Why business valuations for LGBTQ entrepreneurs can build generational wealth
One thing the LGBTQ community lacks is a strategy for building generational wealth. To do that and to make sure our small businesses last longer than we do, LGBTQ small businesses must perform business valuations.
Business valuations for entrepreneurs
If you’re a small business owner, you likely spend most days consumed with working in your business. But have you taken the time to work on your business? Have you thought about what might happen to your business when you retire? If 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 step away?
Learn more about business valuations for small businesses:
Tray Shaw of Massachusetts Mutual Life Insurance Company discusses business valuations
Tracy Shaw is the AVP of Business and Market Development at MassMutual. Tracy’s been working in financial services since 1993, joining the MassMutual team eight years ago. Tracy earned her MBA from Western Connecticut State University, and she is an expert in the realm of business valuation and succession planning.
Tracy joins Queer Money to explain the fundamentals of business valuations, discussing how it guides retirement and estate planning, how often it should be updated, and what factors to consider in conducting a business valuation. Tracy describes how a buy-sell agreement provides a safety net for business owners and why it’s best to fund the buy-sell agreement with a life insurance product. Tracy also offers insight on succession planning, addressing how an NGLCC diverse supplier certification might impact your decision-making.
Listen in to learn how business valuation and succession planning can create generational wealth in the queer community and learn about the free tools MassMutual has to offer small business owners!
Topics covered about business valuations
5 reasons to perform business valuations
- Retirement planning
- Business sale or merger, requiring buy/sell agreements
- Succession planning
- Inheritance
- Building generational wealth
The fundamentals of business valuations
- Gives sense of health of business
- ‘What’s it worth?’
Why business owners neglect the business valuations
- Harder to work ON vs. IN business
- Drive value AND mitigate risk
When you would need a business valuation
- Think of business like 401(k)
- Succession, retirement and estate planning
The fundamentals of a buy-sell agreement
- Safety net for business, business owners
- Sell or buy share from each other or heirs
- Best to fund with insurance product
The five ways a person might exit their business
- Death, disabled, divorce, depart or disqualification
- All but disqualification trigger buy-sell agreement
The statistics around doing your own valuation
- 1 in 4 business owners valued on own
- 6 in 10 get it wrong by as much as 59%
- Don’t consider intangibles (e.g.: human, social capital)
Who can help you with a business valuation
- Accountant and attorney
- Financial advisor helps optimize value
How often to update your business valuation
- Change in value, ownership or family situation
- No less than every three years
The fundamentals of a succession plan
- Essential to continuation, legacy of business
- Allows person taking over to prepare
- Consider diverse supplier certification (i.e.: NGLCC)
- Business-first family OR family-first business
How the business valuation helps you get business lending
- Should be on par with amount you’re borrowing
- Assets to secure lending without imposing on business
The benefits of life insurance
- Use proceeds to buyout deceased partner
- Replace income in case of injury or illness
What to consider in making a business valuation
- Equipment, market comparables and hindsight financials
- Intangibles and income replacement value
The resources MassMutual provides small business owners
- Financial advisors + free tools (e.g.: CoreValues)
- Volunteer mentorship program through SCORE
Tracy’s top advice for small business owners
- Understand your options + leverage professionals
- Know value of business, revisit every three years
- Select and prepare right successor
