Navigating Emotional Challenges in Exit Planning

Fri, 05/26/2023 - 08:00

Written by: JDewing2

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Chasing The American Dream

The United States has always been known as the land of opportunity and new beginnings. For many, families moved to the United States with limited resources and built their own businesses from the ground up. As families grew, family-owned businesses grew with them, establishing community ties and contributing to the economy.  

The American economy is largely supported by family businesses, generating over 78% of jobs and contributing to 58% of the country’s GDP (Hiebert, PhD, CFP). But, what happens when a family business owner can no longer run his or her business at its maximum potential? 

What can you do as a business advisor to convince your potential clients that implementing an Exit Plan benefits both the business and their family? 

This blog post explores a study published by Daniel Hiebert, PhD, CFP which focused on   emotional and psychological factors that contribute to Exit Planning challenges in family businesses, and highlights the importance of involving experienced Exit Planners to ensure successful transitions between families and their businesses. To read the full article, click here: Emotional Attachment and Decision by Family Business-Owners to Seek Help From a Succession Planner.

The Emotional Component: Letting Go of the Business

One significant factor compounding the problem of transition failure lies in the emotional and psychological attachment of business owners to their enterprises. Many owners find it difficult to let go, neglecting the necessary planning for a successful transfer. 

In many cases, the relationship between an owner and their business becomes quite similar to a relationship between a parent and their child. Similarly to a parent nurturing their child up until adulthood, owners often build their firms from a blank slate. 

When it comes time for a parent to send their child to college or into the next chapter of life, attachment anxieties arise. The same argument can be made for owners and their businesses as they grow anxious about a business transfer. 

Furthermore, family relationships intertwine with business management and ownership issues, creating a complex web of emotions and goals that can hinder the planning process and further estate planning. The business becomes intertwined with the individual's identity, making it harder to separate personal and professional aspirations.

Overcoming Emotional Barriers: The Role of Exit Planners

To address the emotional challenges associated with Exit Planning, family business owners must seek the guidance of experienced Exit Planners. These professionals possess a comprehensive understanding of both financial planning along with non-financial goals, allowing them to guide owners through the transition process. 

Research from the article suggests that emotionally attached owners are less likely to seek help from planners, even though their businesses stand to benefit the most from professional guidance.

Key Findings and Challenges:

Various factors contribute to the emotional struggle of letting go and the subsequent planning challenges in family businesses. We’ve highlighted some of these key obstacles below:

  1. Doubt in Successor's Ability: Owners may cling to their businesses due to a lack of confidence in their successors' capabilities to effectively run the company. The fear of potential failure can hinder the planning process. As an advisor, it is your job to facilitate the introduction of a well-equipped candidate. Check out our recent blog, Selecting the Best-Suited Successor to the Business Owner for tips and best practices! 
  2. Family Relationship Turmoil: Turbulence within family relationships, conflicts, and disagreements can complicate the transfer of a family business. Emotional dynamics can overshadow logical decision-making, making it harder to plan for the future.
  3. Heirs Choosing Different Paths: When heirs pursue alternative careers or have no interest in continuing the family business, owners may face significant emotional turmoil. For owners who have counted on their child(ren) taking over when the time comes, whether for trust or legacy reasons, it can be disappointing to have to accept the reality of giving up the day to day work that has driven them for years. Owners may struggle to reconcile their desire to maintain the business with their heirs' divergent aspirations.
  4. Clinging to the Past vs. Embracing the Future: Family business owners who have witnessed their enterprise grow from humble beginnings often find it challenging to detach themselves emotionally from the business. They may view the company as a symbol of their journey, making it harder to embrace change and plan for the future.

The Role of the Exit Planner: An Opportunity to Overcome Emotional Attachments

Exit Planners have a unique opportunity to address the emotional challenges faced by family business owners. Advisors benefit from continuous involvement in the creation of Exit Plans. By understanding the owners' attachment to their businesses, planners can qualify potential clients based on their emotional readiness for succession planning. 

As an advisor, this presents an opportunity to save time and resources, or work with that owner to overcome their attachment. Avoiding Exit Planning Mistakes can be challenging, check out that blog post for tips and resources to become indispensable! 

Additionally, advisors can work with owners to help them overcome emotional barriers, encouraging them to shift their perspective from the past to the future. This approach not only supports successful business transfers but also presents an opportunity for Exit Planners to market their services effectively. 

You can collaborate with your clients to strategize and plan for the future, providing them with insightful recommendations on how to effectively allocate their time and resources. Owners that gradually detach themselves from the business are able to see the big picture, facilitating a smoother business transition.  

The Bottom Line 

Emotional and psychological factors significantly impact Exit Planning in family businesses. Letting go of a business can be an emotional struggle for owners who have dedicated their lives to its growth and success. Owners often shy away from enlisting the help of experienced advisors the more emotionally attached they are to the business. 

Conversely, failing to plan for the eventual exit from can result in loss of business value, resulting in adverse effects on the company culture and value, local economy, and ultimately the personal goals for the owner’s family.

However, involving experienced Exit Planners who understand the intricacies of family dynamics and possess the skills to address emotional challenges can pave the way for a successful transition. By overcoming emotional attachments and embracing the future, family businesses can secure their continuity, contribute to the economy, and preserve their cultural legacy. 

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Navigating Emotional Challenges in Exit Planning

Tax Reduction 101: Get to Know Madison Fund Service, Ltd.

It’s not what you make, it’s what you keep. This is the mindset of Han Gu, President and Founder of Madison Fund Service, Ltd., BEI’s latest strategic alliance who will be featured in an upcoming webinar on June 14, 2023 at 1:00pm EST. Register today for the opportunity to learn tax reduction strategies, strategic tax planning advice, and more, via this one-on-one interview with Han Gu.  

Structured Installment Sales: Examples of How, When, and Why to Use Them

Structured Installment Sales have become a hot topic in the Exit Planning world as a solution for business owners during the sale of their business. During this webinar, Aaron Hickey from Brant Hickey & Associates, will walk through the logistics of Structured Installment Sales as well as numerous examples of when to use an SIS. Aaron will provide examples of real estate, land, and business transactions as well as payout periods of short- and long-term durations.  

Legacy Planning in Your Exit

Fri, 04/28/2023 - 08:00

Written by: JDewing2

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Business owners work hard to build their business into a successful enterprise. They’ve created a strong culture, built a reputation in the community, and provided jobs for many people. 

But, what happens when it’s time to exit the business? How can you properly plan with your clients to ensure that their legacy will continue, and that their non-financial goals will be met? 

When it comes to building a legacy after retirement, Avoiding Exit Planning Mistakes early on in the Exit Process can save your client both time and money. 

How your client defines their legacy is a major aspect of planning a business exit. Beyond creating financial goals and establishing financial security, it involves identifying non-financial goals for the business, such as preserving company culture or maintaining a positive reputation in the community. Join us as we dive into a few quick tips for defining non-financial goals in your client’s legacy plan.

Defining A Legacy:

Identify the company culture: What are the values that have made your client’s  company successful? What makes their workplace unique? By identifying the company culture, you can ensure that it is preserved after they exit out of the business.

Consider community involvement: Has your client been involved in their local community? Do they support local causes or charities? By including community involvement in your client’s legacy plan, you can assist in ensuring that the business continues to be a pillar in the community. 

When thinking about ways to make a lasting mark post-exit, consider donating a portion of the business’s profits to a local charity or creating a scholarship fund for local students. Planning efforts such as these will ensure that the business will be remembered for years to come. 

Additionally, your client can ensure that their business’s resources are being used to benefit others by dedicating a portion of their profit to causes that are important to the company and its employees. By taking the time to consider the community’s needs, you can ensure that your client’s legacy is a lasting one.

Think about employees: Employees are a crucial part of any business’s success. Consider their needs and concerns when defining your client’s non-financial goals. This could include providing them with job security or ensuring that their benefits are not impacted by the business exit.

Depending on the emphasis you believe that your employees have on the continued legacy of the business, your chosen exit path might inherently put your legacy in the hands of your employees (or children). For example, owners who opt for an Employee Stock Ownership Plan (ESOP) or an insider transfer to a key employee have likely made that choice in part due to the implications that path can have on one’s legacy. 

Set clear expectations: Make sure that all non-financial goals are clearly defined and communicated to all parties involved in     the business exit. This will help ensure that the business owner’s legacy is preserved and that non-financial goals are met. This includes setting expectations with the owner’s family and communicating the goals and how they may impact how they believe this transition will occur. With enough time and proper planning, an owner can meet their non-financial objectives while also meeting the financial goals to provide for their family post-exit. Making any assumptions about how the family feels about this plan and the family legacy the owner is leaving can derail the process, so it’s best to make those intentions known early on.

It is important as the Exit Planning Advisor to be upfront with your business owning client early on in planning meetings and conversations. Complete communication is imperative to form and shape the Exit Plan effectively.

Leaving a Legacy Post-Exit

In addition to defining non-financial goals, it’s important to consider how your client’s legacy will be passed on. This could include passing their business down to a family member or selling it to a new owner who shares the same values and vision for the business. Check out this article from Forbes to see first hand how important planning a legacy can be for future generations. 

Legacy planning is not just about financial planning. It’s about defining non-financial goals and ensuring that your client’s legacy continues after they retire and exit their business. By identifying and contributing to company culture, community involvement, and employee needs, your client can work with you to create a plan that will help leave a lasting legacy and establish the owner as a pillar in the community for years to come.

It’s also important to consider how your client’s legacy will be maintained after they leave. This could involve a succession plan that outlines how the business will be managed in the future. It could also include a plan for ensuring that key employees remain with the company after the owner departs.  

The Bottom Line

By doing your part to help build a lasting legacy, you have the opportunity to be a part of something that will benefit not only your client’s business, but the community around it. From setting up a trust or endowment to providing financial assistance to future generations of their family and others, there is room to be creative in planning for this type of exit goal. As stated in the aforementioned Forbes article, “Don’t wait - life’s too short not to leave your legacy how you want to leave a legacy.” 

Legacy Planning in Your Business Exit

Be Proactive: Avoiding Exit Planning Mistakes

Fri, 04/21/2023 - 08:00

Written by: JDewing2

The foundation of an Exit Plan relies on extensive planning and solid implementation. At the cornerstone of a functional Exit Plan, your job as the business advisor is to guide the business owner so that the business can live on after the owner exits. 

For small-business owners, retirement planning is not as simple as saving a certain amount of money in a retirement account. A significant part of retirement planning is Exit Planning, which involves creating a strategy to transition out of the business while maximizing its value. 

So, what can you do to set your client up for success when exiting their business? First and foremost, you should help your client create a timeline for the exit process. This timeline should include both short-term and long-term goals, such as:

  • When the owner plans to retire 
  • How long it will take to transition out of the business 
  • When the new owner will take over

Additionally, you as the advisor should help your client establish a plan for handing off the business to a chosen successor. This plan should include an:

  • Overview of the business 
  • Organized financial review
  • Assessment of the business’s strengths and weaknesses. 

Next, you should help your client review their financial documents, such as their balance sheets, cash flows, and income statements, to ensure that they are up-to-date and accurate. With the right planning and guidance, your client can successfully transition out of their business and maximize its value.

Guiding your business-owning client throughout the Exit Planning Process is essential to a successful exit. Due to differing business exit strategies, many business owners fail to plan for the exit of their business, or make mistakes when planning their exit strategy. 

In this blog post, we will discuss tips to overcome the most common mistakes small-business owners make when planning their exit strategy. 

Tip 1: Proactivity is Key

Many small-business owners start planning their exit strategy when they are already close to retirement age. However, Exit Planning should start long before retirement. Business owners should invest in building a strong culture, optimizing processes, and building revenue from day one. This will not only make it easier to leave when the time comes, but it will also make the business more valuable to potential buyers.

It is important for business owners to assess how well a potential hire's values and work ethic align with their own during the recruitment process. Generous training, pay, and benefits can also show hard-working employees appreciation and create a healthy culture. This is especially true for key employees as they are an integral part of the value drivers for the business.

Streamlining operational aspects of the business can help increase the value of the business to potential buyers. Business owners should also work on expanding their product or service offerings or increasing the markets in which they do business to create a diversified revenue stream. In a previous blog post, we dive into Proactive Business Advising.

Tip 2: Identify a Business Successor

Selling a company is not the only way to exit the business and retire. Business owners should consider having a trusted business partner or family member take over the day-to-day operations of the business. This can help create a family legacy and ease the transition for the business owner, which can satisfy the non-financial goals of many business owners. 

However, it is important to make this plan clear well before retirement to allow time to train and coordinate with the successor. Check out our blog post for helpful tips on Selecting the Best-Suited Successor to the Business Owner!

Tip 3: Become Indispensable

Building a business model around oneself as the central component can delay retirement and make it harder to transition the business to someone else. Business owners should empower others to take their place as often as possible. This could include being more of a mentor than a boss, memorializing policies and procedures, and delegating tasks appropriately. If the majority of the business value is with the owner directly through knowledge and client relationships, the business itself won’t be valuable to another owner.

The Bottom Line

In conclusion, it is never too early for your clients to plan for a business exit. Developing a plan to transition out of the business doesn't have to be a stressful process. It is important to make sure that the successor is properly trained and given time to adjust to the new role. 

Additionally, business owners should become more of a mentor to empower others to take their place and should document policies and procedures to make the transition easier. Planning for retirement may seem daunting, but it is essential for the future of the business. By avoiding these common mistakes, small-business owners can maximize the value of their business and ensure a smooth transition out of the business when the time comes.

Help your clients create  an internal transition team to help with the process. The team should include members from different areas such as finance, operations, and marketing. This team can help to identify any areas of the business that need to be addressed prior to the transition. 

Furthermore, create a timeline for the transition and create a list of goals that need to be achieved to share with the advisor team. With clarity around the goals and expectations of each member, you'll ensure that your client’s transition out of business is as smooth and successful as possible.

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Being Proactive is Key to Avoiding Exit Planning Mistakes

Unlock the Potential of Cash Flow with Currence

Register for an upcoming webinar with BEI’s latest strategic alliance, Currence, to learn proven ways to provide the best financial guidance to your clients by starting at the foundation. As part of the BEI Network, you understand the importance of focusing on the long-term relationship, and not just showing up when your client is ready to invest. Currence will share in this presentation all the ways to help you and your clients make more money – and more importantly, how to get it.   

Exit Planning like a Pro: Process, Priorities & Timelines

Join us for a brand-new webinar with the CEO of BEI, Jared Johnson, and special guest, Fletcher Brown, for an interview-style presentation that dives deep into a proven Exit Planning Process, from beginning to end. Fletcher will talk through his experience working alongside advisors, for advisors, and directly with business owners that ultimately led to a proven process for the discovery and engagement, plan design, and implementation phases.  

Selecting the Best-Suited Successor to the Business Owner

Fri, 04/07/2023 - 08:00

Written by: mernzen

Every exit path requires a solid planning and implementation foundation. At the cornerstone of a functional Exit Plan, your job as the business advisor is to help select the best-suited successor to the business owner so that the business can live on after the owner exits. 

In a Forbes article that discusses choosing a business successor, it’s noted that “The intent of succession planning is to “future-proof” the business - by developing a strategic guide that builds upon the leader’s vision with a focus on a sustainable scale and continual growth for the future.” 

However, it’s hard to guide an Exit Plan in one direction or another without taking the time to pick a target successor. Compared to the lists of possible departure dates or the variety of lifestyle needs at retirement, the list of possible successors may actually be quite short: 

  • A child, children or other family member 
  • A co-owner(s) 
  • A key employee (or key employee group) 
  • An unrelated third party 
  • An ESOP (Employee Stock Ownership Plan)

For the purposes of this blog post, we are going to focus on the top three successor options - all Insider Transfers - to discuss the considerations needed to be made when choosing successors. 

How a Successor Honors Values-Based Goals 

For owners set on an insider transition, this path is usually considered due to convenience and trust. A transfer to insiders, especially family transfers, are typically a surefire way for a business to carry on a legacy if that is something that the owner is looking to do. 

The appeal of an insider transfer is frequently due to the aspiration to reach any of the following goals at the time of their business exit: 

  • Keeping the business in the community 
  • Maintaining existing company culture
  • Ensuring the owner’s legacy and/or family tradition remains 
  • Owner maintaining a desirable amount of control and flexibility while transitioning 
  • Encourages employees to stay with and grow with the company 
  • Business continuity may be easier to preserve

An Advisor’s Role in Choosing a Successor 

As an advisor, it is your job to explain to your clients how each insider transfer option can help reach their ownership objectives. Further, helping them identify the appropriate choice is crucial in ensuring they are able to set aside sentiment and emotions to make the smart choice and avoid common mistakes

Three tips for business advisors: 

  1. Refer back to the financial needs analysis and the company’s preliminary valuation that will provide logical and rational facts for an emotionally charged decision.
  2. Relate each successor choice to your owner’s values-based goals (like the ones listed above) to evaluate if the chosen successor will ultimately help reach those objectives and how.  
  3. Remind business owners that taking the time to make certain you have made the right choice is better than proceeding down the path with the wrong successor and having to eventually change paths or delay an exit.

Questions for Advisors to Ask Business Owners 

It is one thing for a business owner to select a successor who they’d like to take over their business. However, a successful business transfer is very dependent on the willingness of the successor to put forth time, money, and energy to the transition plan, and the overall business. 

As the advisor to business owners, you must ask questions of your owner clients that will get them to think about the feasibility and reality of the successor they have in mind. Such questions might include: 

  1. Is the successor capable of being an owner? 

Owners should be able to explain to you why their chosen successor(s) can run the business without them. Even the best employees do not necessarily make good owners. 

  1. Does the successor desire to be an owner? 

A common mistake that owners often make is to assume their chosen successor wants to become an owner. This misstep is often made in situations where owners want to pass down their business to a child or family member. While it might be easy to assume that one day their child or family member will take over for the sake of keeping the business in the family, ultimately successors must possess the same spark that motivated the owner to start the business in the first place. 

  1. Does the successor understand the risk involved in business ownership? 

Many times even if a successor is interested and/or capable, it’s important that they also understand the risk involved in business ownership. For example, many employees might be willing to become owners until they learn that most times they will have to put their own personal funds in (depending on the structure of the buy-in) to pay for initial ownership interest and fund ongoing business operations. 

Final Takeaway - Tips for Successor Search

When it comes to selecting a successor that is not a strategic outside buyer, there can be more personal attachments and history to consider. In addition to the tips and questions mentioned above, keep in mind some of the following thoughts during these discussions with your clients: 

  1. Keep an open mind. The future of any company relies on new ideas and opportunities, so being headstrong or inflexible will not make for a healthy transition. 
  2. Avoid micromanagement. Regardless of successor selection, it is important to allow for the next leader to find their own way. Giving them responsibility and time and space to learn from before the owner’s exit will increase a successor’s readiness. 
  3. Prepare and be inclusive. The transition should be an open and inviting process for the entire team. Regardless of the assigned successor, having open communication, both internally and externally, allows for the opportunity for feedback and a productive transition period.
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Choosing the Right M&A Option for your Clients

Mon, 04/03/2023 - 12:55

Written by: mernzen

BEI believes that some of the best insights and advice come from peers who are actively using Exit Planning strategies in their daily work. For this reason, we welcome content from our members, niche guests, and our strategic partners, as additional ways to provide high-quality advice and resources for you and your planning practice. 

This week, one of our newest partners, CSG Partners, gives a high-level overview of multiple M&A transaction types and the pros and cons of each. Reviewing these M&A options, as well as how they relate to a business owner’s goals will prepare you for conversations with your owner clients.   


Choosing the Right M&A Option for your Clients

By David Blauzvern, CSG Partners 

The difference between a positive liquidity event and seller’s remorse often comes down to strategic alignment. Deal terms and pricing are important, but the right structure often matters more. The "right" transaction generally reflects a business owner's distinct goals and needs.


Common M&A Options

To illustrate, let's explore three transaction types: strategic sales, private equity deals, and leveraged ESOPs. Each carries its own unique attributes, pros, and cons. While "perfect fit" is an elusive M&A concept, certain options may offer greater situational utility. With that in mind, we'll also look at each strategy through the lens of common shareholder priorities.

Strategic Sale

When business owners envision an M&A exit, this option is usually top of mind. Generally speaking, a larger player or deep-pocketed upstart will purchase a seller's company to gain assets, intellectual property, customers, and/or sales territory.


  • Widely understood process
  • Transaction valuations may exceed fair market value
  • Strategic buyers often have a greater appreciation of market dynamics and nuances
  • That familiarity may facilitate a smoother, post-transaction integration process


  • Confidential company information is shared with potential competitors throughout process
  • Sale proceeds are fully taxable
  • Employees, including tenured staff and top talent, may not be retained 
  • Departing staff are often left with hard feelings and little to show for their efforts

Private Equity

Most private equity (PE) deals are leveraged buyouts. To complete an acquisition, a financial buyer will lever-up a company’s balance sheet with private debt. Once in charge, the acquirer may seek to professionalize operations and drive future efficiencies. 


  • Selling shareholders will often receive a substantial portion of the purchase price upfront
  • PE firms generally have the means and expertise to grow and/or scale a business
  • Sellers may also financially benefit from future add-on acquisitions and M&A activities 


  • Sale proceeds are fully taxable
  • Sellers usually reinvest a portion of their proceeds in the post-transaction structure
  • PE firms often have final say in future operational, strategic, and M&A decisions
  • Risk of putting excessive leverage on the company

Leveraged ESOP

Similar to a management buyout, a company finances the purchase of an owner’s stock. But in this instance, the buyer is an employee trust, rather than a management team.


  • Sellers can eliminate capital gains taxes on sale proceeds and maintain potential upside
  • Company receives tax deductions equivalent to the sale value
  • Company can become a tax-free entity as a 100% S Corp ESOP
  • Board of directors continues to oversee operations


  • Employee trust cannot pay more than fair market value
  • Highly structured deal process
  • Regulatory oversight by Department of Labor and IRS
  • Outside lenders often provide non-recourse financing, but this may only cover a portion of the transaction (seller notes fund the remainder)

Evaluating M&A Options Vis-a-Vis Owners' Goals

So, let’s consider these transaction types in light of common shareholder priorities. 

Seeking Complete Business Exit

Owners that want to cash out and not look back should give serious consideration to a strategic sale. This option likely represents the cleanest of breaks – free of continuing management duties and most other ongoing entanglements.

Of course, a third-party sale is subject to capital gains taxes, so a premium valuation can take on outsized importance.

Looking to Gradually Step Back

For shareholders seeking to pare back their day-to-day involvement while diversifying their personal portfolio, a private equity or ESOP sale may be the right option. Both can provide a partial liquidity event with potential upside. Ongoing “skin in the game” takes the form of rolled equity in a PE sale and retained stock and/or stock warrants in an employee stock ownership plan transaction.

Businesses seeking an infusion of outside talent could be well-served by a private equity buyer. These firms often specialize in industry-specific transactions and provide operational know-how and human capital to scale their portfolio companies. The common trade-off is a loss of independence. While selling shareholders may play a role in the restructured entity, day-to-day control is generally assumed by the PE firm.

If a company already has the bench strength to facilitate a gradual leadership transition, an ESOP may be an attractive PE alternative. Sellers and their companies can reap the associated tax benefits with only a 30% sale to an employee trust. Even in the event of a majority or 100% ESOP sale, the company’s board of directors will continue to operate the business, and sellers can continue to earn a salary and a maintain meaningful role, without being obligated to stay. 

Solely Focused on Financial Diversification

While certain owners may be fully invested in their business, it could be the right time to take chips off the table. The case for an ESOP is compelling under these circumstances. Selling shareholders can complete a partial, fair market value sale to an employee trust and still maintain a majority stake. 

Under a minority ESOP, operations and leadership remain largely unchanged, while the company benefits from increased cash flow, thanks to the ESOP’s tax incentives. Employee-owned companies, on average, are also more stable and productive than their non-ESOP equivalents. The stock incentive can help foster increased employee engagement and provide a unique incentive for attracting and retaining top talent.

An employee-owned company also has significant flexibility to accommodate evolving stakeholder goals and future growth. Partial ESOP sales can be followed by a range of transactions including secondary sales, M&A or PE deals, and ESOP plan terminations. As a result, owners have the latitude to actively shape their business legacies even after a minority employee stock ownership plan sale.


In Conclusion

The sale of a company is one of the most significant transactions a business owner will face, and it can have a huge impact on their future and the legacy they leave behind. An educated seller will almost always end up with the best possible outcome among available options. Taking the time to explore the full impact of transaction alternatives, on all stakeholders, puts business owners in a position to avoid surprises while choosing the best path forward.

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