Unlock Your Client’s Business Value to Create Investment Liquidity

Financial planners (FP’s) can look forward to the most rewarding ten years of their profession by taking advantage of paradigm-breaking knowledge and techniques in their work with small to mid-size business (SMB) owners.

Traditionally, FP’s have worked with business owners to diversify their investments outside of their business enterprise. This is critical, as we recognize that most business owners’ wealth is “locked” in their business and it never makes sense to “have all your eggs in one basket.”

As more and more owner-clients reach retirement age, however, converting a business value into investment liquidity rises to a higher priority for both the FP and the owner.

A recent study by Deloitte illustrates the need to connect converting business wealth with the owner’s overall planning efforts.

According to Peter Brown, Deloitte Partner, “71% of small and mid-sized enterprise owners plan to exit their businesses within the next ten years…however, the challenge is that few organizations genuinely understand what actions they must take to achieve this goal.”

Successful planners recognize the significance of this opportunity to reshape their client relationships over the next few years and receive the windfall of investable liquidity.

What if an owner does not plan for their eventual business sale?

The statistics on the numbers of failed business transfers, and subsequent liquidity squandered, is startling. Here is a look at the historical success rate of business owners attempting to sell their business.



# of Businesses Value Employees % that Sell*
4.6 MM < $1MM 5 to 9 20%
690K $1MM to $2.5MM 10 to 19 25%
566K $2.5MM to $10MM 20 to 100 33%
90K $10MM to $50MM 100 to 500 50%
22K > $50MM 500+ 100%

*20% for sale each year. Source: 2009 Business Broker Press, Tom West

Businesses valued at $10 million or less have a 33% chance or worse of successfully converting their intangible business value to tangible cash.

Just doing the math on the highlighted row above (move your mouse over the row that starts with 566k), we can estimate that each year $380 billion dollars of potential wealth will never be realized.

Many owners and advisers are simply unaware of the challenges faced when attempting to capitalize on business value.

In the initial retirement planning meetings, it’s critical for the adviser and owner to have a caring and candid conversation regarding business exit obstacles and steps an SMB can take to preserve, protect and make the most of their largest retirement asset.

The reward for the FPs that are instrumental in leading their clients through this process is a pipeline full of happy business owner clients that each receive multi-million dollar checks for their retirement investments.

In the next post, you will learn more specifics on the opportunities and challenges you can make a part of your conversation with your SMBs.

Nick Rodites is a Merger and Acquisition Advisor with Bankers Advocate Group specializing in providing intermediary services to SMB owners and their advisors in the areas of business sales, acquisitions, valuations, and exit strategies including family and key employee succession planning. Nick’s professional designations include Certified Business Intermediary, Accredited Valuation Analyst, and Certified Exit Planner. He is a member of the National Association of Certified Valuation Analysts, the International Succession Planning Association, and board member of the Orlando Chapter of the Association for Corporate Growth (ACG). As a continuing education sponsor, he is a recognized authoritative resource and regular speaker to leading accounting, legal, banking and retirement investment firms. Contact Nick Rodites at (407) 620-9042, email nick@bankersadvocate.com www.linkedin.com/in/nickrodites or visit our Web page www.bankersadvocate.com.

One Response to Unlock Your Client’s Business Value to Create Investment Liquidity

  1. Chris Curtin says:

    Another great post, Nick…

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