Failing to Plan is Planning to Fail – Rethinking Exit Planning

Failing to Plan is Planning to Fail – Rethinking Exit Planning

We “professionals” call it “M&A,” an “exit” or “business succession,” but to a business owner, it is a major and often the last involvement with the company they likely helped create and build.  But all things must end, and exiting a business is an integral part of any business; it involves developing and executing a plan or process for business owners to exit. Creating an effective and personalized plan requires both discipline and time. It’s complex. It’s emotional. As a result, business owners are often reluctant to even discuss exit planning, which can lead to difficult or unsuccessful transitions. A robust team of business advisors can help develop and execute a plan effectively.


That’s where you come into play:  as an advisor to a business (whether you are an exit planning advisor, financial planner, attorney, or some other type of consultant), you can begin to rid the negative connotation that exit planning holds by changing the way your business clients view it. If you are wondering how exactly you can accomplish such a task, keep reading.


First, put yourself in your clients’ shoes: why are business owners reluctant to create an exit plan?


Many business owners have a hard time focusing on exit planning when the demands of their business require their time and undivided attention. They may struggle to see the worth of creating an exit plan when the business needs them right now. For some owners, it may be difficult to think about leaving their company some day; and when that day feels like it is in the distinct future, planning is easy to put off.


Emotions definitely play into the reluctance. Business owners have an emotion connection to the company that they have built or played a large role in. An owner may question whether she will realistically be ok with terminating her attachment to the business. What if she has regrets after selling the business? What if she doesn’t have the financial means she planned on? Unanswered questions can further prevent owners from creating an exit plan. 


Second, figure out what your clients want: what are the personal and professional goals for business owners creating exit plans?


You want to help each business owner understand what he or she can expect during and after the plan has been executed. Setting goals and expectations can help the owner feel more comfortable while exit planning and can prepare them for transition. It can also reduce the likelihood of feeling regret after leaving the business. Two key areas you should encourage business owners to think about are impacts on their finances and on their personal life.


Many business owners are used to a stable income and reinvesting back into their business. This will change after they exit the business, and you need to help them view their wealth differently in the long term. Encourage them to consider various financial options to find one that best fits their needs.


Business owners also need to face the reality of what life will be like after transitioning out of their role. As an advisor, you can help support them through this challenge by making sure they consider important details. Ask how they plan on spending their time, what role they will have in their community, and if they have any charitable goals. It is also important to discuss how the owner’s departure might impact her company and employees.


Third, support your client throughout the process: how can you help an owner strategically plan an exit from his or her business?


Planning for the emotional and financial transition out of business needs to occur far before the actual exit. As an advisor, you are in a critical role of counseling and preparing your clients. A good place to start is changing the way they think about exit planning. Rather than viewing their exit plan as an event, you want them to think of it as a process. To navigate this process, they must create a strategy. This strategy addresses personal and business finances, personal goals, business needs, estate planning, and investment management – all related to transitioning out of the business. The strategy is comprehensive and consequently, it requires a comprehensive team of advisors. If you are a financial advisor, encourage your client to seek other consultants for guidance on areas outside of your domain. The same goes for other types of advisors. Encourage your clients to build a team with individualized expertise.


Your goal – and your client’s goal – should be a smooth transition and helping your client to rethink exit planning can be the first step.


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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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