80: {Interview} Maximizing Business Value through Clean Books with Stephanie Vokral, CFP®, AIF®, CDFA®

Are you mixing your personal and business finances together? We've all been there, but the reality is that things can get messy quick. 

In this conversation, Stephanie Vokral discusses the importance of planning for exiting a business. She emphasizes the need for business owners to work with a certified financial planner and a certified exit planning analyst to ensure a holistic approach. Stephanie explains that it is crucial to start planning for an exit several years in advance, with a minimum of five years but potentially up to 10 years depending on the industry. Stephanie addresses the complexities of selling a business during a divorce and the need for prenuptial or postnuptial agreements to protect business assets.

Takeaways

• Working with a certified financial planner and a certified exit planning analyst is crucial for a holistic approach to exiting a business.
• Planning for an exit should start several years in advance, with a minimum of five years but potentially up to 10 years depending on the industry.
• Keeping clean books and separating personal and business finances is important for maximizing the value of a business.
• Selling a business during a divorce can be complex, and prenuptial or postnuptial agreements can help protect business assets.

Stephanie is a Certified Financial Planner (CFP®) and has extensive training in the areas of investments, risk management, estate planning, tax planning, education planning, and retirement planning. As a financial planner, she answers her clients’ financial questions. How do I not run out of money when I’m older? When should I take Social Security? Can I afford to be my parents’ caregiver or is there a better way? Is my spouse’s divorce proposal a fair settlement to me?

She has also completed a specialized educational program in professional divorce analysis to earn the Certified Divorce Financial Analyst (CDFA®) credential. 

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Transcript

Caroline (00:00.82)
Welcome Stephanie. So I just wanted to jump right in from our longer episode that we just talked about. We've delved in taxes a good bit, but I wanted to really talk with you more about exiting a business. If you're starting a business, you're listening to this podcast, we get all excited. We get things going. We blow it up and then we get looked back and we're like, what do we do now?

Stephanie Vokral (00:20.182)
Right, absolutely. Yeah, so I will say when we work with business owners in a financial planning engagement, and I say we because my partner Erin Aris is a certified exit planning analyst. And so she has had special training in working with business owners to actually do this the right way.

having a certified financial planner and a CEPA work with you is huge because we look at things more holistically. Even when, and we are seeing this a lot right now, where you may have a private equity firm coming in, they're really wanting to control that, but understanding it from a financial planning situation,

gives you a much more objective lens to be able to see that through. And it's just really good work because we get into the weeds on that. And we are looking at things to, you know, make sure that you don't miss anything. Cause that's the biggest thing you're hiring us for is to make sure that, you know, we know what you don't know. And so part of that is thinking through,

your business. One of the most common mistakes that we see with business owners on the planning to sell the business side is you just keep putting money back into the business and you never take money out to put in a retirement plan or something like that. So we help with that. But then when you're ready to exit, it is, you know, making sure that we get involved a few years ahead of time.

so that we can look at your books and help you understand why you wouldn't want to allow somebody to value your business based just on your tax returns, but you might wanna think about, and we help you understand how to run a separate set of books that are really gonna show the value to a buyer.

Stephanie Vokral (02:38.134)
and I'm just gonna use one item in your tax return to help you understand what I mean, and that is depreciation. We all use depreciation as a tax write -off in our business, but none of us actually write a check to pay for depreciation, right? So it's a deduction. If you're only valuing your business with a buyer based on your tax returns,

you might not be showing the value that's really there. So that's just one way that we can get in the weeds with you and really show you how to plan for that. And then it's looking at, once we have a valuation, it's looking at who are candidates? Do you have a family member that's a buyer? Do you have a third party like a private equity firm or a competitor, or is it a key employee?

Each of those require very different ways that we go about helping you through that process.

Caroline (03:41.748)
So let's say someone's listening to this podcast and thinking about selling. How many years ahead of time do they need to engage someone like you with your services?

Stephanie Vokral (03:52.662)
I would say at a minimum, you really need to be planning for that at least five years ahead. But depending on the industry, we might even need to start working with a client 10 years out.

Caroline (03:59.028)
Wow, that's even longer than that.

Caroline (04:07.06)
Wow, that's a lot longer than I was expecting you to say.

Stephanie Vokral (04:10.294)
I know. And most people, you know, because we're business owners, we're entrepreneurs, we go, look at that shiny squirrel. We jump on that. We move here. We're nimble. We're quick. We pivot. We're used to wearing many hats. You know, we think that these processes can move that same way. And that's just really not the case. We really need to be involved with you many years ahead of time. And if you're...

listening to this and you go, I don't have that amount of time. It doesn't mean we can't still jump in there and do good work for you, but at least it would be having someone like us from a financial planning lens to look at that, not just a potential buyer like a private equity firm. You want to have somebody on your team as your advocate to really help you understand that. And it needs to be somebody beside an attorney.

I love attorneys, I work with them all the time, but they're not financial planners.

Caroline (05:13.78)
As someone who's married to one, yes, agreed.

Stephanie Vokral (05:16.182)
Yes.

Caroline (05:18.932)
And so why is it important that if you're listening to this podcast and you're ready to sell your business, no matter if it's, you know, for whatever amount that looks like, why is it important that you keep your books clean?

Stephanie Vokral (05:25.558)
Stephanie Vokral (05:32.598)
Well, again, because you don't want that to be a risk for you on the personal side, we don't want your business finances to be so intertwined with your personal. And that's another thing that I would say when we're running those two sets of books, we want to take some of those personal expenses out. Like if you're running a car through the business, you know, makes sense for a write -off.

but we need to maybe look at that as a personal expense. We need to kind of pull those things out of the books to help show your value better. And so we really work with you on doing that kind of thing and having a financial planning lens looking at your business, if that makes sense. So the other reason is also, you know, anytime you go through,

divorce, death, disability, a purchase, or a sale of a business, you're looking at a financial audit. I mean, your finances are gonna be audited. And so for you to maximize value, you need to have your house in order. And so making sure that your books are clean and having somebody like us help you do that many times.

can translate into dollar amounts for you at a later time. It can increase the value that you have on your business. And that's why I say us getting involved five, sometimes 10 years ahead of time can really help you do that. Does that make sense? Did I answer your question?

Caroline (07:21.012)
Yeah, you did. And I'm also going to ask you a curveball question. So what if you own a business and or you and your husband own a business and you're going through a divorce? Is that a whole nother mess to unravel on top of the personal?

Stephanie Vokral (07:36.246)
Yeah, it's a mess. Well, I will just say it's a mess if you haven't planned for that. And so that's why I am a very big proponent of pre -nups and post -nups because if you're a business owner and you, even if you started that business before you got married, it is marital property.

Caroline (07:38.068)
Okay.

Stephanie Vokral (07:59.382)
And people don't want to hear that. And so, and I'll just give you a couple of examples so that, cause I don't want people to fall out of their chairs, but if you're newly married and you go to get divorced and you've had that business a long time and you've only been married less than 10 years, very small part of that possibly is marital property. Especially if you have the business and a trust and you have a

pre -nub, there are ways to plan for that. But if, and I hear people argue this, long -term marriages, greater than 15 years, 20, 30 year marriages, they try to say that it's not marital property. It just doesn't fly in court. There is case law that says otherwise. You know, people didn't talk about divorce 30 years ago, 20 years ago as much. And so I can promise you most of those business owners,

do not have that in their agreement, they don't have a post -nup, that is marital property. And so it is really having an expert that's a financial person on your team, along with your attorney to help you with that if you are going through a divorce. But it's almost all the time marital property and people just don't like to hear that. I'm a business owner, I get it. I mean, but.

You know, if I went through another divorce, and I certainly don't think that's the case, I love my hubby, but it could be, you know, at some point, and it's marital property for me. So, you know, you really have to think about that, and you have to find ways to protect yourself, you know?

Caroline (09:45.428)
So if you didn't catch the first episode and you're just chiming in for this one, how can our listeners find you, Stephanie?

Stephanie Vokral (09:51.382)
Yeah, great. So it's investra .com. That's I -N -V -E -S -T -R -A dot com. Please check out our website. You can also connect with us on Facebook and we're also on LinkedIn. We're also on LinkedIn and X or Twitter. So yeah.

Caroline (10:16.532)
Thanks Stephanie.

Stephanie Vokral (10:17.814)
Yeah, thank you.