3 Vital Variables around Valuations
DEAR ADVISORS,
When I think about traditional business valuations, I think of an expensive, obligatory report, and if my business isn’t growing like I wanted or projected, it’s not a very fun exercise. Where’s the value in that? I’m here to tell you there’s a better way! Like Albert Einstein, we’ve put in the time and research to break valuations down into the following 3 simple variables. With this information, you can quickly and efficiently use your valuation to shape your business and meet your growth goals! Here’s what you need to know about Why, When, and Where to get a valuation:
Why to get a Valuation -
Formal valuations are done when requested by the IRS, during a divorce, or when otherwise required by court proceedings. These are done by a certified valuation analyst, to provide an accurate value of your business for legal or tax purposes. These are also very expensive. Don’t worry about formal valuations for now.
Informal valuations are the most valuable because they help you see your business objectively, and collect data to make business decisions. Reports generated from a valuation are like the financial planning report you give clients at the end of their financial plan. The reports are full of dry, boring numbers, that you have to study for hours to interpret into usable information. The real benefit to an informal valuation is like the benefit of financial planning - the value lies in the experience, not in the report. Unlike most valuation companies, we turn the valuation into a summary of key performance indicators (KPIs) which you can compare to similar companies your size, and track your progress year-over-year.
When to get a Valuation - You'll know when a formal valuation is required. Informal valuations should be done annually. It’s like going to the doctor for your annual check-up! Our clients can access their valuation, KPIs, and benchmarks anytime they want, through their secure portal. Additionally, we review the data together at least annually. During these meetings, advisors decide what they need to change in their business and set better goals for the coming year. For example, we may decide that it’s time to raise fees, implement a more stable client servicing structure through workflows, or even hire an associate advisor or partner. By doing this annually, you have more clarity around the strengths and weaknesses of your business today, and what you need to change to build the business of your dreams. Annual valuations give you control over the future of your business. That’s something every advisory firm owner craves, but few achieve. Our clients know that we’ll cover this once a year, because securing the future of your advisory firm is our mission!
Where to get a Valuation - To answer this, you have to go back to the first question, which is, “Why get a Valuation?” If a formal valuation is required, then you likely need to contact a Certified Valuation Analyst (CVA) who specializes in doing valuations for financial advisory firms. If you’re looking for an informal valuation, there are two options. Most valuations by other exit planning firms simply generate that dry, lengthy report. If you’re simply looking for an updated valuation range, then you may prefer their services. At Ellevate Advisors, we specialize in interpreting that report into useful information for you. Whether you work with us to do financial planning or exit coaching, we include a valuation and access to the valuation portal through Truelytics free of charge. The interpretation and strategy call really gives you more bang for your buck!
Most of my client relationships become more like a coaching relationship over time. Since we work with advisors exclusively, we’ve seen a lot of ways to make advisory firms successful. We often serve as a sounding board or brainstorming partner to help create a business growth strategy for the firm you want in the long-run and break it down into small steps which are practical to implement over time. Our goal is to make the process of updating your firm’s valuation both efficient and engaging. From a succession planning standpoint, adding transferrable value to your firm is our biggest value-add. It’s our mission to help you secure the future of your family and your financial advisory firm!
Warm regards,
Brooklyn
P.S.
At Ellevate Advisors, we believe that advisors deserve to retire too. What does that look like for you, your family, and your business? Let’s figure it out together! Check out our services here, or get to know me on my bio here!