Month: January 2024

Owners tend to focus on growing their companies and give little thought to business risk. They may assume their Property and Casualty (P&C) business insurance adequately covers their risks. Their assumptions may be correct. Or not. It’s beyond the purview of most advisors, including Owner-Based Planning (OBP) advisors, to provide advice on commercial casualty coverage. Instead, we suggest advisors emphasize the importance, and benefit, of having an experienced P&C professional review existing coverage.

Business Risk Cannot Be Overlooked

But there are also uninsurable business risks, that if overlooked can threaten and even destroy a profitable company. OBP advisors have the tools, products, and training to address many such risks.

These risks include:

• The death or disability of a key employee or owner.
• A key employee who quits (or is fired) and steals valuable employees, vendor relationships and important customers and starts up or joins a competing business.
• The theft (usually by an employee or vendor) of trade secrets, intellectual property, including customer information, pricing policies and more.
• Property and casualty insurance lacking adequate coverage of insurable risks such as employee embezzlement and harassment lawsuits.
• An outdated or non-existent Employee Handbook lacking provisions such as:
  • benefits,
  • disciplinary policies,
  • employee rights, and
  • confidentiality concerns.

How Owner-Based Planners Can Address Risk

An important aspect of Owner-Based Planning is helping owners to first understand these risks and then to recommend a solution. For example, one recommendation deals with acquiring key person insurance to provide cash should a key employee or owner die. The insurance proceeds can be used to replace the lost revenue and profits caused by the key employee’s death (or disability), as well as to hire a well-qualified replacement.

Another recommendation the BEI software provides is to design and implement an employment agreement for key employees containing non-solicitation and non-disclosure provisions. This would  prevent key employees from leaving, taking customers, trade secrets and the like. Part of this employment agreement is to create an informally funded non-qualified deferred compensation plan in order to motivate and retain key employees.

Compensating for the loss caused by a risk event is essential when insurance is available—whether P&C or life insurance. Avoiding non-insurable risk through well-drafted agreements is also critical. OBP advisors are trained and have the tools, including the aforementioned recommendations, to explain risk exposure and how to minimize or avoid it.

How Addressing Risk Protects Business Value

The result of this planning for the owner is 1) an incentive plan to motive the key employee to grow the company and remain long-term, 2) an employment agreement for the key employee in part to protect the company from harm, 3) key employee insurance to replace the loss of the key employee, and 4) informal funding of the incentive plan.

Having the knowledge gained through BEI training and the software design tools and  recommendations makes a real difference in the success of your owner clients. 

One last point—do you know of any advisors who proactively reach out to their owner-clients with recommendations such as these?

We encourage you to differentiate your practice by incorporating Owner-Based Planning which provides branded recommendations, assessments, white papers, newsletters, meeting agendas and more. BEI’s next training course will be held February 14 and 15, 2024 from 2:00 – 5:00pm EST. Learn more and sign up at the link below.

Learn

Two recent surveys of over 50,000 owners and CEOs found that 83% of owners want and feel they need to grow their business.[1]  Our experience of over 40 years working with successful owners confirms that owners will engage the advisors who can help them get what they want. That’s why we created Owner-Based Planning for Advisors (OBP): A suite of training, marketing tools and deliverables that equips you to help business owners grow and protect business value using your professional services and products.

In addition to helping owners meet a pressing need, Owner-Based Planning sharply differentiates your practice from competitors.

Where do you begin?

Successful advisors promise and deliver the assistance owners need to grow cash flow and business. In doing so they powerfully differentiate their practices from their competitors.

If you are a financial advisor and you promise to help owners safely grow their investments, your value proposition is identical to every other investment advisor.

The same is true for insurance advisors: Promising to provide funding in the event of an owner’s death or disability does not meaningfully differentiate you from every other insurance advisor—including the owner’s current advisor.

As an OBP Advisor you differentiate yourself from your competitors because you offer a service that other financial and insurance advisors can’t: You will help owners dramatically grow and protect the cash flow and value of their businesses.

How do you help owners grow and protect business value?

The critical component of building value is a skilled and motivated management team. You can help owners by helping them incentivize their key employee(s) to 1) consistently grow revenue or cash flow, and 2) remain with the company long-term.

Protecting business value involves protecting it from unnecessary risk and providing for the company’s continuity if the owner dies or becomes incapacitated. As an OBP Advisor, you can promise owners to help them do both.

Owner-Based Planning is the Key to Differentiation

Promising to help owners protect and build business cash flow and value can seem to be outside the bounds of your typical practice area. However, growing and protecting business value uses the tools and products that you already offer. By approaching owners with the proposition of helping them achieve their growth goals you differentiate your practice and open the door to using the services and products you’ve always relied on.  

With OBP marketing and planning tools, you can:

• Attract and engage successful owners to your practice using branded marketing materials, including assessments, white papers, and newsletters.

• Create a simple action plan that consists of recommendations for actions owners can take to grow and protect value. Recommendations might include deferred compensation plans, employment agreements, continuity planning arrangements for sole owners, etc. BEI has created 29 written such recommendations for use by OBP Advisors.

• Use your services and products to implement recommended actions. For example, a recommendation to create a phantom stock plan or other deferred compensation plan includes informally funding with insurance or financial investments.

• Become an Owner-Based Planning Advisor who deploys marketing materials, tools, and deliverables to help your clients and grow your practice.

In future blogs, we will detail additional OBP recommendations, so you can see exactly how they incorporate both financial and funding products and services. We encourage you to learn more about how the OBP planning process and tools differentiate and enhance your practice by joining our next webinar on January 23 at noon EST with BEI Founder, John Brown.

Exploring Advisor Success: Introducing BEI’s Owner-Based Planning System

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[1] Sandman, George, quoting International Exit Planning Association BERI survey and data generated using CoreValue Software in The Growth-Driving Advisor, copyright 2023.

As we step into the new year, advisors are poised to take their client relationships to new heights by becoming not just financial guides or legal experts, but trusted partners in every stage of their clients’ business journeys. One strategic approach to achieving this goal is to incorporate more comprehensive planning services into your advisory practice to help your owner clients with what they need most.

The Trusted Advisor Vision for 2024

In 2024, the role of an advisor extends beyond traditional financial planning. A trusted advisor is someone who is deeply invested in their clients’ success, understanding their unique needs, challenges, and aspirations. The goal is to forge a lasting relationship built on mutual trust and a shared commitment to achieving long-term business objectives. Ultimately, advisors know what steps need to be taken in order to grow and protect business value so that owners are in an opportune position to sell or transition from their business on their own terms when the time comes. 

The Significance of Exit Planning

Exit Planning is a comprehensive strategy aimed at helping business owners successfully transition out of their businesses. As a trusted advisor, integrating Exit Planning into your practice allows you to guide clients through the complex process of selling or transferring their businesses. By addressing critical aspects such as valuation, tax implications, and succession planning, you position yourself as an indispensable partner in their business journey.

For years, BEI has shared several ways for advisors to work with owners on a crucial aspect of the Exit Planning Process: increasing business value. Time and time again, advisors find that emphasizing the importance of transferable value – what a business is worth to a buyer without the owner’s presence and involvement in the business – is what drives a successful exit. Transferable vale can be increased by having strong value drivers, including: 

• Next-Level Management
• Operating Systems That Improve the Sustainability of Cash Flows
• Diversified Customer Base
• Proven Growth Strategy
• Recurring Revenue That Is Sustainable and Resistant to Commoditization
• Good and Improving Cash Flow
• Demonstrated Scalability
• Competitive Advantage
• Financial Foresight and Controls

9 Ways to Help Your Owner Clients Grow & Protect Business Value

Strong Value Drivers are what make a company a desirable acquisition to buyers as they inherently contribute to cash flow. However, in the years working with Exit Planning advisors in a variety of different speciality areas, we’ve concluded that advisors share a common goal of helping owners improve transferable value – regardless of the owner’s exit timeline or if the advisor is specifically helping craft an Exit Plan. 

Exit Planning at its core begins with determining an owner’s pressing goals and objectives and therefore progresses through each stage and phase with the owner at the forefront. However, depending on area of expertise and clientele demographics, the advisory services provided at your practice might need a more holistic approach vs. a beginning-to-end Exit Planning engagement. 

Owner-Based Planning: A Holistic Approach

Owner-Based Planning, BEI’s latest endeavor, takes a holistic approach by considering the personal and professional goals of the business owner. This involves aligning the business strategy with the owner’s financial and lifestyle objectives. By understanding your client’s vision for their future, you can tailor your advice to not only enhance the value of their business but also ensure that the transition aligns with their broader life goals.

In order to focus on the goals of the owner, the advisor must showcase effective strategies and tools to engage owners in planning, even if they are not solely focused on Exit Planning. BEI’s Owner-Based Planning aims to enable advisors to implement core service offerings more effectively while assisting the owners in initiating the planning process. 

Exploring Advisor Success: Introducing BEI’s Owner-Based Planning System

The Resolution for Success in Your Advisory Practice

Adding Exit Planning or Owner-Based Planning to your advisory practice is more than just a strategic move—it’s a resolution to elevate your client relationships and contribute significantly to their success. Here’s how:

• Proactive Relationship Building: Engaging in Exit Planning allows you to start discussions about long-term goals early in the client relationship. This proactive approach demonstrates your commitment to their success, fostering a deeper and more meaningful partnership.
• Comprehensive Guidance: By offering comprehensive planning services, you become the go-to resource for all aspects of a business transition. From financial implications to personal aspirations, your guidance becomes indispensable in navigating the complexities of change.
• Value-Added Services: Incorporating these planning strategies into your practice positions you as a provider of value-added services. Your clients will appreciate the foresight and dedication to their success, solidifying your role as a trusted advisor.
• Overcoming Challenges: While there are a plethora of challenges an advisor might face or interpret when considering Exit Planning or Owner-Based Planning, many can be overcome with a mindset shift and a dedication to career growth. From a lack of budget and bandwidth to fee aversion and learning curves, many obstacles can be overcome with the right strategies and resources. By addressing budget concerns, simplifying the process, and emphasizing the benefits, advisors can successfully add Exit Planning or Owner-Based Planning to their practice and provide valuable services to business owners seeking to boost business value and  transition their business effectively. 

Overcoming Challenges in Adding a New Service to Your Practice

As we embrace 2024, let this be the year your advisory practice evolves into a dynamic force, guiding clients not just through financial decisions but through transformative business transitions. Exit Planning and Owner-Based Planning are not just tools; they are the building blocks of lasting, impactful relationships that transcend the traditional advisor-client dynamic. Elevate your practice, elevate your clients, and let success be the common resolution we strive for in the coming year.