You would never let a client put 90% of their portfolio into one stock.
You would call that what it is: concentrated risk.
So why do we still accept the same thing when the asset is a privately held business?
For most business owners, their business is not just an asset. It is THE asset. It is the engine that funds their lifestyle, supports their family, and eventually becomes the foundation of retirement. Recent data continues to show that for the large majority of owners, the business represents the core of their net worth and retirement plan.
That should change how we plan.
Because if 85% to 90% of someone’s wealth is tied up in a single illiquid asset, and we do not know what that asset is worth, we are not doing financial planning. We are guessing.
Advisors spend a lot of time helping clients manage diversification, risk tolerance, liquidity needs, tax efficiency, and retirement outcomes. All of that is important. But when it comes to business owners, there is often a massive hole in the analysis. We build the personal plan around investment accounts, cash flow, insurance, and tax structure, while the largest asset on the balance sheet is either estimated casually or ignored entirely.
That creates a serious problem.
You cannot properly assess concentration risk if you do not know the value of the concentrated asset. You cannot build a reliable retirement plan if the retirement plan is the business, and nobody has quantified what it is worth. You cannot set an appropriate investment strategy for the household if you treat the business as both priceless and riskless.
It is neither.
A lot of owners say some version of this, and they are usually right.
The business is the retirement plan.
But that statement only becomes useful when it is paired with a real valuation framework and ongoing monitoring.
Otherwise, it is just a hope.
What matters is not just whether the business has value today. What matters is understanding:
That is where valuation stops being a one-time exercise and becomes a management tool.
When advisors and business owners do not incorporate business value into the personal plan, several things get distorted.
A business owner may look conservative in their investment accounts and still be taking enormous overall risk because their household balance sheet is heavily exposed to one company, one industry, one customer base, or one geography.
If we ignore the business value and its volatility, we can easily misclassify risk tolerance and recommend the wrong portfolio strategy.
If the plan assumes a future business sale but the current value is unknown, then every retirement number downstream is built on a weak foundation.
When can they retire?
How much can they spend?
How much should they save outside the business?
What is the backup plan if the exit happens later, or at a lower value than expected?
Those are not small questions. They are core planning questions.
Owners often wait too long to seriously plan for an exit because they do not have a clear view of what the business is worth or what would increase that value.
A valuation process helps turn vague intentions into a concrete strategy.
It gives owners and advisors something measurable to work with.
Buy-sell agreements, estate freezes, shareholder planning, key person insurance, and tax strategies all depend on value.
If the value is stale, assumed, or unsupported, the planning around it is weaker than it should be.
This is where I think the conversation needs to evolve. The question is not whether a business should be valued at some point. Of course it should. The real question is whether advisors and owners have access to value data in a way that is current enough, practical enough, and understandable enough to support decision-making.
Because value changes.
Performance changes.
Risk changes.
Industry multiples change.
Customer concentration changes.
Interest rates change.
Management depth changes.
If we only look at business value during a financing event, a tax filing, or a sale process, we miss years of decisions that could have been made better.
If a client’s largest asset is their business, then valuation should not be treated as a niche exercise reserved for transactions. It should be part of the planning baseline. Not because owners need a perfect number every day. But because they need a credible view of value, the key drivers behind it, and how that value connects to the rest of their financial life.
That is how you make better decisions around:
Without that, we are effectively telling business owners to build a long-term financial plan while ignoring the largest variable in the equation.
We would never do that with a public market portfolio.
We should not do it with a private business either.
Many owners create tremendous wealth by concentrating their time, capital, and energy in one business. The problem is not the concentration. The problem is pretending it does not need to be measured.
If the business is going to carry the retirement plan, then we owe owners something better than assumptions.
We owe them clarity.
And it starts with knowing what the business is worth.