Why a Business Valuation Can Create Intergenerational Wealth for LGBTQ Entrepreneurs
What the LGBTQ community lacks is a strategy for building generational wealth. To achieve this and ensure our small businesses last longer than us, LGBTQ small businesses must complete a business valuation.
Business valuation for entrepreneurs
If you’re a small business owner, you probably spend most days working in your business. But have you taken the time to work? To Your company? Have you thought about what might happen to your business when you retire? When 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 leave?
Learn more about business valuation for small businesses:
Tray Shaw of Massachusetts Mutual Life Insurance Company discusses business valuation
Tracy Shaw is AVP of Business and Market Development at MassMutual. Tracy has worked in financial services since 1993 and joined the MassMutual team eight years ago. Tracy earned her MBA from Western Connecticut State University and is an expert in business valuation and succession planning.
Tracy joins in Queer money™ to explain the basics of business valuation and discuss how it impacts retirement and estate planning, how often it should be updated, and what factors to consider when conducting a business valuation. Tracy describes how a purchase and sale agreement provides a safety net for business owners and why it is best to fund the purchase and sale agreement with a life insurance product. Tracy also provides insight into succession planning and how NGLCC certification for diverse suppliers could impact your decision-making.
Listen in to learn how business valuation and succession planning can create generational wealth in the queer community and learn more about the free tools MassMutual has to offer small business owners!
Business valuation topics covered
5 reasons to carry out a company valuation
- Retirement planning
- Corporate sale or merger requiring buy/sell agreements
- Succession planning
- estate
- Building intergenerational wealth
The basics of a company valuation
- Gives a sense of the health of a company
- “What’s it worth?”
Why entrepreneurs neglect company valuation
- It’s harder to work in business than in business
- Increase value AND reduce risk
If you would need a business valuation
- Imagine a business like a 401(k).
- Succession, retirement and estate planning
The Basics of a Buy-Sell Agreement
- A safety net for the company and the business owners
- Sell or buy a share from each other or from your heirs
- It is best to finance with an insurance product
The five ways a person could exit their company
- Death, disability, divorce, departure or disqualification
- All but disqualification will trigger a buy-sell agreement
The statistics surrounding carrying out your own valuation
- One in four entrepreneurs evaluate the rating themselves
- 6 out of 10 get up to 59% wrong
- Do not consider intangible assets (e.g. human capital, social capital).
Who can help you with the company valuation?
- Accountant and lawyer
- A financial advisor helps optimize value
How often do you need to update your business valuation?
- Change in value, ownership or family situation
- At least every three years
The basics of a succession plan
- Essential for the continued existence and legacy of the company
- Allows the person taking over to prepare
- Consider various supplier certifications (e.g. NGLCC).
- Business-first family OR family-first company
How Business Valuation Helps You Get Business Loans
- Should be equal to the amount you borrowed
- Assets to secure lending without putting a strain on the business
The advantages of life insurance
- Use the proceeds to buy out the deceased partner
- Replace your income in the event of injury or illness
What should be taken into account when valuing a company?
- Equipment, market comparisons and retrospective financial data
- Intangible assets and income replacement value
The resources MassMutual provides to small business owners
- Financial advisor + free tools (e.g. CoreValues)
- SCORE’s Volunteer Mentoring Program
Tracy’s top advice for small business owners
- Recognize your options and use professionals
- Know the value of the company and revisit it every three years
- Select and prepare the right successor