Many Odessa business owners face issues throughout the business life cycle including co-owner friction, retirement needs, risk assessments, succession planning, and family planning. If you are a business owner, do you want to face these issues alone? Do you have the time to run your company and navigate all of these issues? Luckily, Odessa business owners have been relying on Caprock Business Consulting’s expertise and business appraisals to assist them in planning to overcome these issues. We will cover some of the top hurdles Odessa businesses face and how to overcome them.

All business partnerships eventually come to an end when one or more partners leave the business, whether by choice or otherwise. Being prepared for the end of the partnership decreases the possibility of unwanted challenges between co-owners down the road. A business appraisal is just one of the tools that helps owners plan for unforeseen circumstances. A business appraisal combined with a buy-sell agreement would be considered the gold standard.

Common Reasons Why Partnerships End

Odessa owners share a unique relationship. They have built a company together, sometimes out of nothing. They have been through the good times and the bad, working diligently to keep their company thriving.

Partnerships between Odessa owners, like any relationship, change over time. Partners can grow apart; goals and visions can change. Co-owners may have different financial situations or targets. The ways in which they intend to take care of their families in the future may differ. Partners may be on different timelines due to age, health concerns, or personal interests. And of course, one owner may become disabled or die unexpectedly. The reasons for a partnership to end vary widely. Being prepared for any of these scenarios is crucial. 

Retirement Needs Analysis

Consider how much each Odessa co-owner will want (or need) on the day he/she leaves the business. Each owner should understand what the value of the company is today by utilizing a business appraisal by a firm serving Odessa, such as Caprock Business Consulting. Each owner should also understand where the company will need to be when each owner decides to leave and how much an owner will need or want to sustain their life after their departure. This is a combination of each owner separately reviewing their personal financial situation, as well as a cooperative effort to understand the current and expected future value of the business but hiring an independent third-party Odessa business appraisal firm. 

A valuation prepared by an Odessa business appraisal firm, like Caprock Business Consulting, can help partners come together and agree on how the business will be handled and valued in the event the partnership ends. A business appraisal can be used in conjunction with a buy-sell agreement to outline the exact price that must be paid. Once these are known, owners can work together to plan now for the various possible ways each may leave the business in the future.

Risk/Liability Assessment

Each co-owner cares about the potential risk or liability associated with the Odessa business after a co-owner departs. The departure could impact the company. There may be a risk that employees loyal to that owner may also leave. Customers in the Odessa area may feel anxious when an important partner departs. Sales may lag. The risks following the departure of an owner are different for every business. Identifying them now, and putting measures in place to minimize these risks can make all the difference. An Odessa business appraisal will generally highlight the risks associated with the business and Caprock Business Consulting can make recommendations on how to deal with them.

Ownership Agreements

Owners are sometimes caught off guard by an unexpected need to buy out a co-owner at fair market value. Whether that co-owner has decided to retire or has recently passed away, conflict may arise about who will buy the ownership interest, how it will be valued, and what rights it includes. If the business is likely to experience a disruption at or after the departure, concerns may be magnified. Insurance to buy out a co-owner may not be available, or if it is available, it may not be enough. Disagreements and financial challenges can distract owners and cause the business to suffer. A carefully constructed and regularly reviewed ownership agreement (also called a buy-sell agreement) can address most of these issues in advance in a way that all owners (those who later leave and those who stay behind) believe is fair. The buy-sell agreement should be updated annually, and it can specify exactly who is to perform the Odessa business appraisal.

Succession Planning

Business appraisals are important to successful planning. They tell you what your business is worth to a potential buyer. Though business appraisals seem simple on the surface, even the smartest and most successful business owners can misinterpret their importance.

Business appraisals generally tell you two things. First, they tell you whether you can sell or transfer your ownership, right now, and achieve financial independence. Second, and more importantly, they tell you how much more work you must do to build your Odessa business’ value to achieve that financial independence.

Financial independence is the most important goal of planning for your business’ future. Other goals are important. But by definition, an Exit Plan must give you financial independence to be successful. It’s likely that your business is the most valuable asset you hold and, thus, will play a huge role in achieving financial independence. Knowing what it’s worth by obtaining an Odessa business appraisal and what you must do to build its value is commonly the bedrock of a successful plan for the future, whether you intend to exit or keep your business forever.

How Will Your Spouse be Affected?

Be sure to include your spouse in the planning process from the beginning, or at least keep them in the loop. In most cases, a spouse should not only be informed about the plan you are putting in place for your business, but they should also be involved in the planning process from start to finish. Be sure you know what their goals and dreams for the future are and why they may want you to make certain choices rather than others. What are their frustrations, desires, fears, and hopes about the future? Your spouse is likely to be affected by your transition out of the Odessa business in ways you cannot anticipate. Getting them involved now is a good way to avoid surprises later.

Your spouse may also feel personally invested in the business after years of direct and indirect involvement, so they may want to participate in critical decisions like how much longer you’ll run the Odessa business.  

Caprock Business Consulting strives to help Odessa business owners identify and prioritize their objectives with respect to their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you about how a business appraisal may achieve those goals.