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Most advisors want to help business owners in the best possible manner, and they also know that exit planning is more than a 2-person team. This is exactly what they mean when they talk about “forming an exit planning advisor team.”
The complexity of exit planning entails numerous aspects to consider. From setting your own exit goals and transferring the business, a proper exit strategy includes building the business’ value, looking for a buyer or a successor, resolving a number of disconcerting tax implications, and retaining all the key employees.
A single advisor cannot handle these mammoth tasks alone. To give a business owner the best chance to exit (on his or her own terms), they suggest bringing in a team of advisors from different fields. The team may include a CPA, a financial advisor, lawyers (for estate planning and business), an insurance advisor, and a business valuation expert. The team’s size may vary between two and seven advisors of different specialties as determined by the size and the complexity of the business. Diversity of expertise definitely works for the owner’s benefit.
Exit planning advisors also advise business owners to form their next level advisor team which comprises all the key employees who tangibly contribute towards the business’ success.
The exit planning process begins with two things:
For any business owner, disengaging from the company that he or she has built is a difficult process–mentally, physically, and emotionally. It is important that the business owner implements proper strategies for an exit that will enable a seamless transition.
Getting good value from your business at the exit is also important. If the business’s current value does not meet the owner’s expectations, then the advisor’s primary goal is to help the owner build the business’ value. To do this, the business owner needs the support and help of his or her executive team.
Most business owners do not share all the details of their exit with their boards and key employees, adding difficulty to the exit process. Unless they share their vision and exit strategy with their executive team, they do not know how the board and team members will contribute towards a successful exit. When all key people are on the same page, their confidence in a tidy exit process will mitigate the turmoil of transition.
If the business owner does not have an executive team, he or she should start by identifying the right people for such a team. Identifying a key employee can be challenging: for example, a sales executive who meets his business targets and occasionally exceeds expectations is a good employee, but he is not necessarily a key employee. On the the other hand, another sales executive who always exceeds his business targets and has helped his colleagues by creating a sales script that increased sales volume or profit by 25 percent is a key employee.
Exit planning advisors report that owners typically propose chief financial officers, office managers, and bookkeeping personnel as key employees. However, if you look at the exit planning process closely, these people are not usually considered key employees. Therefore, the first step in forming an exit strategy is to identify the right people for the job, while forming your executive team. To do this, ask questions such as:
As Sara Hartary, the founder of BizOps Solved, rightly says, “Connecting the dots behind purpose and effort and making that easily understood by all people in the company will guide operational decision-making at the most granular level.”
When exit planning advisors propose a differentiated value creation plan, that plan affords the team an enterprise-wide overview of how the current state of the business can be improved. The plan offers guidance with specific initiatives and actions that will enhance capabilities, identify and close gaps, describe the need for external and internal resources, define operational and financial metrics, and depict the overall governance framework.
To implement the necessary improvements, business owners and their advisors must go beyond just growing top line revenue. They have to involve other departmental heads, like sales, marketing, product, and service managers. When they do this, they clearly demonstrate that they have a solid and stable sales mechanism that shows the prospective buyer the business will generate future income long after the founder has exited.
If the end objective is to improve business value, then owners should involve the people who contribute toward improving operational efficiency, implement processes at the ground level, and utilize systems that will yield predictable (and profitable) outcomes.
Business owners who want to exit, but haven’t started the exit planning process yet, should start right away and give themselves the crucial few years necessary to build the runway they need to enhance and prove the value of their businesses.
In our January 2021 webinar I shared 8 secrets of the most successful exit planners. Access the recording or download the slides to learn more tips from some of the best in the business.
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