Most successful business owners take pride in their abilities to simplify the complex by systemizing a process. But many owners struggle to systemize their business exits, since business exits tend to be both the most important financial decision of their lives and vastly complex. Most business owners don’t know where to turn for sound business-exit advice, and they find that their advisors cannot provide a comprehensive process to help them exit successfully. But for owners and their advisors, there is hope. Let’s look at what Michael Overton—a fictional but representative owner—did to address the early stages of his Exit Planning process and how he knew which advisors could best help him.
Michael Overton bragged that he operated his successful custom home–building company by keeping things as simple as possible. In practice, this meant that as business complexities grew, Michael delegated increasing responsibilities to others within his company, especially his two business-active children. By delegating, he kept it simple for himself.
However, as he grew older, he began to realize that he couldn’t delegate the entirety of his business-exit planning to others, since only he knew what he wanted from his exit. As he researched how to exit his business, he found himself asking, “How can I make exiting this company as simple as I have made running it?”
Michael started by asking his advisors. When he mentioned his desire to transition out of ownership in the next five years, he was blasted with a fire hose of information and suggestions about several seemingly unrelated things:
- The tax advantages and costs of Employee Stock Ownership Plans (ESOPs).
- The numerous roadblocks in transfers to children.
- The risks and benefits of selling to an outside party.
- The need to protect his business from risk before and during his exit.
- A multitude of estate planning considerations.
- The pressing need to grow business value and cash flow.
Each advisor Michael spoke to offered a distinct slant: a separate set of suggestions, a different starting point, and alternate (and often clashing) Exit Paths. What bothered Michael most was that of all of his advisors, not one asked him what he wanted from his exit. They all offered answers to questions Michael never asked, adding even more complexity to something that had overwhelmed Michael in the first place.
In Michael’s situation, many business owners might have thrown up their hands in frustration, vowing to return to planning their exits later but ultimately doing nothing. But Michael was vigilant and reached out to an advisor who claimed to have expertise in Exit Planning. When Michael told this advisor, Katie, that he wanted to exit in five years, he was surprised and overjoyed by her response: “What other goals do you have for your exit?”
The Guide to Identifying Good Exit Planning Advisors
Unlike Michael’s advisors—who were all high-quality advisors in their fields but had no formal Exit Planning training—Katie refused to open her discussion with solutions. From her experience and training, she knew that the best Exit Planners take responsibility for their clients’ exits by overseeing the process, the advisors involved in the process, and the tasks necessary to allow a successful business exit. More specifically, these are four things all good Exit Planning Advisors do for their clients:
Begin by Asking Questions, Not Providing Solutions
Business owners are the experts when it comes to their businesses and goals. That’s why it’s so important for advisors ask them what they want their exits to accomplish for themselves, their families, their employees, their communities, and their companies. Part of the art of Exit Planning is knowing which questions to ask and when. BEI has developed a list of questions and short assessments that encourage owners like Michael to identify their concerns and priorities at the outset of an Exit Planning engagement. Advisors who are BEI Members have access to these questions and assessments.
Make Sure Business Owners Understand They Own the Exit Planning Process
Like all good Exit Planners, Katie used an owner-centric process to describe how she would help Michael address his concerns, establish his priorities, and achieve his objectives and aspirations upon exiting. By doing this, she assured that Michael remained in charge of his exit while she oversaw the process of getting Michael to that exit. The Exit Planner’s role is to oversee the process necessary to achieve the business owner’s goals, not determine what the owner’s goals (and vicariously, Exit Path) should be.
Keep It as Simple as Possible
Exit options and their inherent issues do not matter unless an advisor knows what the business owner wants and needs. Notice that Katie’s discussion with Michael did not center on his many exit options or how she could help address their inherent issues. Instead, she focused on Michael’s concerns, priorities, and goals. By determining what Michael thought he wanted and needed from an exit, she simplified the process as much as possible at the outset. This gave her and Michael the best chance to speak on the same terms and address the same problems, rather than solving problems that didn’t exist or failing to address underlying, unrecognized problems and needs.
After Determining the Business Owner’s Wants and Needs, Offer Help
After asking questions, explaining the process, and keeping things as simple as possible, Katie had a better grasp on Michael’s situation and could determine how she could assist him best. She helped Michael understand that she used a comprehensive process that incorporated the recommendations of his other advisors to give him the best chance at exiting his business on his terms. She illustrated how she worked with other clients to achieve their exit goals by establishing and leading an Advisor Team. Most importantly, she learned exactly what Michael needed and expected from a successful exit, allowing her and her Advisor Team to create strategies to help Michael leave his business when he wanted, for the money he needed, and to whomever he chose.
Focus Is Key
Most advisors are trained to offer the options, tools, ideas, and processes specific to their respective professions to solve their clients’ problems. But advisor-centric options, tools, ideas, and processes are not what business owners need when first exploring their desire to exit. They need a focused approach based on their needs, wishes, and resources. That’s why successful advisors approach business owners using the steps outlined here. They stay focused on the owner, they begin with the end in mind, and they keep it as simple as possible.