Guiding Your Client Through Their Business Exit

An exit planning advisor should ease the experience of selling a business. They explain, initiate, and guide business owners throughout the planning process. They also help their clients understand that their own business and personal goals dictate the path to a successful exit.

They meet with a business owner to gather information, establish their exit aspirations, and check what resources are available to achieve the client’s exit objectives. Then, they create a draft of planning recommendations based on that information and data.

In a nutshell, the three primary responsibilities when working with business-owning clients are:

  • Informing and educating the owner about the entire exit planning process.
  • Facilitating the exit planning process by coordinating their activities with the client’s internal advisory team.
  • Providing services that ensure the business owner’s successful transition from the business.

Related: Helping Your Client Through Value Creation. 

How Can You Help Your Client?

Understand What Your Client Wants

As an exit planning advisor, your primary responsibility is to set the exit objectives by helping the business owner quantify those objectives.

Outlining the exit strategy provides a blueprint for the future and sets benchmarks for success. This phase also helps the business owner understand their vision for life beyond the business.

But first, it is necessary to understand what your client wants. To do this, ask questions such as:

  • What are your financial goals?
  • Do you want to spend the rest of your life dedicated to your business?
  • Do you want to be involved in the business after your exit? If yes, in what capacity?
  • How much money will you need to meet your retirement needs?

Help the owner figure out their business and personal goals and understand how financially prepared they are to attain those goals. After discovering the above information, you must align the most suitable exit strategy with the owner’s business and personal goals and their current readiness to exit. The next step is to calculate the company’s current value and determine the value gap, so you and the owner can clarify the accurate exit options. Refining the owner’s exit goals is also essential to develop an appropriate plan to exit the business.

Understand the Scope of the Company

As an exit planning advisor, you need to understand the company’s scope before coming up with an exit strategy. How an exit is executed directly impacts the value shareholders derive from the business exit, the business’s success in the future, plans for expansion, and its products and services.

For instance, if the business is a startup, including the exit strategy in the business plan is essential when seeking funding from angel investors or venture capitalists. So, before choosing the exit strategy, it’s vital to organize the business structure (how the company is owned and how it operates) and the relationships with co-owners (if any). Doing this ensures:

  • Exit opportunities are not limited.
  • The owner is not liable to pay more tax on business sale proceeds than is legally required.
  • The exit will be a favorable one.
  • The business is prepared to handle critical market or industry situations proactively.
  • You will be able to resolve critical cash flow issues.
  • The right people are hired and trained to help the owner run the business.

Only after understanding the exact scope of the company can you design a blueprint of business objectives. The business objectives build accountability into the long-term vision and growth strategy and help get periodic insights on whether the strategy is coming together. Business operations and industry scope play an essential role in selecting the right exit strategy for your client’s business.

Communicate Throughout the Process

Exit strategies vary for each type of business, but the one critical aspect of every successful exit is practical and open communication. Just like the manner and timing of presenting information is essential, clarity and brevity of communication are equally important, especially when it comes to effective communication between you and the business owner and between the owner and the management team and other employees. As an advisor, your key responsibility is to help strategize the exit plan’s execution and identify possible problems the owner may face while executing their exit.

There are two types of professional advisors: relationship-based advisors and transaction-based advisors. Relationship-based advisors work with the business owner for an extended period. These include accountants, lawyers, etc. In contrast, transaction-based advisors are hired to perform a specific task and leave after the task is completed.

Due to their long association with their clients, relationship-based advisors are well versed with the owner’s needs, business vision, and the business growth target. In contrast, a transaction-based advisor (a.k.a. you) must uncover the owner’s plans, business conditions, and growth target(s). A successful exit requires open and transparent communication, getting all the facts right, and maintaining transparency among all the parties involved.

Working with a team of professional advisors is also challenging and will test your leadership skills. You are responsible for managing a diverse group of professionals with different expertise and working styles. Since they don’t report to you, be prepared to face the challenge of having little or no authority to oversee their work. But as the team leader, you are accountable for the successful delivery of your ultimate product: the client’s exit plan. You will also be expected to lead, motivate, and communicate effectively to build trust and resolve conflicts while keeping the client (business owner) in the loop.

Work to keep all channels of communication open. You are your client’s trusted advisor, and they should feel comfortable sharing their ideas and thoughts with you.

Advise Throughout the Process of Value Creation

Business owners may be challenged to recall a time before they got caught up in managing the demands of the business. They may also find it challenging to manage the emotions of leaving the company they built from scratch.

As their advisor, you need to understand this and guide the client throughout value creation and exit planning, during which there will be times when they feel overwhelmed by the sheer enormity of the tasks facing them.

Help your clients identify their goals, help them stay on track during the process of value creation, and assist them in logically determining the appropriate conditions for their business exit. Your role is to act as a lifeline of logic and reason, especially when your client faces a tidal wave of emotion and finds themselves overwhelmed by the situation.

A Few More Tips

  • Go beyond duty to demonstrate a willingness to learn about your client’s business.
  • Have frequent conversations with your clients about their challenges.
  • Commit to deepening your understanding of building business value and what drives it.
  • Consistently update your knowledge and understanding of investing.
  • Study new markets to know what drives value in privately-held businesses.

Exit planning encompasses more than succession planning, financial planning, or tax planning. It is a holistic approach involving all these planning aspects, plus much more. To help your client, focus on building a custom exit plan based on your client’s needs, wants, and wishes and, yes, be there for them!

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Matt Lawver

Matt Lawver

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