Uncover Financial Gaps

Compass Point Consulting’s Managing Partner, Tom Garrity, shares insights into the fifth pillar of the Six Pillars of Family Business: Uncover Financial Gaps. We work with you and your other advisors to look at the whole picture and discover if there’s a gap between what you have today and what the value of the business is to have enough in liquidity to live the lifestyle you need. Don’t let this trip up your transition, as is often the case…

Transcript:

Hi, I’m Tom Garrity, the managing partner of Compass Point family business consulting where we build successful businesses, aligned ownership groups, and stronger families. Today, I want to talk about the fifth pillar in our six pillars of building an enduring family business. And that is the financial gap. And it’s in this pillar where we work with business owners and their other advisors, your tax advisor, your CPA, your, your financial advisor, your estate planner, to look at the whole picture, and ensuring that you are going to have the proceeds to live the lifestyle that you and your spouse have always envisioned.

If there’s a gap between what you have today, and what the value of the business is to have enough in liquidity, in your portfolio, to live the lifestyle that you need, then we know we need to go back to the strategy pillar to build more value into the business so that we can create a bigger liquidity event for you. We want to make sure your assets are protected. We want to work with your estate plan around how you want your assets distributed and how we protect the wealth that you’ve worked so hard to generate.

So, this is the type of work that often trips up transitions because people wait until the last minute. And now they’re ready to sell their stock. And they haven’t worked through some of these really critical issues, including a review of your shareholder documents. We’ve had a number of deals that trip up because people were unaware of the warranties and reps in the shareholder document or didn’t understand how the business is being valued, which might have made sense 20 years ago when you designed that shareholder agreement, but makes no sense today. And now tensions are high, and people aren’t doing their best thinking. And it’s a really poor time at that point, to start having the discussion around how we’re going to value the stock.

We want to work on these things, years, 2/3/5 years ahead, or even more of having a plan. Pretty macro, when you’re five or 10 years out and getting narrowed in as you’re getting closer and closer to your transition date of having all these different areas buttoned up. So that the transition is smooth, that everybody is aware of how assets are going to transfer, how they’re going to, you know, how liquidity events are going to happen, how it’s going to be funded. Just a much more successful transition both for the business, transition for the family, and really helps keep ownership groups on the same page and aligned.

If you’d like to take your family business to the next level, please contact us and we’ll help you build the family business that you’ve always envisioned. Thank you.