check up with their annual audit or review, or their corporate tax return with their accountant.  Then they talk about their personal investments and issues with their investment advisors who may or may not have any idea on leveraging your greatest asset - your operating company.

Your company and its value should be a big part of that annual conversation. This check up should include your advisors, possibly board members or family members who need to understand where this business is going and to allow you to step out of it for a while and look at it strategically.  This check up allows you as the owner and operator, with as little emotion as possible, to discuss what is best for you, the family and the business at various stages.  Even if you don’t plan on acting on all plans, it is good to know and be prepared for the offer I referred to in my last blog.  

Even though you may have all the stock and may not be required to report to anyone as a public company or a private equity manger reporting to investors would.  There are still stakeholders other than you that should be considered - employees, family members etc. that are relying on you.  They expect you to run your company like a business and increase value over time for yourself (and them).   

Items to discuss annually with your advisor:

  • How to increase value?

  • What will I do with this stock?

  • What is my business worth (estimate)?

  • How does it relate to my other investments?

  • Do I have enough insurance?

  • How much tax would I pay if I sold it?

  • How can I keep some of my top executives and incent them to grow the business?

  • Should I gift some of this to my children?

  • Should they get involved and if so when and what will they do?

We have developed tools that make these conversations easy to have and help to create a roadmap over time as we go through these check ups with clients.  It helps them to answer these questions and more - like ‘what do I have?’, ‘where is it?’ and to help make assumptions about fair value so business owners can see how their operating company and real estate investments interact with everything else.  

We help bring it all together - and also begin to discuss what you need in retirement and how this business will help provide you comfort for the rest of your life.   Whether you decide to sell it, gift it, or keep it and have it professional managed. Even if a company is growing it may not always equate to positive cash flow. You have many decisions along the way to consider, such as:

  • How much can I borrow to grow?

  • How much can I take out of the business to diversify?

  • What else do I have personally that I need to protect and may be at risk?

This is not a formal valuation of business but there are models that would be used by someone purchasing your business that can be used to give you an idea of your company’s value.  These tools will also help you see where the money you take out of the business is going over time, and will provide an estimate of what you can expect.  

There are enough emotions tied into these decisions.  We can get the easy stuff taken care of and help take some of the stress out of it and hopefully facilitate discussions that will help the planning process. 


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Jim Rollins is a Vice President in Meaden & Moore’s Assurance Services Group. He specializes in advising privately held businesses on acquisitions, accounting and manufacturing systems and controls, and performance measurement and reporting. In his spare time Jim enjoys coaching baseball and cheering on his children at their various sporting events. Click here to read more about Jim or click here to contact him directly.

Jim Rollins, Partner In-Charge - Assurance and Tax Services Group, has over 25 years of public accounting experience.

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