What is Keeping Business Owners from Planning Their Exits?
The idea of Exit Planning is a touchy subject for many business owners, and it is not hard to see why. For many business owners, the thought of leaving a business they put their lives’ work into can render many emotions. However, the risks of not having a solid Exit Plan in place are high, not just for the business owners, but their families as well.
Without Exit Planning:
- Business owners miss out on ensuring the full potential of their personal and financial goals.
- Business owners risk a reduced value of their business at the time of exit.
- It often becomes more difficult to separate themselves from the business.
Business Owners Don't Know How to Start Exit Planning
Business owners lack the skills or expertise needed to do Exit Planning on their own. For example, many don't know how to accurately determine the value of their company. When they lack the appropriate knowledge, they procrastinate and may only turn to the necessary experts after the time has passed to properly execute their desired plans.
That's where you, as the Exit Planner, can come in handy. Exit Planning Advisors are necessary as exit strategies require a team with expertise in valuation, accounting, financial and estate planning, legal, and wealth management.
In addition to overseeing the advisor team and keeping the plan on track, you will act as a liaison between the team and the business owner, accurately articulating the business and financial situation.
Business Owners May Have No Plans to Retire
It takes a lot of courage, hard work, and persistence to build and grow a business from nothing. That includes a great deal of sacrifice and failure along the way.
Business owners often don't plan for their exit because they cannot contemplate relinquishing control of their business. For owners that are still very active in the operation of the business, their exit may seem too far away to plan. Furthermore, many owners underestimate the amount of time that is needed to appropriately plan.
But in case of unforeseen situations such as illness, disability, or death, business owners may need to leave unexpectedly before their desired exit. These circumstances induce chaos on the business and the owner’s family that could be prevented by making planning a priority while the owner is still able and involved.
A Fear of Letting Go
Many business owners find it challenging to let go of their company, even though they know it is time. In many cases, they are worried about the future of their employees once new ownership takes over. It is also difficult for owners to tell their employees that they are selling the company in fear that it could create concern over the performance of the business and lead employees to jump ship.
Business owners have many options when it is time for them to decide what direction their business will go once they are gone. The transition from this position is challenging, but they must consider why they took this step and what option makes the most sense to continue the legacy they’ve built.
It is vital to keep all the owner’s goals in mind during planning so they aren’t making emotional decisions in the moment. Help your clients choose an exit path that protects the legacy they want to keep with the business. Then, help owners with a vision for what they plan to do after exiting.
You’ll help to alleviate the fear because it gives them something else to look forward to.
Business Owners Don't Think They Need an Exit Planning Advisor
Many business owners who have built long, thriving businesses over time, feel that they don't need anyone to tell them when or how to leave the company.
However, these owners know the requirements to be successful and are often just hindered by uncertainty. They understand the value of hiring experts to handle certain aspects of their business where they lack knowledge and experience.
Business owners hire employees to handle areas they are not skilled in or enjoy because they know that’s what builds a valuable business. Most of your clients have an expert team in place for the same reasons, including a CPA, a financial advisor, an attorney, and an insurance advisor. Odds are, this team isn’t asking the owner about planning for their exit.
Help them understand that as their Exit Planning Advisor, you will coordinate with this talented team and bring added value as they work together to serve the owner’s interests.
Having an Exit Plan cannot be underestimated by any business owner. With proper understanding of how to get started and the advantages, the argument for planning is too strong to ignore. Your job as an advisor is to help your client understand the benefits of planning early and to guide them through the whole process.
For an owner, there are a variety of hesitations and hurdles that might stand in the way of the Exit Planning conversation. As an Exit Planning Advisor, overcoming these hesitations will be possible because you will have the knowledge to make sound recommendations as well as the ability to implement a systemized process to ease transition planning.
And remember, the most important reason to create an Exit Plan is to ensure the owner meets their desired goals – so keeping those goals at the forefront will ultimately help business owners and their families benefit from their lives’ work.