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Don’t Let Lack of Knowledge Delay Exit Plans

Submitted by John Brown on Fri, 10/09/2020 - 8:00am
educate yourself

Like we mentioned last week, advisors who attend our Exit Planning Boot Camp Livestream training reported that their two biggest issues in establishing an Exit Planning Process are attracting and directing the attention of owners to the need to plan their business exits, and their own lack of planning knowledge and experience.  

In this post, we deal with the second problem: an advisor’s lack of knowledge and experience in addressing an owner’s eventual business exit.  

Exit Planning might be as straightforward as working with an owner to motivate and retain a key employee, or as complicated as designing and executing a plan to transfer a multi-family business to multiple children and non-family members.  

In either situation, the planning process begins with an understanding of the owner’s long-term goals and aspirations as well as the resources available to accomplish them. Obtaining this information does not require an immense amount of experience. It does, however, require a measure of knowledge beyond the training that most professions offer and an organized process that flows out of asking appropriate questions.  

Let’s start with the simple case of “John,” an owner who wants to motivate and retain “Pat,” a key employee. Advisors are familiar with and use a variety of plans to motivate and retain key employees. There is no way to determine which of those plans is appropriate for John, however, without securing answers to several questions—questions that require a certain level of planning knowledge. 

  1. Advisors ask a number of relevant questions that reveal an owner’s long-term objectives, such as: when owners want to exit, whether they want to maintain their current lifestyle with their present income, what type of buyer they prefer and whether they need to grow business value in order to achieve their goals. 
  2. Armed with this knowledge, the Exit Planning Advisor will work with other advisors —initially an attorney and CPA—and recommend the appropriate incentive plan to motivate and retain Pat. Developing and leading a team of various advisors is a critical piece of the Exit Planning representation process. These advisors must possess the subject matter knowledge to, in our example, design and implement an incentive plan.  
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While an incentive plan may achieve John’s goal of retaining and motivating Pat, it does not address John’s goal of selling the business in five years or achieving the financial resources he needs to live the lifestyle he desires. 

For that reason, John’s Exit Planning Advisor suggested to the advisor team several key employee incentive-based plans designed not only to motivate and retain Pat, but also give him incentive to grow the business at the pace necessary to allow John to exit with financial security in five years.  

Only advisors with such knowledge and experience are equipped to recommend or suggest incentive plans that can move owners toward their longer-term goals: leaving a business when they want, with the cash they want, and in the hands of the successor they choose. 

For most advisors, Exit Planning is not a new aspect of their practice. Instead, it’s an extension of the core work they know well and have had success with throughout their careers. Exit Planning, with the right training and resources, can create a new pool of prospects for your core services and a sense of trustworthiness beyond your core work due to the nature of the questions you ask your clients. By setting your practice up to have your core work and your Exit Planning services feed off each other, you will not only grow your practice, but also impact more business owners by helping them reach their short- and long-term goals. 


Deal with the lack of planning knowledge and experience by: 

  1. Gaining knowledge of the Exit Planning Process. What are you doing to gain the knowledge you need to help your clients exit successfully? 
  2. Accumulating experience in your own profession. If you’re a financial advisor for example, you need to know how to design and implement a financial plan, but you should also understand how employee incentive plans can help your business-owner clients.  
  3. Assembling and coordinating a team of experienced advisors from multiple professions who have the skills necessary to implement planning recommendations.


Are you ready to help your clients transfer their businesses to family?

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