Exit Planning Proclamation #3 – We’ll Understand Clients’ Personal Situations

Business owners hire advisors, consultants, fractional COOs, and fractional COOs to help them grow, manage, and improve their business performance. They turn to you to drive efficiency, mitigate risk, increase earnings, and build enterprise value. But, at the end of the day, if you’re working with entrepreneurs and owners, you can’t render that advice in a void.

To be a highly successful value creation advisor or exit planning consultant, we have to commit ourselves to understanding both the client’s business and their financial situation.

At the height of the pandemic, a client asked me for advice as to where to focus his business energy going forward. He was exploring some different options at that time.

One option under consideration was to continue growing a service business he’d been building for about six years. The second was an inherently riskier venture: he wanted to launch a new SaaS product in the marketplace. He had much more passion for the new launch. On the surface, it’s a simple calculated business decision. Which of these two businesses had more potential future earnings and wealth creation potential for the business owner?

But which option was the right one? There is no way to render sound advice to that question without having a complete understanding of the client’s financial situation. Would a financial advisor recommend a risky investment without knowing how that high-risk/high reward investment weighs on the rest of the portfolio? Of course not.

Yet, business advisors provide direction, in the absence of complete information like this, all the time. They forget to ask whether new business decisions introduce untenable risk. Will such decisions delay the client from achieving their life goals or lead to the client’s ruin?

We Must Understand All the Risk and Opportunities

Many business owners reinvest much of their profit into their businesses to fund their retirement from the sale of the companies. The business is already their most significant investment, and they depend on it for income and insurance.

Most entrepreneurs struggle to separate their businesses from their personal lives. We can’t solve for the former without solving for the latter. To guide clients to an exit strategy that secures their futures after their involvement with the business ends, we have to take a holistic view of their business and personal life.

Professional advisors should help their clients avoid unnecessary risks and support them in making the most of hidden opportunities. Sometimes that means reinvesting in the growth of an existing business. It also means jumping into a new business venture or exiting the business altogether and doing something else entirely. We can only render that type of sound advice if we consider the whole picture – their business situation AND their situation.

What That Services/SaaS Client Did

So, you’re probably asking yourself – what happened to that client pondering the services business and the SaaS business? After exploring both the client’s business AND personal situation, I advised him to pursue the SaaS offering. The client’s current financial needs were already fully met. The SaaS opportunity represented greater future potential financial upside. And, the owner had much more passion for that business opportunity. He’s now in the market and building a successful value creation plan – on Value Scout.

Download the Exit Planning 2.0 Manifesto

Value Scout is built on recognizing that we, as value creation advisors and exit planners, have a unique and rare opportunity to help our clients achieve something they’ve only dreamed about – a successful transition on their terms. To accomplish that mission, we have to hold ourselves accountable to a high standard, a set of memorable beliefs that guide our work and everything we do. We call them the 8 Proclamations of the Value Advisor.

To read all eight proclamations, download the Exit Planning 2.0 Manifesto.

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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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