Business Valuation: Key for Your Clients' Business and the Financial Professional

This webinar was produced by NAIFA’s Investment, Retirement, Estate and Advanced Planning (IREAP) Center. To learn more about NAIFA and NAIFA’s Knowledge Centers visit https://centers.naifa.org/centers

Speakers

• Steven Susel, Managing Director, MS Capital, Marshall & Stevens
• Andrew Rinn, Assistant Vice President, Advanced Strategies, Sammons Financial Group

Overview of the Discussion

The conversation begins with an important distinction between a formal business valuation and a calculation of value.

A formal valuation involves a more extensive review of financial information and valuation methodologies to arrive at a specific opinion of value. A calculation of value uses an abbreviated process to develop a range that can help begin a broader planning discussion.

As Susel explains:

“That calculation of value is really great for beginning the process, beginning the conversation process.”

That conversation can include questions about the value of the business, whether a buy-sell agreement is appropriately funded, and whether an owner expects to transfer the company to family members, employees, management, or an outside buyer.

The discussion also addresses the information needed to support a valuation, the importance of understanding adjusted EBITDA and financial trends, valuation considerations for family transfers, and the factors financial professionals should consider when assessing the value and eventual transition of their own practices.

What You’ll Learn

• The difference between a formal valuation and a calculation of value
• How valuation can support estate, retirement, succession, and transaction planning
• Why the purpose of the valuation affects the analysis
• What financial information helps support a credible valuation
• How valuation considerations can differ across industries
• What financial professionals should consider when valuing and transitioning their own practices
• Why transition planning should begin before an owner is ready to sell

Key Takeaways

Water and wastewater valuations involve more than assessing physical assets—they require understanding infrastructure systems, available data, and the regulatory and operational context.

Key insights from the session include:

• Know the value before building the plan
• The quality of the financial information matters
• The purpose of the valuation affects the analysis
• Financial professionals should evaluate their own practice

Why This Matters

A business can represent several planning issues at once. During the discussion, Rinn describes how a business may effectively represent an owner’s business, estate, and retirement plan, particularly when it comprises a substantial portion of the owner’s net worth.

That makes valuation an important starting point rather than something reserved for the moment a business is sold.

The webinar illustrates this with a client whose business experienced significant growth while the owner had little organized estate planning in place. Marshall & Stevens performed a calculation of value to quantify the business asset. That information could then be used by the client’s other advisors for estate and insurance planning.

The broader point is captured in Susel’s closing takeaway:

“It’s really important to understand the value of the client’s largest asset.”

Knowing that value gives the owner and advisory team a more informed basis for evaluating succession, retirement, estate planning, insurance needs, and a potential future transaction.