Prioritize Planning Phases 

Fri, 07/17/2020 - 08:00


In our professional practices, we naturally begin our engagements by asking new clients what they want us to do for them. We do the same as Exit Planners: we ask owners what their objectives are, and then determine whether they have the resources they need to accomplish them. If there is a gap between objectives and resources, we create and execute a plan to close that gap.

Some owners approach us with broad requests such as “I’d like to exit my business in five years with financial security. Can you help me?” That statement may sound specific—five years and financial security—but to address it, we must tackle a cornucopia of issues, such as growing and protecting business value, minimizing taxes, choosing the best successor (e.g., child, employee, ESOP, an outside third party, etc.), ensuring business continuity should an owner die before the planned exit, estate planning, and much more. For owners with broad requests we deploy a comprehensive approach: BEI’s Seven Step Exit Planning Process.

The issues in the list of issues above are just the tip of the Exit Planning iceberg. Tackling them all at once could cause “owner overload.” So, taking a cue from phased planning, the advisor and owner identify a few planning issues to deal with first. This is the first phase of the owner’s plan and might take several months to complete before you are able to move on to the next phase. 

For example, if an advisor finds that an owner is most concerned with growing business value, that’s the area to focus on first. If that owner is also disturbed about what could happen to the business if he died or became disabled, advisors can include Business Continuity as part of the initial planning phase. Advisors meet owners where they are, rather than march in lockstep through each of the steps in the BEI Seven Step Exit Planning Process.  

Closing the Gap

While meeting with one of her advisors, owner Chris Welch brought up her wish to exit her business in six years. The advisor (trained in Exit Planning) asked Chris a number of questions and involved Chris’s financial planner and a valuation expert to determine the value of both her current resources and her business. Using that information, the advisor met again with Chris to explain that, based on the current value of her business and resources, there was a resource gap between the likely value of her company in five years and the post-exit lifestyle she wished to enjoy, of approximately $3 million.

The advisor talked with Chris about many of the strategies they could implement over the next six years to close that gap.  Chris quickly recognized the need for a plan. She only decided to engage her advisor, however, when he noted that her business would likely fail and her estate would be worthless if, given the absence of both a strong management team and continuity planning, she became disabled or died.

Chris gave her advisor the go-ahead to create a plan but wanted to address the management team and continuity issues immediately. Her advisor promised that he and the rest of her planning team would recommend and implement several strategies designed to ensure business continuity—one of which would be to find, motivate, and retain top-notch management—before they tackled other Exit Planning issues identified at the beginning of the Exit Planning Process.

As Chris’ story illustrates, successful Exit Planning Advisors recruit a team of advisors and draw upon their expertise to respond to their clients’ most pressing needs. They then proceed according to the owner’s priorities rather than according to a step-by-step comprehensive Exit Planning Process. 


Exit Planning, especially in more involved situations, is often facilitated by using a phased approach in which an owner’s most pressing concerns are dealt with first. Subsequent phases address the balance of the Exit Planning recommendations.