Month: September 2023

In the world of entrepreneurship, change is inevitable, and business owners often work on their own schedules. Every business owner at some point, with or without a plan, faces a crucial juncture in their journey—the transition or exit from their business. Whether it’s retirement, a strategic sale, or passing the torch to the next generation, this transition is a pivotal moment in their life that comes with heavy financial and personal decision.  

What many fail to realize is that the success of this transition hinges on something far more profound than just paperwork and negotiations: it’s about the relationship between the business owner and their advisor(s). Engaging business owners before, during, and after their transition is of paramount importance.  

Let’s delve into why. 

Before the Transition: Building Trust and Understanding their Mission

As an advisor, it’s crucial to engage with business owners before they even begin to contemplate their exit. This phase is about building trust and understanding the unique circumstances surrounding their business. Business owners are often emotionally invested in their enterprises. They’ve poured their heart, soul, and countless hours into making it a success. By engaging early, you can develop a deep understanding of their goals, values, and aspirations.  

This understanding of mission is invaluable when helping them move through the planning process. The more you learn and uncover, the more customized you can get in the creation of a transition plan that aligns with their vision. Moreover, by building trust, you can ensure that the owner feels comfortable and supported throughout the process, especially since it is bound to change along the way. This is not merely a transaction; it’s a life-altering event that should be handled with care and ongoing advice and support from a trusted advisor.  

Engaging with Business Owners During the Transition: Guidance and Support 

The transition phase is the most critical and potentially tumultuous period for a business owner. It’s the time when the carefully crafted plans must be executed, and the owner must navigate the complexities of relinquishing control. Engaging business owners during this phase is like being their guiding light in the dark tunnel of uncertainty. 

Effective communication is key during this stage. Business owners need to feel they have a reliable partner who can answer their questions, address their concerns, and provide strategic advice. Whether it’s negotiating terms with potential buyers or ensuring a smooth transition of leadership, your involvement can make all the difference in the success of the transition. 

Another key element to this stage is adaptability. Leading up until this point, the plans and goals have likely changed a handful of times, meaning that the owner is going to rely on you to stay the course and be flexible as much as possible. The role of the Exit Planning Advisor is often related to the role of a quarterback. Working with the owner each step of the way, relaying information to and from the team of advisors, and keeping everyone involved on track is the job that you take on.  

After the Transition: Ensuring Long-Term Success 

Many advisors make the mistake of thinking their job is done once the transition is complete. However, the post-transition phase is just as crucial. This is the time when the business owner is adapting to their post-exit reality. They may be facing a newfound sense of purpose or grappling with the emotions of letting go. Your ongoing support is essential to ensure the long-term success of both the business and the individual. 

Staying involved after the transition can help address unforeseen challenges, capitalize on opportunities, and ensure a smooth transition of power or ownership. It also reinforces the trust and rapport built during the earlier stages, which can lead to enduring partnerships and future opportunities. It’s often found that after leading a client through a transition, they will then come to you for things such as wealth planning, estate planning, investment management, family governance, and more. For you, that means more work with the client as well as the potential for referral business resulting from the trust you spent so much time building.  

Conclusion

A longtime BEI Advisor, Nick Niemann, shared in a 2023 BEI National Conference session the four key mindsets that come to play in engaging clients and staying involved with them through their business owner lifecycle.  

1. Begin with the End in Mind. As an Exit Planning Advisor, a business owner will rely on you to provide the big-picture view and keep the end goal in mind throughout the process.  

2. Start with Simple. Some owners will only comply to an Exit Planning engagement if they can see results first. Perhaps starting with a small piece of the puzzle – such as business continuity instructions or a buy-sell agreement, will create a sense of urgency and clarity for the client.  

3. Go For Great – Not Perfect. Advisors make mistakes too. When engaging business owners on such an important planning event, it’s helpful to be open and vulnerable with the owners as you would like them to be with you. If you keep the mission of the owner, as well as the scope of the engagement in mind throughout the process, you are bound to find solutions to any hiccup that might come up along the way.  

4. All Plans are Firm… Until They Change. Adaptability is a key quality of a good advisor. Knowing that plans will change along the way, and being open to re-visiting goals and reassuring clients is all part of the all-important engagement process. 

The importance of engaging with business owners before, during, and after their transition cannot be overstated. It’s not just about securing a deal; it’s about honoring the legacy of the business and the dreams of the owner. By building trust, offering guidance, and providing ongoing support, you can help ensure that this significant life event is not just a success – but a fulfilling and transformative experience for everyone involved.  

Marketing is the lifeblood of any business. It’s how companies connect with their target audience, build brand awareness, and ultimately drive sales. In today’s tech-savvy world, marketing has evolved significantly, and there’s an ongoing debate about which approach is more effective: traditional or digital marketing. In this blog post, we’ll delve into the strengths and weaknesses of both traditional and digital marketing to help you make informed decisions about your marketing strategy. Further, we’ll highlight the importance of marketing strategy in the professional services space and why personalizing your approach to client-engagement as an advisor will differentiate you from your competitors and boost credibility and trustworthiness among clients and prospects.  

Traditional Marketing: Time-Tested Strategies 

Traditional marketing encompasses the tried-and-true methods that businesses have been using for decades. This includes print advertising, television and radio commercials, billboards, direct mail, and events. Here are some key points to consider: 

1. Tangibility: Traditional marketing materials like printed brochures, flyers, and business cards offer a tangible presence, allowing potential customers to physically interact with your brand. Oftentimes, a physical interaction sticks with a client or prospect longer than a digital interaction.  

2. Local Reach: Traditional methods can be especially effective for local businesses, as they can target specific geographic areas effectively. Advisors are more likely to be able to meet face-to-face with someone in their local area, than with a prospect across the country.   

3. Trust and Credibility: Many consumers still find traditional marketing materials to be more trustworthy and credible, especially when compared to online ads that might be seen as intrusive. 

However, traditional marketing also has some downsides: 

1. Limited Metrics: Tracking the ROI (Return on Investment) can be challenging with traditional marketing. It’s often difficult to measure how many people saw a billboard or read a flyer. While word-of-mouth is certainly of high value, it can sometimes be hard to put a number on that value.  

2. Cost: Traditional marketing can be costly, especially for advisors with small firms and limited staff and resources. Printing materials, running TV ads, or hosting events can require a significant budget compared to some methods carried out online.   

3. Limited Targeting: Traditional marketing methods often lack the precision of digital marketing when it comes to targeting specific demographics or interests. 

Digital Marketing: The Power of the Internet 

Digital marketing leverages the internet and technology to reach and engage with your audience. It includes strategies like social media marketing, content marketing, email marketing, pay-per-click (PPC) advertising, and search engine optimization (SEO).  

Here are some advantages of digital marketing as a professional advisor: 

1. Precise Targeting: With digital marketing, you can target specific demographics, interests, and behaviors, ensuring your message reaches the right people at the right time. 

2. Measurable Results: Digital marketing provides in-depth analytics and metrics. You can track website traffic, conversion rates, email open rates, and much more, allowing you to make more accurate, data-driven decisions.  

3. Cost-Effective: Compared to traditional marketing, digital marketing often requires a smaller budget. Pay-per-click advertising, for instance, means you only pay when someone clicks on your ad. As another example, running a social media campaign or creating email sequences can produce organic traffic and leads that cost you little to nothing.  

4. Global Reach: The internet knows no boundaries. With digital marketing, you can reach a global audience, making it ideal for advisors looking to expand their clientele beyond local markets. 

5. Relevance: Someone who attends a live event may forget the takeaways after a few weeks. However, content on the internet can always be found. For example, if you post a thought-provoking article on your website or social media channel, someone searching for that topic could stumble upon it weeks, months, or even years later.    

However, like traditional marketing tactics, digital marketing has its challenges: 

1. Information Overload: The digital space is crowded, making it challenging to stand out. Users are bombarded with ads and content, which can lead to ad fatigue and inboxes are so full many users opt to mass-delete without reading.  

2. Constant Evolution: The digital landscape is always changing, requiring businesses to stay updated on the latest trends and algorithms. For many advisors, they simply do not have the bandwidth or staff to keep up with the latest and greatest.  

3. Privacy Concerns: With increasing concerns about data privacy, advisors need to be cautious about how they collect and use customer data. Business planning is personal. In creating long-term plans for an owner, it’s required of you to gather a large amount of private and financial information in order develop and work towards goals. Sometimes owners can be averse to sharing this information over a screen or phone. 

Marketing Overlaps as a Professional Business Advisor  

As a business planning advisor, you are already juggling the needs, concerns, and goals of your clients. Marketing your practice and focusing on your client-engagement techniques may often fall by the wayside. In considering the pros and cons of traditional and digital marketing strategies listed above, it’s important to consider how both affect the other in a client-advisor relationship and in a long-term planning engagement.   

1. Business planning is a competitive marketplace. Whether you are competing for clients against other advisors in your area, or are up against the oversaturation of the digital landscape, competition is high. The key to staying top of mind is to focus more on relationship management than acquiring clients, at least in the beginning. Establishing trust and credibility will go a long way in sustaining a long-term business relationship.  

2. Dedicate a budget for marketing. Many advisors don’t have the time or expertise to do marketing at all. For an advisor, your expertise and time lies in the work of business planning and managing client portfolios. However, hiring a contractor to help produce content or a larger marketing firm to guide strategy and automation will help take some of the marketing tasks off your hands, and really pay off in the end.  

3. Keep in mind generational shifts and preferences. There can be an argument made that both traditional and digital marketing is preferred depending on who you ask. It is important to acknowledge the generational changes in communication styles when determining your strategy. For example, a younger client might respond more quickly to an email or LinkedIn message over lunch than they would to a voicemail. Or, a long-time client nearing Retirment might prefer a meeting over coffee to discuss plans over an email or software management system. 

4. Find a balance. Personalization is still key, in both realms of marketing. Regardless of the means in which you connect with clients, the messaging and storytelling is what will stick with them. 

Conclusion  

In the battle of traditional vs. digital marketing, there’s no one-size-fits-all answer. Both have their strengths and weaknesses, and the best approach often depends on your business goals, target audience, and budget. Many successful marketing strategies today incorporate elements of both traditional and digital marketing, creating a comprehensive approach that reaches a broader audience and provides measurable results. 

Ultimately, the key is to understand your audience of business owners, stay flexible, try new tactics, and adapt your marketing strategy as needed to meet the ever-changing demands of the market. Whether you choose traditional, digital, or a combination of both, effective marketing remains the cornerstone of business success in the digital age. 

Business value is important to all businesses, but it is transferable value – what a business is worth to a buyer without the owner’s presence and involvement in the business – that drives a successful exit. Transferable Value can be increased by having strong Value Drivers. Strong Value Drivers are what make a company a desirable acquisition to buyers. Buyers will pay top dollar for a company with well-functioning Value Drivers because Value Drivers inherently contribute to increased cash flow.

To help guide you toward the kinds of Value Drivers your clients should aim to install in their companies, we’ve compiled a list of the nine most important Value Drivers. As you read through this list, remember that it is not exhaustive. Depending on who your clients are and which types of businesses they run, there may be other Value Drivers that create and increase transferable business value. However, these Value Drivers are nearly universal. 

9 Value Drivers

1. Next-Level Management 
2. Operating Systems that Improve Sustainability of Cash Flows
3. Diversified Customer Base 
4. Proven Growth Strategy 
5. Recurring Revenue that is Sustainable and Resistant to Commoditization
6. Good and Improving Cash Flow 
7. Demonstrated Scalability 
8. Competitive Advantage
9. Financial Foresight and Controls 

Next-Level Management

Next-level management is the mother of all Value Drivers. It is the most critical Value Driver because in the end, management oversees the installation and growth of all other Value Drivers. 

As the name implies, next-level managers usually work in companies that are larger than your clients’ companies. Next-level managers will know how to grow the company at least to the level of the larger companies they’ve worked for. These managers have worked with customers, vendors, advisors, consultants, and others in the market at levels to which your clients aspire to grow their companies. 

This isn’t to say that your clients’ existing managers can’t grow the company to the level needed to bridge any Asset Gaps your clients might have. Whether current managers can do that is a determination you must help your clients make, using either your own expertise or the expertise provided by your Advisor Team. Existing managers certainly can drive growth at the pace necessary if your clients’ companies are currently growing at a pace that will bridge any existing Asset Gaps. If growth isn’t on track to achieve your clients’ goals, then their existing managers, with additional training (perhaps working with outside consultants and coaches), may be able to improve to the degree necessary to achieve the results your clients require.

Operating Systems  

Establishing and documenting standard business procedures and systems demonstrate to buyers that your clients’ businesses can maintain profitability both after the sale and after your clients have exited. Properly established and practiced systems create cash flow and increase its sustainability. As an advisor, having tools and systems to document your clients’ business procedures goes a long way in assuring that they can show potential buyers what those procedures are and that those procedures work.

In short, savvy buyers—without exception—look to this Value Driver. If it is absent or weak, buyers move on. We cannot understate the importance of this Value Driver: Creating and documenting systems and processes is crucial to building your clients’ business value to the point at which they can leave their businesses on their terms without fear that they will fall apart without them. 

Diversified Customer Base 

Buyers typically look for a customer base in which no single client accounts for more than 10% of total sales. A diversified customer base insulates companies from the loss of a major customer. For example, if you are working with a client whose three top customers generate 40% of all sales, a buyer would be concerned if one or more of them left upon learning that your client sold the company. To a lesser extent, this may also be a concern to key employee, co-owner, or family buyers if the biggest customers are loyal to the business owner rather than to the business itself or other employees. Thus, customer concentration is a risk factor to avoid, regardless of the Exit Path your clients choose. While it may be difficult for your clients to consider new and/or profitable markets for their products and services, if you have clients who rely on only a handful of customers, it’s a topic you must broach.

Proven Growth Strategy

Even if your clients expect to retire tomorrow, it makes sense for them to have a written plan describing future growth, and how they will achieve that growth in the context of industry dynamics and demand for their company’s products. This growth plan may include developing new product lines or augmenting existing ones, market plans, growth through the acquisition of other companies, expansion into new territories, or increasing manufacturing capacity. A detailed and properly communicated growth plan helps attract buyers, especially if your clients’ previous plans have allowed them to successfully attain their goals. Combining next-level management with a written growth plan that details business value is a powerful one-two punch. Top management, with input from your business-owning clients, will create the plan for how goals will be accomplished and assign responsibility and deadlines.

If your clients have not created a written plan, you must help them evaluate the resources within their companies to create a plan that, at a minimum, bridges the existing value/cash flow gap. This is an area where collaborating with members of your Advisor Team, or even bringing experts from the outside onto your Advisor Team, may be essential.

Recurring Revenue

You may want to view this as two Value Drivers:

1. Recurring, sustainable revenue.
2. Having products or services resistant to commoditization.

The reason that revenue is a Value Driver is evident: If you were a buyer, you’d much prefer to buy a business that makes money hand over fist than one that struggles to eke out a profit. The question you should ask your clients is, is there a way for their companies to create one or more recurring revenue streams? Whether your clients can think of ways to create recurring, commoditization-resistant revenue or not, getting them thinking about this question opens a door for you to help them, either with your own expertise or through your Advisor Team.

The first step in installing this Value Driver is to find out whether your clients’ companies have recurring revenue streams to begin with. Another question to ask your clients is whether their products and services are viewed as commodities by customers.

It’s difficult to create any useful product or service that can’t be quickly imitated and commoditized by competitors, so continuous innovation in addition to the other strategies mentioned above is crucial when it comes to building transferable value.

Good & Improving Cash Flow 

Ultimately, all Value Drivers contribute to stable and predictable cash flow. You can help your clients increase their companies’ cash flow today by focusing on ways for their management teams to operate their businesses more efficiently: increasing productivity and decreasing costs. However, this alone may not create sufficient growth to allow your clients to achieve their objectives on time. Additionally, this Value Driver depends on the effective operation of other Value Drivers.

Growth throughout the entire infrastructure of your clients’ companies is pivotal to growing cash flow. For example, growth in the number of customers your clients serve requires growth in customer service. When the quality of your clients’ customers increases, or when your clients add or change product and service offerings, the entire organization must grow in lockstep. This means more—or better—management, more training, and more accountability. As an Exit Planning Advisor, you can search for, find, and introduce your clients to the people and programs necessary to make the improvements a reality, ultimately improving transferable value.

Demonstrated Scalability 

Under the right circumstances, increased revenue can lead to increased profit margins for your clients. Consider a gaming app on a phone. There’s a fixed cost to design and test the app, but additional sales don’t necessarily increase those costs. While scalability may be a bit more difficult if you’re representing the owner of a hardware store, it’s not impossible: If your hardware store owner enjoys high profitability and strong revenue growth, it’s likely that the company has many of these Value Drivers in place, including a competitive advantage. If these Value Drivers can be replicated, your client can scale the business by establishing new stores in different locations using the same Value Driver model, similar to the model Apple uses with its Apple Stores.

Scalability should be a major focus for your clients. It is perhaps the quickest way to grow cash flow and increase business value because scalability is based on something the company is already doing.

Competitive Advantage 

The competitive advantage your clients provide is the reason their customers buy from them instead of from their competitors. How do you help your clients identify any competitive advantages their companies might have? It isn’t easy, especially since your clients may have a competitive advantage that they don’t even know they have. A good way to determine whether there is a competitive advantage at all is to compare your clients’ profit margins and growth rate to their competitors’. If they are considerably higher for your clients, it’s a good bet that they have a competitive advantage. If so, you and your Advisor Team must help them determine what it is and protect it.

It’s possible that your clients have a competitive advantage and know what it is. However, if they don’t, they’re likely competing on price alone, which means that they’re susceptible to commoditization. In either case, it’s worth spending time on this Value Driver with your clients, their management teams, and your Advisor Team. If the company has a competitive advantage, you’ll want to help your clients protect it and more importantly, promote it.

Financial Foresight 

Like recurring revenue, this Value Driver also has two aspects. The first relates to financial controls or reporting. Many companies lack reliable financial reporting to such an extent that buyers can’t determine what the company has or track the source of its revenues. Usually, this problem is correctable, but it takes time to do so. More importantly, sloppy financial reporting can indicate to buyers that there’s an underlying problem, the most benign of which is that owners and management lack a clear understanding of their own company’s financial performance. The second aspect is less apparent but more important. If your clients want their companies to grow substantially and quickly, their companies “must be fed.” As you help your clients create a growth plan for their businesses, you must also help them project the cash flow cost of implementing the plan. Generally speaking, giving yourself and your clients a full year allows you, your clients, and your Advisor Team the time necessary to arrange financing.

You must assure that your clients have a firm grip on their companies’ financial condition. This is a critical responsibility because your clients are the ones signing off on all the loans and other obligations of the company. Thus, helping your clients forecast the financial demands that their growth plans will create, with the help of a CFO or CPA if necessary, is important. If growth needs to accelerate substantially and quickly to meet your clients’ goals, it may take more than the cash flow their companies produce to support it. Bank or other financing should be secured before your clients find themselves in the middle of expansion and short on cash.

Conclusion: Timing the Installation of Value Drivers 

The sooner owners begin to install or improve their companies’ Value Drivers, the more their companies benefit. It’s important for you, as your clients’ most trusted advisor, to encourage your clients to install Value Drivers as soon as possible. One of the more common objections you’ll likely face is when owners tell you they’ll start installing Value Drivers (i.e., building transferable value) when they’re ready to exit. But if your clients wait to begin building transferable value until they are emotionally prepared to leave the business, several problems arise. 

First, they will still have to do all the same work necessary to build business value whether they’re emotionally ready to exit or not. The only difference is that if your clients wait until they are emotionally ready to exit to install Value Drivers, there’s a high probability that they will have lost the passion and drive they had before they were ready to leave. Once entrepreneurs lose their drive, the energy and growth of their businesses suffer. Acting to push business value upward is vital and, since owners must do it anyway, why not start today?

Second, if your clients wait to build transferable business value until they are emotionally prepared to leave the business, they will have forfeited years of increased cash flow. Third, by waiting, owners also forfeit a more pleasing ownership experience, because the heart of value building is making the owner replaceable while increasing cash flow. As you help owners install Value Drivers, the first tasks you’ll likely help your clients do will be assigning duties that they find uninteresting or unpleasant to others. 

Finally, when owners wait to build transferable business value until they feel ready to leave the business, they limit their Exit Path options and increase the difficulty of the obstacles they’ll encounter. Allotting extra time to allow owners to pursue alternative growth strategies (e.g., replacing non-performing management) is crucial, and without that extra time, they can trap themselves. Insufficient transferable value is the principal cause of failure in Exit Planning, so the time to act is now, while your clients have the time to create additional business value. Don’t let a lack of time or knowledge curtail your ability to do all that is necessary for your clients.