Month: July 2023

As business and financial advisors, you are uniquely positioned to guide clients through the intricate maze of Exit Planning. Beyond the financial forecasts and legal structures, one of the most influential aspects is often deeply personal: communication within the family and their involvement in the planning process. 

In this blog post, we’ll explore the critical role that effective family communication plays in shaping a successful business exit strategy and what you can do as an advisor to facilitate this essential step for your clients.

Understanding the Value of Family Involvement:

Clients’ families can have considerable emotional and financial stakes in a business, particularly in family-owned enterprises. From Navigating Emotional Challenges when considering a business exit to putting the plan in action, the entire family is impacted. Thus, an exit strategy transcends beyond a business transaction—it marks a life-altering transition for the whole family. 

Your role in facilitating clear and consistent communication of business exit objectives can ensure a smoother transition, preserve familial relationships, and safeguard the business’s legacy.

Championing Open Communication:

Remember, it is never too early to plan for the exit of a business. Similarly, the foundation of successful family involvement begins with open, honest, and early communication. Encourage your clients to initiate conversations about their business exit sooner rather than later. 

Provide them with strategies on how to broach the subject, address potential emotional concerns, and create an atmosphere conducive to understanding and collaboration. 

Articulating Goals Clearly:

Assist your clients in formulating and communicating their exit strategy goals. These might include financial maximization, business longevity, or family harmony. With the help of many resources like BEI’s Exit Planning software, you can demonstrate various exit strategies, helping both your clients and their families understand the potential impacts of each scenario on their defined objectives.

Steering Family Participation in Decision-Making:

Family involvement can be a vital asset or a challenging obstacle, depending on how it is handled. Advise your clients on involving their family in the decision-making process, ensuring each member feels heard and valued. 

However, it’s equally crucial to establish boundaries, defining which decisions necessitate collective input and which remain under the client’s purview. In many cases everyone but the owner is ready for retirement. Navigating owner hesitancy can be challenging but can be solved if the entire family is aligned on the future of the business. 

Leveraging Professional Resources:

Complex situations involving multiple family members or intricate business structures may call for additional professional assistance. As an Exit Planning Advisor to business owners, you likely have grown your network to include peers of professionals with a variety of different expertise. Don’t be afraid to lean into those sources and share that knowledge with your clients. 

Advocating Continual Communication:

Guide your clients to maintain regular updates on the Exit Planning process to the family. This practice ensures everyone stays informed, any concerns are addressed promptly, and the plan can be tweaked based on changing circumstances or new information.

The Bottom Line

The path to business Exit Planning is fraught with complexities. As a business advisor, your role extends beyond the financial and legal aspects—you are tasked with navigating the human element of the process. 

By prioritizing family communication and involvement, you’re not just facilitating a business transition; you’re helping safeguard relationships, legacies, and futures.

With BEI’s Exit Planning resources, you’re equipped to guide your clients through this journey effectively. Remember, a meticulously planned exit is as crucial as the entrance, and clear goals, open communication, and family involvement are cornerstones to a successful transition. As you support your clients on this journey, always bear in mind that the path traversed is just as significant as the destination reached.

Many successful business owners (and their families) look forward to retirement. After years of hard work, retirement allows business owners to kick up their feet and live the dream. But, what if that dream doesn’t exist for your client? What happens to the business and the family when everyone is ready for their retirement except for the owner? In this blog, we delve into the complexities of retirement planning and provide essential guidance for business advisors like you.

Preparing for Life After the Business 

For a business owner, giving up something they’ve nurtured, grown, and given their life to is extremely difficult. Even worse, many business owners fail to recognize just how intertwined their businesses and identities can become. This often leads to problems for the owner, the business, and the owner’s family. 

Whether your client knows when they want to retire or are only thinking about it because they’re being asked, there are a few tips to consider when speaking to your owner clients about this subject. 

1. Avoid Making Promises That Can’t Be Kept 

Owners resistant to retirement often let assumptions about their timeline prevail among family, employees, and management. If the owners don’t broach the subject on their own, it may be assumed that a child will take over one day or that the owner will sell the company once they reach retirement age. 

A promise that “everything will work out” is an empty one if there isn’t an Exit Plan in place. In the cases of death, disability, or illness – all things that can come abruptly and unexpectedly – a business can quickly be consumed by chaos without a plan in place. It’s important to share with your clients the various ways a business can quickly spiral without a plan in place and the impact of loss of business direction, employees, and customers. 

2. Get a Taste of Retirement Before Retiring

A great benefit of planning for a successful future is that doing so makes the owner less consequential to the business’ success. In other words, encourage owners to delegate tasks to next-level managers or key employees so they can get a taste of what it’s like to live with a shorter to-do list. This allows the owner to test the retirement waters while also providing the opportunity to see how these managers handle the responsibility. Further, the eventual transition will be more successful if the owner has time to train and support the successor(s) well before they leave. 

One thing to encourage your clients is to explore hobbies they’ve always dreamed of doing, such as traveling or spending more time with their grandchildren. At BEI, we like to pose retirement as an owner’s “next great adventure.” 

Prompting your clients to explore some of these hobbies ahead of retirement provides the trial runs needed to evaluate the owner’s readiness to retire. Asking the right questions at the appropriate time about values-based goals and post-exit plans can really indicate what is important to the owner if they do decide to retire. 

3. Plan For Retirement (even if there is no plan to)

For some business owners, work is all they’ve ever known, and they like it that way. While there is no shame in this mindset, it can often create dissonance for others and conflict with family members or potential successors. For instance, they might be left in the dark and wonder what happens if they literally die at their desk. 

For this reason, Exit Planning Advisors must encourage owners to plan as though they’ll retire, even if they don’t. Proactive planning helps position the owner’s family for financial independence if the owner were to leave the business due to death, disability or injury. It can also strengthen the business so that when the owner does leave, the people who rely on the business can continue to thrive. 

Conclusion 

Encouraging business owners to look past the day-to-day reality they have been living since the inception of their business is no small feat. However, it is crucial to engage in discussions regarding your clients’ desired lifestyle post-exit in order to determine the necessary steps for achieving their goals. By providing essential insights, strategies, and guidance, advisors can empower owners to navigate retirement challenges and live their post-business life to the fullest extent. 

As a dedicated business advisor, you play a pivotal role in helping business owners navigate the complexities and challenges of planning their eventual business exit. While many owners possess a do-it-yourself mentality and believe they can handle the entirety of the Exit Planning Process  alone, it’s essential to emphasize the value of your expertise and what you bring to the table. 

Throughout this blog post, we’ll explore reasons why business owners tend to fall short when planning for their future on their own. What can you do as an advisor to better serve your clients when it’s time to exit their business? 

We’ll highlight four major elements of planning for a successful business future that can be challenging for even the most capable owners to handle independently. 

Guiding owners beyond their individual brilliance:

Business owners are often driven by their unique talents and abilities, which have propelled their success thus far. However, it is crucial to shift their mindset from relying solely on their individual brilliance to building a business that can thrive independently of them. 

Owners need to understand that if their business is entirely dependent on their presence, it becomes challenging to transition or exit. As a knowledgeable advisor, you can help owners build a business that outlasts them  by developing documented operating systems and scalable processes that reduce reliance on their personal involvement, ensuring a successful future for the business.

Clarifying the concept of a successful future:

While business owners may have a broad vision of what a successful future entails, the specifics can be hazy and uncertain. It’s common for owners to fall into the trap of overestimating their preparedness for the future, leading to complacency and potential setbacks. How do you combat this thinking as an advisor? 

By working with a professional advisor like yourself, owners can gain clarity on their financial needs and develop a comprehensive plan that aligns with their desired outcomes. Your expertise in assessing their situation and providing accurate information will enable owners to make informed decisions and mitigate risks effectively.

Next-Level Management:

One of the crucial aspects of planning a successful business future is identifying the right individuals to lead the business after the owner’s exit. However, many owners struggle with this step due to their personal relationships and emotional attachments to current managers. As a seasoned business advisor, you bring objectivity to the table, allowing you to assess the talent pool objectively. 

Your insights can help owners evaluate their current managers and determine if they possess the skills and capabilities required for the business’s continued success. By guiding owners through the process of next-level management selection, you can ensure a smooth transition and maximize the business’s potential. Looking to increase business value but not sure where to start? Check out BEI’s 9 Ways to Increase Business Value!

Navigating emotional challenges:

Planning a successful business exit is an emotional journey for owners. Their businesses often hold deep personal meaning and attachment, making it difficult for them to objectively assess their value and potential. Owners may overvalue their businesses, leading to unrealistic expectations during the exit planning process. 

Your role as a professional advisor is to provide a reality check by offering accurate valuations and assisting owners in addressing any weaknesses or areas for improvement. With your guidance, owners can detach emotionally and make decisions based on objective analysis, enabling them to create a business future aligned with their goals. 

For more on navigating emotional challenges within business continuity, check out our blog post here: Navigating Emotional Challenges in Exit Planning. 

The Bottom Line: 

At BEI Exit Planning, we specialize in empowering advisors to help their business owning clients to prioritize their objectives for their businesses, employees, and families. If you’re ready to discuss your goals and gain insights into achieving them, we’re here to help. Contact us at your convenience to schedule a conversation about planning your successful future.