Exit Planning Consulting for Wealth Managers: Where to Start?

Many entrepreneurs begin planning their exit from business too late, making it impossible to achieve both their personal and professional goals. Not having adequately prepared their exit may adversely affect their standard of living during retirement and even the company’s performance.

To avoid such negative consequences, it is essential that the clients whose wealth you manage to prepare for their exit several years ahead of time and revise and modify their exit plans, if necessary.

Most businesses are not marketable today for the sale price the business owner expects. Exit presents a critical point of failure for them because:

  • They assume that the business they’ve built will be worth far more than it is.
  • They don’t plan for an exit; hence, they don’t build for an exit.
  • They don’t understand the rules of the game as it relates to an exit.
  • In the end, they don’t think about it until it’s too late.
  • This destroys their retirement.

Many wealth managers are well-positioned to help entrepreneurs avoid this.

What is exit planning?

Exit planning is the development of an exit strategy for an unlisted company. Exit planning considers the entrepreneur’s objectives in valuing the company, its employees, its position in the market, and personal aspects such as the family context and the surrounding community.

These factors are used to develop an action plan that allows the entrepreneur to achieve their professional and personal goals when leaving the company.

Why do owners need an exit strategy?

Exit planning isn’t just for retiring entrepreneurs. Financial experts recommend that business owners have an exit strategy several years ahead of schedule to maximize their chances of achieving their goals.

Several major reasons for entrepreneurs to implement an exit strategy include:

  • A new start: When their business reaches cruising speed, many entrepreneurs leave their managerial positions to start new businesses.
  • Disaster planning: Natural disasters, social upset or unrest, financial problems, etc., may disrupt business activity. This disruption may result in liquidation or a change in ownership.
  • Tax optimization: Planning takes advantage of all opportunities for tax optimization.
  • Cash flow optimization: Like tax optimization, business owner can maximize their post-exit cash flow through careful, thoughtful planning.

Who’s generally involved?

The planning process is usually led by an exit planning advisor who has specialized training for this purpose. While virtually anyone can become an exit planner, wealth managers, attorneys, CPAs, or business consultants typically pursue this specialization. A strong exit planning team generally includes all the professionals named above, plus a solid internal team on the client’s side.

Why exit planning as a wealth manager?

If you’re already working with the business owner, extending that relationship to include an exit planning service makes a lot of sense. It allows you to deepen your practice and your value proposition to clients. It opens the door to deeper, more meaningful business conversations than you’ve had previously. It helps you get a handle on the value of your client’s most critical asset, their business. Finally,

What are the wealth manager’s primary responsibilities?

To help owners realize a successful exit, a financial advisor may:

  • Start the conversation early, at least five to seven years before a client’s expected date of ownership transition.
  • Help the client pinpoint the value gap by identifying the exit value they’ll need to retire, connecting them with resources such as Value Scout to establish a baseline value for what that business is worth now, and clarifying the space between the two.
  • Connect the client with a consultant who can give targeted recommendations on closing that value gap and connect them with other specialists (sales advisors, marketing advisors, operational excellence consultants) who can help them do it.
  • Inform and educate the owner about the exit planning process and the game’s rules about a company sale.
  • Facilitate the exit planning process by coordinating your activities with the business owner and their other advisors.
  • Provide guidance and resources to help the client envision their post-transition future.
  • Develop a clear financial plan to support their life post-transition.

What’s a wealth manager’s advantage?

Business owners increasingly view their financial advisors as their most trusted advisors because you can understand both the client’s business situation and their situation. Being a specialist in this field, you possess the expertise and tools necessary to help your client build an accurate assessment of their need to retire when they hope to do so. The complementary advisory relationships you’ve developed with accountants, lawyers, and other advisors who can assist your client create a network of experts who refer business to one another even as they serve their clients’ best interests.

What does it take to be successful?

Like any profession, success in wealth management and the specialization of exit planning are not guaranteed. To succeed in this field, you must:

  • Build a plan for acquiring new customers and for introducing the topic to existing clients.
  • Develop an understanding of your client’s businesses and how they make money.
  • Demonstrate a willingness to learn about business at a more intimate level to have relevant conversations with your clients about the challenges they face on a week-to-week basis.
  • Commit to understanding business value and what drives it (strive to develop the same level of fiscal understanding you have of investing, saving, and the markets to what drives value in a privately held business).

Where should you start?

  • Join Value Scout’s Guidon Community and learn from seasoned exit planners within our local community groups and SIGs.
  • Take some of Value Scout’s courses on understanding business value and driving value creation.

Author Summary

Makalyn Feaster

Makalyn Feaster

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