Today, we are going to be exploring the value of strategic planning as it pertains to EXIT STRATEGY. Not planning on exiting any time soon? You still need a plan in place. Not all exits are voluntary. Remember the 5 D’s that can sink your business? Death, disability, divorce, disagreement, and disaster.
Navigating the intricate landscape of business management is no small feat. As a diligent business owner, you trust your advisor to guide you through the complexities, ensuring your financial well-being and the success of your enterprise. However, there might be a critical conversation missing from your advisory sessions: exit planning.
Why is that?
1. Lack of Awareness on the Dangers
Your advisor might not be aware of the profound dangers that come with neglecting an exit plan. Without a comprehensive strategy, your business is exposed to unforeseen risks like the “5 D’s”: death, disability, disagreement, divorce, and disaster. These events can jeopardize the continuity of your business and the financial security you’ve worked so hard to build.
Case Study: Father started business and two adult children worked with him. He got cancer and died 7 years after diagnosis. Mom, who had never worked a day in the business, inherits the business. There was no business continuation plan for the children. Mom decides she doesn’t want the business and after two years, shuts the company down. No asset sale, most is donated away. When speaking to the daughter, she asked where I was when they needed me. None of their current advisors helped them protect against death of the owner.
2. Difficulty Bringing It into the Conversation
Exit planning is a nuanced topic, and your advisor might be unsure about how to broach the subject. It’s not merely about selling your business; it’s about ensuring a smooth transition, preserving your legacy, and safeguarding your wealth. They might be hesitant, fearing it could be an uncomfortable conversation.
Case Study: Advisor has been working with partnership of two brothers for several years. They are good clients and have grown a good solid business. One of the brothers passes away. The credit line for the business is due in full by the bank and there is not enough liquidity to pay the credit line. Remaining brother is forced to liquidate assets to pay the credit line. Continuation of the business is in jeopardy.
3. Focused on Expertise Silos
Advisors often specialize in specific areas, such as financial planning, investments, or legal matters. Exit planning requires a holistic approach, integrating these areas seamlessly. Your advisor may be focused on their expertise silo, inadvertently overlooking the broader picture of your business’s future. Your exit planner can be the catalyst to pull your other advisors into the fold, to coordinate all the areas to have a common goal of running and growing a successful business with a solid strategy for a graceful and profitable exit. If the exit is involuntary, due to one of the 5 D’s, a plan will still alleviate chaos and streamline the process. You will have protected your business, its value, your loved ones and your employees and their families.
4. Perceived Lack of Caring
While it might seem harsh to say, some advisors may not prioritize exit planning because they don’t fully grasp its significance. They might be caught up in day-to-day tasks, focusing on immediate concerns rather than considering the long-term implications for your business. As a Certified Exit Planner (CEPA), we are given tools and resources that other advisors may not have, and certainly don’t focus upon. The value of using an Exit Planner far outweighs the investment in time and resources for the business owner. Your value can increase in multiples with proper planning. This will benefit not only the business owner, but all the advisors, though they may not realize this.
So, What Can You Do?
Initiate the conversation. Ask your advisor about their thoughts on exit planning. Share your concerns and aspirations for the future of your business. If they are unaware or hesitant, it might be an opportunity for both of you to explore this critical aspect of your business journey together. A good advisor will be willing to cover this with you and, if they are not competent in this area, hopefully they have met and connected with someone who specializes in this arena.
Explore the Conversation
Exit planning isn’t about abandoning ship; it’s about setting a course for a secure and successful future, whatever that may look like for you. Your advisor is a key ally in this journey, and by opening this conversation, you’re taking a proactive step toward securing your business legacy.
In our next blog post, we’ll delve into the pivotal role advisors play in guiding clients through successful exit planning. Stay tuned!
Need assistance with your exit strategy? Give me a call today at 520.888.9649.
