In our last post, we discussed the advantages of a process, specifically, The BEI Seven Step Exit Planning Process™, for both the business owners who use it to exit their companies and their advisors. Today, we describe Step One from the same perspective: What’s the advantage of setting goals at the outset of Exit Planning for owners and their advisors?
Setting Goals: Benefits for Business Owners
Setting goals is critically important to owners who begin Exit Planning. Let’s look at four reasons why setting goals is so important and how setting goals benefits owners in these contexts.
- Setting goals allows business owners to establish a target for the success of themselves, their families, and their businesses. By establishing the why behind exiting their businesses, it encourages owners to then discover how they can get to that point, giving them a reason to pursue those goals and putting them on the path to Exit Planning success.
- Setting goals helps business owners develop a road map for how to achieve their goals. This takes much of the initial anxiety about Exit Planning out of the equation by showing owners that they can achieve their goals if they, with the help of their advisors, take the first steps toward approaching them systematically.
- Setting goals helps business owners track where they are on their journey toward Exit Planning success. Having an appreciation for where they are on the path toward their exit goals can encourage owners to stay the course when times are good and help owners refocus if things get bumpy throughout the Process.
- Setting goals lets business owners find and address conflicting goals, dramatically improving the probability of both resolving them and exiting successfully.
Setting Goals: Benefits for Advisors
Advisors play a crucial role in helping their business-owner clients set goals. They often act as a sounding board, strategist, and motivator throughout the goal-setting process. Because they play such an important role, advisors stand to benefit from helping business-owner clients set their goals in several ways.
- Exit Planning Advisors are often the first advisors business owners talk to in a professional setting about their goals and aspirations for themselves, their businesses, and their families. If they understand the Exit Planning Process, those Exit Planning Advisors are also most likely the first advisors owners have met who use a proven process to make their goals a reality. This gives Exit Planning Advisors an inside track to do business with their business-owner clients.
- As leaders of their clients’ goal-setting processes, Exit Planning Advisors position themselves to coordinate the actions of their clients’ other professional advisors. No single professional has all the skills necessary to (a) execute the strategies necessary to achieve all of an owner’s goals, (b) prepare owners for life outside of their businesses, and (c) prepare businesses to run successfully without their owners. This leadership allows Exit Planning Advisors to build a unique trust with their business-owner clients.
- Participating on an owner’s Exit Planning Advisor Team—whether as the Exit Planning Advisor or not—gives the advisor direct knowledge about the direction and timing of a client’s business exit. This is crucial for building strong advisor–client relationships because it gives certain advisors opportunities to apply their expertise both in Exit Planning and their core practices, which inevitably leads to more business opportunities. Consider the following professions and what they address on the Exit Planning Advisor Team:
- Business Attorneys: buy-sell agreements, key-employee incentive agreements, and renegotiation of long-term contracts and leases for the company.
- CPAs: income tax planning, cash flow forecasting, budgeting, financing, and consulting.
- Estate Planners: projected value of a company at the owner’s exit date, income-based estate-planning issues (e.g., how the death of an owner would affect the business, its ownership, and the income available to the owner’s family).
- Insurance Advisors: funding employee incentive plans, providing income for an owner’s family should that owner die or become incapacitated, buy-sell agreements.
- Financial Planners: creating financial plans for owners (an essential first step in every Exit Plan), investing non-business assets to support an owner’s income and departure date goals.
- By introducing their skills in the context of Exit Planning, these advisors create new avenues for business with the exiting business owner and all of the contacts with whom the business owner works.
- Helping a business owner set goals shifts the advisor’s relationship from advisor–business to advisor–owner. Most business advisors represent the business rather than the owner. For example, attorneys and CPAs draft documents for the business: employment agreements, leases, tax returns, financial statements, cash flow projections. Exit Planning is an activity that sets advisors apart because the focus is on the person—the owner— rather than the business, and that focus starts with identifying the owner’s goals and aspirations.
Start the Conversation
If advisors are to truly engage owners in the Exit Planning Process, they first must explain why setting concrete, actionable exit goals should matter to them, their businesses, and their families. BEI Members indicate that the following four statements are the best ways to introduce Exit Planning to owners.
- “I can’t tell you whether you should sell your business, transfer it to your kids or key employees, or simply close it down. The Exit Path that is best for you is the one that meets your goals. Let’s sit down and talk about them.”
- “Until you define your hopes and wishes for your future and the future of your company—that is, your exit goals—you are stuck on the ownership treadmill, no closer to (and maybe farther from) where you want to be.”
- “When or whether you decide to exit is a decision you make only after you set specific and personally meaningful goals related to (a) what you need and want as you exit from the business, and (b) what you seek after you leave.”
- “You can leave your future to chance, or you can define it. We start by defining your financial needs and wants, desired successor owner, and departure date. We then include your values-based goals, such as family harmony, business legacy, the well-being of your community, favorite charities, and any others you may have.”
In our next post, we will tackle Step Two—quantifying resources—from the same perspective: advantages to both advisors and business owners.