4 Exit Planners’ Expert Tips on “Doing the Work”

winning the work

In our recent webinar, Secrets of the Most Successful Exit Planners, I shared insights on how some of the best advisors I know have found ways to do this work exceptionally well – driving value creation efforts for their clients and uncommon performance for themselves.

Based on the feedback I got from advisors in the community, I’ve grouped this into four best practices:

  1. Be “deeply present” in client business (understand how they operate and how they make money)
  2. Don’t be “just a hammer”; make sure the engagement starts from the client’s starting point
  3. Link personal goals back to value creation; “pluck a motivational nerve for founders to take action.”
  4. Have hard conversations about value and feasibility

Let’s look at each a little more closely:

#1 – Be Deeply Present in Your Clients’ Businesses

A survey of 577 entrepreneurs we conducted between 10/8/2020 –12/7/2020 revealed some interesting facts. On average, most of these business owners felt that only 30% of advisors stepped up during the pandemic. As devastating as the data is, business owners have started expecting more out of their advisors. Business owners don’t believe that their advisors know enough to offer actionable advice. Too many advisors do a “fly-by” on a clients’ business from their area of expertise.

Unfortunately, entrepreneurs often feel that most advisors form initial impressions of what needs to change and offer incomplete or ill-informed advice. If you don’t go deeper to look at all the ancillary issues presented within that business, your client may soon start feeling the same about you. By diving deeper, our experts mean that you must strive to understand the whole company and tie it back to how it relates to your client’s situation.

Here are some questions you can use to drive your work in this area.

  • What drives the business? What drives value?
  • What are the most significant risks to a successful transition?
  • Is the business owner fully aware of those risks?
  • How can they be mitigated?
  • What is the value the owner needs to retire properly?
  • What strategies will be most effective at closing that gap?

#2 – Don’t Just Be Another Hammer

Every business owner comes from a different starting point, and as an exit planning consultant, first and foremost, you must understand this fact. Most advisors put the client in a box and come to them with the same solution they bring to everyone regardless of their business. Going the extra mile to understand where the client is starting from and starting there won’t hold you back.

For instance, often in the world of investment banking, every company is viewed as a transaction – value the company, stand up an auction process, and do a transaction. But, not every business is transaction-ready. Not every business is ready for the owner to depart, and not every owner is ready to transition and move on to something else. The same holds for virtually every discipline and facet of exit planning.

“We have to meet the business owner where they are and work from there. They aren’t a nail, and I’m not a hammer. We have to be more creative and recognize every business owner comes to this conversation on their terms.” – Martha Sullivan, Founder at Provenance Hill.

Here are the tips to avoid just being a “Hammer.”

  • Diagnose the client, understand their starting point.
  • Know enough about everything to do this well and identify other vital individuals you can bring to the table to enable the client’s success.
  • Then bring your deep layer of expertise if/when the time is right.

#3 – Link Personal Goals to Value Creation

Many exit planning advisors, particularly consultants and accountants, tend to focus almost entirely on the business without stepping back to ask questions and build understanding about a client’s personal goals. Consultants talk about growing revenue and driving efficiencies; CPAs speak of tax and compliance. But, it’s incumbent, as a trusted advisor, that we step back and ask some questions about the owner and what they’re trying to do:

  • Why is the owner in business at all? Why this business?
  • Why grow? To what end?
  • Why exit? To what end?
  • What does “the other side” look like?

It’s easy to assume that the personal goal is just to make more money. But, there is often a whole host of other drivers. Maybe it’s spending time with children, transitioning to a life passion, or becoming more involved in charitable or community endeavors. Regardless, you have to seek understanding and drill down on what’s driving the desire to transition and what’s next.

“Intimately knowing the business owners’ personal goals and being able to connect the dots between value creation AND personal goals plucks a motivational nerve for founders to take action.” – Adam Trouy, Founder at Altitude Financial

#4 – Have the Value Conversation Early and Often

To sell a company is to touch the fruits of years of hard work of your client. But a healthy business does not guarantee a successful sale! Valuing a company well and early is a subtle exercise in balancing the company’s past and future prospects in question. Too many advisors, even certified exit planning consultants, are too timid in talking about value. Or, they speak about only one dimension: the value of the personal estate and needs to retire or the value of the business and how to grow it.

On the other hand, the best advisors weigh the value of the estate and the needs of the estate with the value of the business and its contribution to a successful transition.  Then, they work to get more granular on that value conversation so they can pin down what needs to happen when the client realizes the outcome they want.

Work to find answers to the following questions as early as possible:

  • How much does business value need to grow for a transition to be successful?
  • What are the inputs to those assumptions?
  • What happens if those inputs change?
  • When will we revisit?

So, there you have it – 4 tips from some of the most successful exit planners I know on how to do the work exceptionally well. But, that’s only useful if you have a client, isn’t it?

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Author Summary:
Dan Doran

Dan Doran

Is the Founder of Value Scout, Quantive and the 2019 Exit Planner of the Year. He is a recognized expert and speaks frequently about M&A, valuations, and developing more deliberate value creation strategies.

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