The Benefits of Quantifying Resources for Owners and Advisors

Submitted by John Brown on Fri, 04/05/2019 - 10:00am
A paper with a line graph and bar graph on a wooden table with someone’s index finger pointing at it.

Last week, we showed that advisors can best overcome an owner’s unwillingness to take action by accurately establishing the owner’s Asset Gap. When owners understand that there’s a gap between the financial resources they actually have and the financial resources they’ll actually need to live financially secure post-exit lives, they become motivated to close it. The Exit Planning Advisors they work with then create road maps (i.e., Exit Plans) to take owners from where they are to where they want to be.

Accurate information has the power to motivate owners to engage in Exit Planning, but it also has several other key benefits.

1. Accurate Information Leads to Successful Outcomes

When advisors base their planning efforts on an accurate assessment of an owner’s Asset Gap, the likelihood of plan success increases dramatically. Consider this: If an owner’s exit fails, or the owner never begins to plan because the gap was never properly ascertained, who is to blame? The owner who made those faulty assumptions or the advisors who accepted them without question?

2. Information Organizes Everything and Everyone

Having a proven process to obtain information keeps all of the professional advisors involved focused and organized. It’s easy to forget how big and complex Exit Planning can be without the right tools, such as a top-notch Advisor Team and the ability to track deadlines easily. By simplifying an otherwise complex planning process, advisors prove their worth to their prospects and open up new revenue stream opportunities among their current business-owning clients. And the benefits to owners are obvious: When the complexity behind a successful business exit is handled by advisors, owners can focus on what they’re good at (running the business) until it’s time for them to exit successfully.

3. Information Enhances Advisor Credibility

The ability to refer clients to other experts who provide cost-effective, timely, high-quality information to owners, such as a valuation expert or financial planner who works on the Advisor Team, reflects well on the referring advisor. It reinforces the perception that the advisor’s goal is to help their clients by taking the glut of the work off their shoulders. Advisors do so by consulting with the owner about the owner’s goals, aspirations, and progress throughout the process, rather than simply going through the motions.  

4. Information Gathering (i.e., Gap Assessment) Is the Doorway to Ongoing Engagement

Gathering accurate data for owners and objectively assessing the distance they must travel to reach their financial goals is just one project for advisors. Once the Gap Assessment is complete, most advisors become involved in creating and implementing the Exit Plan that owners will use to reach their goals. Additionally, most advisors on the Advisor Team continue to work with owners post-exit, and some even continue working with the new business owners after they take over. In short, the opportunity to expand the advisory footprint and provide more advisory services to more people grows quickly as advisors provide Exit Planning solutions.

5. Gap Assessment Doesn’t Care What Your Expertise Is

Assessing an owner’s Asset Gap is not the exclusive domain of any one type of professional advisor. With training in Exit Planning, any advisor can learn to recruit expert advisors to correctly assess an owner’s needs, evaluate their goals and aspirations, and calculate any gaps they might have in their planning, including the Asset Gap. Once an Exit Planning Advisor does all these things, they then call upon members of their Advisor Teams whose professional input, tools, products, and services are complementary to theirs.

Takeaways

  • Determining the size of an owner’s Asset Gap is an essential element of an advisor’s representation and of every owner’s Exit Plan.
  • The gap between the assets owners have and they assets they need to live the post-exit lives they desire is far wider than most owners imagine.
  • When owners understand the size of their Asset Gaps, they are motivated to engage in comprehensive Exit Planning.
  • Until an owner’s Asset Gap is accurately quantified, sound Exit Planning cannot begin.

In the next several posts, we’ll tackle the strategies Exit Planning Advisors use to close the gap: minimizing income taxes, and preserving and growing value.



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