In last week’s article, we dispelled a nagging worry that many advisors have about Exit Planning: that they must wait a long time before they see returns. This week, we’ll look at another concern, shared by advisors and business owners alike: If I’m already comfortable with what I’m doing, why would I consider Exit Planning?
Exit Planning for Advisors Who Like What They’re Doing
Advisors tend to be deliberate people. They crave processes that have proven to work, and they tend to shy away from anything that’s too new or too risky. It’s often their deliberate nature that makes good advisors good. There aren’t too many individuals, let alone business owners, who want an advisor who plays it fast and loose with their advice.
Because Exit Planning is a relatively new concept, deliberate advisors may look at it as something that’s out of their comfort zone or focus area. But another trait that deliberate advisors tend to have is their thirst to expand their knowledge. Expanding their knowledge allows even the most deliberate advisors to consider new ideas in terms of how they can successfully leverage them.
As deliberate advisors expand their knowledge about Exit Planning, they understand why they should consider doing it and how they can implement it. Last week, we provided several examples of how many advisors are already practicing elements of Exit Planning in their core work. Much of the work that advisors are currently doing is concurrent with the work required of Exit Planning.
The crown jewel that Exit Planning provides to deliberate advisors is process. From initial data collection and plan creation to client engagement and education, Exit Planning takes many of the elements successful and deliberate advisors use within their practices and leverages those elements to provide proven, value-added services that most business owners need. This process doesn’t intrude on the successful advisor’s current processes, instead integrating with and even supplementing them.
The payoffs for implementing a proven process are obvious: more revenue, more referrals, and a greater expansion of knowledge and expertise. Exit Planning’s process and educational opportunities speak directly to the deliberate advisor’s desire to critically consider all outcomes before deciding, and then applies that deliberation to help their business-owning clients do the same regarding the futures of their businesses.
Exit Planning for Business Owners Who Like What They’re Doing
The refrain throughout the Exit Planning industry is that all business owners, no matter how successful or driven, will one day exit their businesses. Whether by choice or by death, no owners own their businesses in perpetuity. So, the question owners must ask themselves isn’t “Do I want to exit?” Instead, it’s “Do I want to exit on my terms?”
When confronted with these two choices, most business owners will choose to exit on their terms. After all, business owners have lived most of their business-owning lives doing things their way. Why would they treat their inevitable business exits any differently?
Ironically, it’s this desire to do things their way that sometimes gets in the way of allowing business owners to exit on their terms. They figure that they’ve built the business successfully to this point and can do the same for their exits. Frankly, most business owners who have this attitude are wrong.
There are three things that typically surprise the owners of successful small to mid-sized businesses.
- Their businesses aren’t worth as much as they think: One of the most common (and touchiest) roadblocks to exiting on their terms is business value. Consider what John Brown, BEI’s founder, discovered about overvaluation: “The most common complaint that we receive from private equity representatives is that owners vastly overvalue their businesses and then demand unobtainable sale prices based on the overvaluation.” Usually, business owners who continue doing what they’re doing cannot build business value to a point at which they can get the money they (or their families) need for a comfortable post-exit life. Exit Planning Advisors can tackle this thorny issue because they know how to broach the subject without offending their clients and have access to advisors who can help them install processes to help owners build their businesses’ value.
- Being the rainmaker can drown them: Countless successful business owners are the hub of the business: All big decisions go through them and they have a hand in most of the company’s success. While this may sustain the business while the owner is running it, it’s one of the worst positions for owners to be in as they attempt to exit on their terms. But most owners don’t know any other way of doing things. Exit Planning Advisors help them draw up internal succession plans that draw or train next-level management to start doing the heavy lifting. In addition to freeing owners from their rainmaking responsibilities, having next-level management almost always increases business value.
- Exiting on their terms takes time: Planning a successful exit isn’t something owners can do on a whim. Creating and fully executing an Exit Plan can take anywhere from 3 to 10 years, depending on the type of exit the owner wants and the business’ current standing. This doesn’t mean that business owners can expect to dedicate all of their time to Exit Planning, but it does mean that they need to start planning sooner than they assume and keep the ball rolling. Exit Planning Advisors provide a proven process to map the owner’s Exit Plan, gather the Advisor Team to do what’s necessary to pursue the owner’s goals, and shoulder the brunt of the planning work, leaving owners to do the things they want to do most within the business.