Issue link: http://palletcentral.uberflip.com/i/1009631
iStockphoto.com/ilkercelik palletcentral.com PalletCentral • July-August 2018 35 Hole 5: Cookie-Cutter Valuation Formula The valuation methodology (e.g., agreed-on value or book value) is too simplistic. While such a formula may be adequate when a business first forms, it does not adjust sufficiently to account for business growth. Hole 6: Outdated Buy-sell agreements may not have sell-by dates, but they should. When they lie at the bottom of dark drawers, un-reviewed in the context of current business circumstances and the changing desires of owners, they can yield ugly surprises. Owners rely on buy-sell agreements to manage emotionally charged situations, and if those agreements don't account for changes in the business, they cause huge problems for everyone involved. Hole 7: Poorly Implemented If insurance funding is lacking or insufficient, or information about the beneficiary and ownership of insurance is incorrect, there is no way that the agreement can serve its purpose. What you should do 1. Review your buy-sell agreement, to see if there are any gaping holes that you think might exist. Contact your advisors to review the suitability of your existing buy-sells. This will allow you and your other advisors to begin addressing holes, putting you in a better position to exit. 2. Articulate your Exit Planning goals. Have you given thought to someday leaving your business? Do you know how much income you want post-exit? If you died today, would the proceeds from your current buy-sell, plus your existing personal assets, allow you to reach your post-exit income goals? 3. Even many well-drafted agreements are often drafted too narrowly (e.g., trigger events include only death and perhaps incapacity) and do not consider all, or even the most likely, transfer scenarios. 4. Many partners do not consider the consequences they face if they become the surviving owner. Discuss what each owner wants to happen if either