We have supercharged your Module 12 experience by expanding the Envelope Test to include more detailed insight into an owner's readiness to exit and calculating their Freedom Point, a precise moment in time when selling would yield a return that will allow them to achieve financial independence.
PLEASE NOTE:
The previous Freedom Calculator has been replaced with the Freedom Score assessment and corresponding report.
The objective of the Freedom Score and corresponding report is to evaluate an owner's financial readiness to fund the next phase of their life after their business. It is meant to measure the degree to which an owner is dependent on their business as an asset to meet their retirement goals. Freedom Score calculates a business owner's Freedom Point – when the sale of their company will generate enough to fund their desired lifestyle for the rest of their life. The score takes into account risk factors, withdrawal rate, and the gap to reaching the Freedom Point.
In this exercise, an owner will estimate the income needed to feel financially free. Next, they'll estimate the wealth accumulated outside of the company and combine it with the after-tax proceeds they expect to gain from the sale of their business. If they add up to a number greater than the nest egg needed to fund the life after their business, they’ve reached The Freedom Point. The results are able to be re-calculated and will be dynamically updated so you can adjust the inputs to illustrate their effect on reaching their Freedom Point and overall score. In the final step of the assessment, you will be able to help an owner evaluate the risk they hold in operating their business today.
As an advisor, you know that it is not a matter of if your clients will exit their business, but when. Just as they have trusted you to guide them on building value within their business to prepare for the future, they will be looking for your help to pinpoint the best time for them to exit.
By aligning an owner’s personal needs with their business’ value, you can help them calculate the ideal intersection to sell their business – what we call their Freedom Point. By assisting in this critical decision, you will help owners reach financial independence, de-risk themselves financially, and live comfortably for the next phase of their life.
You can configure most of the inputs in the Value Builder Engagement Program Settings when starting an engagement or by going to the cogwheel of an engagement program if already active. Please note: these are the same as the default settings used for the Freedom Score under Personal Settings > Freedom Score Settings.
Note: We have done a data migration to ensure a consistent user experience. If your contact had an existing Freedom Score or had completed the Freedom Calculator exercise in Module 12, their Freedom Score tab will be marked as completed and show all historical data. If they completed a Freedom Calculator exercise, they have been given default risk question answers (step 4 of the assessment) and provided with a Freedom Score to ensure that the report functions.
The webinar below (also available in the Events> Past Webinars section of the portal) looks at the advisor's role in helping owners align business value with their financial and personal readiness to exit. As well as providing insight into the new tools available in Module 12: The Envelope Test, in the Value Builder Engagement and how to use them. Please note: since the introduction, we have replaced The Freedom Calculator with the Freedom Score in Module 12 of the engagement.
For more information on Freedom Score, check out these articles: What is Freedom Score? and Freedom Score Tool Guide.