E268: Your Business Isn't Worth What You Think! (How to Fix It Before You Sell) - Watch Here

About the Guest:

Alina Rivera is a business valuation expert and the founder of Advising Puerto Rico, a firm specializing in business advisory, financial planning, and fractional CFO services. With a background in auditing, forensic valuation, and advisory work for global firms like BDO, she helps business owners understand the true worth of their companies and prepare for growth, financing, and eventual exit. Rivera is also a strong advocate for using business valuation as a proactive tool rather than just a transaction necessity.

Summary:

In this episode, the How2Exit podcast welcomes Alina Rivera, founder of Advising Puerto Rico, to discuss business valuation, exit planning, and the economic landscape of Puerto Rico. With a deep background in accounting, advisory, and forensic valuation, Rivera shares how businesses can strategically prepare for growth, optimize their valuation, and avoid common pitfalls when planning an exit. The conversation also explores Puerto Rico’s unique economic incentives, its impact on business valuations, and the importance of having a fractional CFO. Rivera emphasizes that businesses should not wait until they are ready to sell to start valuing their company—the process should be part of a continuous strategy for financial health and scalability.

Key Takeaways:

1. Business Valuation as a Strategic Tool – Business owners often overestimate their company’s worth. Regular valuations help align expectations and identify key value drivers.
2. Exit Planning Should Start Now – Waiting until retirement or an emergency to prepare for an exit can result in financial disaster. A business should always be sale-ready.
3. Puerto Rico as a Business Hub – The island offers tax incentives for companies that export services, making it an attractive option for entrepreneurs, including those in tech and finance.
4. Fractional CFOs Drive Growth – Businesses earning between $1M-$10M benefit significantly from hiring a fractional CFO to manage cash flow, forecasting, and growth strategy.
5. Common Valuation Mistakes – Owners often base their valuation on industry hearsay or personal financial needs rather than market data and financial fundamentals.
6. Owner Dependency Kills Business Value – A company reliant on its owner for operations, sales, and decision-making is much harder to sell and less attractive to buyers.
7. Financial Planning & Process Documentation – Having structured financial statements, KPI tracking, and documented workflows is critical for growth and eventual sale.
8. The Risks of Poor Succession Planning – Businesses without a succession plan risk collapse when an owner unexpectedly leaves due to illness or other circumstances.

Article:

How to Avoid a Business Valuation Nightmare – And Why Puerto Rico Might Be Your Next Big Opportunity

It’s a scenario that plays out far too often—an entrepreneur spends decades building a company, only to realize too late that it isn’t worth what they thought. Or worse, they pass away unexpectedly, leaving their business in financial disarray.

This is where Alina Rivera, business valuation expert and founder of Advising Puerto Rico, enters the conversation. On this episode of the How2Exit podcast, Rivera pulls back the curtain on why business valuation isn’t just for exit planning—but a tool every entrepreneur should be using regularly.

Your Business Is Probably Not Worth What You Think

One of the biggest hurdles Rivera encounters is business owners grossly miscalculating their company’s value. “Many times, when I ask an owner how they arrived at their number, the answer is something like ‘that’s what I need to retire’ or ‘I heard businesses sell at 10x earnings,’” Rivera explains. Unfortunately, valuation isn’t about gut feeling or wishful thinking—it’s a precise, data-driven process.

A common mistake? Assuming EBITDA multiples from other industries or strategic sales apply universally. “Not every business is Facebook selling to Microsoft,” she jokes. “A lot of businesses in the small-to-mid market space trade at much lower multiples, and that’s a reality many owners don’t want to face.”

Exit Planning Isn’t Just for Exits

For Rivera, a valuation should be part of a business’s ongoing financial strategy, not just something dusted off when an owner decides to sell. “When business owners understand what drives value, they can take strategic steps to increase it over time,” she says. These steps might include reducing owner dependency, optimizing processes, or improving cash flow management—all things that make a company more attractive to potential buyers or investors.

“Exit planning isn’t just about selling,” she emphasizes. “It’s about being prepared for whatever life throws at you—whether it’s a sale, a merger, or an unexpected event.”

Puerto Rico’s Economic Edge

The episode also dives into why Puerto Rico is becoming a hotbed for entrepreneurs and investors. Thanks to unique tax incentives, the island has attracted businesses in industries like tech, finance, and professional services.

“Puerto Rico offers programs that can reduce tax rates on exported services down to 4%, making it an attractive location for U.S. business owners who want to operate internationally while still benefiting from U.S. laws,” Rivera explains.

But it’s not all sunshine and incentives—understanding the local business environment, valuation standards, and economic conditions is crucial before making a move.

The Power of a Fractional CFO

A critical takeaway from the discussion is the role of a fractional CFO in business growth and valuation. Many businesses making between $1M and $10M in revenue assume they can’t afford a CFO—but the reality is, they can’t afford not to have one.

Rivera breaks it down: “A bookkeeper records what happened. A tax accountant ensures compliance. But a CFO looks forward, planning cash flow, growth, and long-term strategy.” Without this level of financial insight, many businesses remain stagnant or, worse, make decisions that erode value over time.

What Happens When There’s No Plan?

One of the most compelling stories Rivera shares is about a business owner who ran a commercial electrical company, but never put a succession plan in place. When he unexpectedly passed away, the business collapsed in weeks—service contracts went unfulfilled, payroll couldn’t be processed, and customers left for competitors.

“It wasn’t that the company wasn’t profitable,” Rivera explains. “It was just completely dependent on one person, and when he was gone, so was the business.”

This underscores her main argument: A business that can’t run without its owner isn’t really a business—it’s a job. And jobs don’t sell well.

Take Action Before It’s Too Late

Rivera leaves listeners with a clear call to action: Know your numbers, plan your exit, and treat valuation as an ongoing strategy, not a last-minute necessity.

“If you don’t want your business to die with you, start planning now,” she advises. “Whether you’re 30 or 80, the best time to prepare for an exit is today.”

For entrepreneurs considering expansion or relocation, Puerto Rico’s business incentives could be a game-changer—but only if approached with proper planning and financial strategy.

And for those who don’t want to become another cautionary tale? A fractional CFO might just be the smartest hire you ever make.

Want to connect with Alina Rivera?
Visit her website at advising.global or connect with her on LinkedIn to explore valuation, exit planning, or fractional CFO services.

🚀 Final Thought: Whether you’re building to sell or planning to scale, your business is only as valuable as the plan you put behind it.

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