R. Shawn McBride continued to speak about on a series on updating buy/sells.
R. Shawn McBride with you here live, talking about updating our buy-sells. So for many of you, you’re tuning in after watching our video series on updating your buy-sells, available here on the R. Shawn McBride public page on Facebook or on YouTube at McBride for Business. What we’ve been talking about is how do we get those buy-sells updated and how do we do it. And we’ve talked about various different planning scenarios.
So many businesses let their buy-sells get out of date, so if you missed the earlier series, we talked about why they’re out of date, what the problems are, and some solutions to some common issues we see in buy-sells. So make sure you catch up on the series after watching this video. But today, I wanna talk about a very serious issue, which is an evaluation.
All these mechanisms we talked about, talk about buying in, buying out, and how we get partners in and out at different times, and we need to be realistic. We know business partners in a business are going to change, both the way they view things, but they’re also going to change who they are daily, right, we may have partners A, B, and C at the beginning of the business. And at the end, we might have partners A, F, and G, because people have come and gone, so we need to be realistic. But all these things are triggered by evaluation, right?
There needs to be a buy-out number. And we wanna agree on that number at the beginning of the life of the business, not at the end of the life of the business, right? So we need to know how we’re gonna evolve this business over time, and we gotta know how to set evaluation. If we have partners disagreeing, the time to agree to the value is not at the time of the disagreement, it’s the time before the disagreement. So we typically want a formula or a system – something objective that’s gonna get to a number that doesn’t require the agreement of the partners. What does that look like? It could be a multiple of the net income of the business. It could be a third-party evaluation. It could be a periodic agreement of the partners of the value of the business as long as they do keep to that periodic update.
A lot of different options here for you to get to that value, so well, but what’s important is we need to have something objective and agree in advance. And you can work with your attorney, find an attorney you trust, somebody you like. We do this for our clients, not saying it has to be us. Find the right fit for you. Or a business advisor can even come a long way to help you and then go to an attorney to document it. But you want to create a system where you have objective measures of evaluation, so you’re not having a fight after you have a fight.
So if this is something that resonates with you, check the McBride Attorneys blog. McBride for Business blog also has a lot of content on this. Get the download, the business evaluation checklist at McBride For Business would love for you to check that out. And let me know how I can help you. Feel free to reach out. Like the R. Shawn McBride public page on Facebook, send me a message, let me know what you’re dealing with, and then we can get you some content for the future. Hope to talk to all of you soon!
Make sure you download our free checklist to assess your business.
This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Valentina Jori.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment , gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at firstname.lastname@example.org or (214) 418-0258.
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