It takes years to become a successful entrepreneur and generations to build a business empire. However, the sad reality is it takes just one adverse situation for it to all fall apart. As many of us learn, an ounce of prevention is 100x better than the medicine it takes for the cure. One of the many reasons to have an exit plan is to create a series of contingency strategies if and when a business faces a crisis. A crisis may be financial, internal, or operational: it doesn’t matter. What does count as a consultant is whether you’re capable of creating efficient exit plans for your clients to address these types of scenarios.
One critical piece of this process is linking your client’s personal goals to their value creation strategies.
Link Personal Goals to Value Creation Through Smart Questions
Here are some of the typical questions for which you’ll need clear answers before you can formulate an exit plan, particularly one designed as a contingency plan in a crisis.
1. Why did your client wish to do business at all? In other words, what motivated your client to start a business in the first place? The purpose of starting a business is not only to earn money; there is always a more significant aspect to that decision. Maybe it’s to create more personal freedom. Perhaps it’s to make a change in the community. This is the mission statement for the business. Every business owner should be prepared to answer this question, and most are. Often, it gives you a clear picture of what life might look like after the business. So, it’s critical to ask it upfront.
2. Why did your client choose this particular business? Once you are convinced that the client is ready for the challenge of building a business, the next question is why this specific business. Look at whether the client has any prior knowledge of that particular niche. Maybe your client worked in a more prominent firm and saw a missed opportunity. Maybe your client saw an option in the market.
3. Does your client have a clear vision for growth? Every successful entrepreneur has a clear vision of what they will do, that divine motivation that compels them to pursue business in the particular niche they’ve chosen. Without that vision or reason, they lose the urge to succeed in business. Find out how much zeal the client has to reach heights that the company has never gone before.
4. Does the concept of an exit plan disturb your client? Believe it or not, some business owners, even highly successful ones, are not comfortable talking about transition. Also, some are not realistic about their business’ current position and don’t fully understand what the industry lacks. One might argue that it is your job, as an advisor, to know that, but the client should also understand what the company is missing. It’s up to you to help the client manage expectations for what their business is worth and what it’s genuinely going to take to exit.
5. How much does the client care about an exit plan? This relates to whether your client is willing to create an exit plan. Some business owners just figure it will take care of itself, and no amount of convincing will get them to look at their situation differently. If you and the entrepreneur are on the same page regarding the development of an exit plan, then you know they trust you to prepare that contingency plan as well.
6. What is your client’s vision for the business? The most successful CEOs and business owners have a clear future-facing vision of where the market is going and where they see their business headed within that future reality. They know where they want it to be in the next few years, in the next five years, and the next ten years. But, most clients don’t have that type of clarity in a future state. It’s up to you to help them think through what the future vision looks like. What does the client expectations regarding employee churn, new customer acquisition, customer retention, and other factors?
Hope for the best, plan for the worst
Creating an exit plan prepares the entrepreneur when something goes wrong, not just when the business owner decides to retire or pursue another business objective. Generally, when crafting operational strategies, one hopes for the best results. For that, you need to align your perspective with the clients. To do that, you, the advisor, must have a clear vision of what the client expects from you.
Expectations include both short-term and long-term objectives. Keeping tabs on those will always give you an edge moving forward and signals benchmarks that indicate milestones achieved or failed. At the same time, when planning an exit, discuss the lowest point that triggers an exit plan. Detailed information about the company’s objectives helps you prepare an ideal exit point.
Business goals help to create an efficient exit plan
You and your client both want the same thing: to achieve success and to sustain it long-term. The same information that helps guide a business to success also serves to create an exit plan if unfortunate events arise.
In addition to using the information in the business’s best interests, the rapport you build with the client foments a relationship of collaboration, trust, and confidence. For instance, if an opportunity arises that you believe perfect for your client and requires immediate action, your relationship with that client will enable you to act promptly and not lose the opportunity. Ultimately, adequately implemented strategies will reap the rewards for both you and your client.
Conclusion
Creating a feasible exit plan is a challenging task that requires a lot of details and access to often sensitive information. With detailed, accurate information, you can craft an exit plan that can cover almost every aspect for increasing a company’s value and mitigating losses should adversity cause the company to fail.
Value Scout can help you along the way. With Value Scout, you get access to detailed questionnaires to drive your exit planning work. Your clients get an initial estimate of baseline value on their business and a set of clear findings that will explain where and how they can invest in growing value and achieving a successful exit.
The best advisors use Value Scout to enable the success of their exit planning work. Schedule a demo today.
