Exit Planning Process: Creating a Comprehensive Plan

The idea of creating a full-fledged Exit Plan may seem daunting and expensive to a business owner. However, as we discussed in our previous blog post, the benefits of having a well-crafted Exit Plan far outweigh the costs of time and money. In fact, developing a comprehensive plan with your business owner clients can help create a sustainable business, maximize its value, and reduce risks. 

What exactly does an Exit Planner do to create and execute the best possible Exit Plan? 

As a business advisor, you know that planning for the future is critical to ensuring a successful outcome. It’s one thing to engage prospects and persuade them of the necessity of your expertise in planning. But when it comes to crafting and executing a suitable plan, it can be a complex and complicated process that requires a lot of preparation and collaboration. At this point, you’ve done the work to attract your client in the following ways: 

In this blog, we’ll conclude the Exit Planning Process series with an introduction into the Representation Process and the four key steps involved in creating an executable Exit Plan.

Step 1: Hold Data Collection Meetings

The first step in the Representation Process is to hold data collection meetings with the business owner(s). During these meetings, you will:

  • Set goals and gain a thorough understanding of the owners’ aspirations, feelings about their businesses, and future plans with and without their businesses. 
  • Collect the data necessary to draft the initial business valuation, initial cash flow projection, and financial needs analysis. 
  • Ask owners to introduce you to their existing advisors who they want involved in the creation and execution of their Exit Plans.

This step typically takes about 30 days to complete and sets the foundation for the rest of the Representation Process.

Step 2: Create a Discussion Draft

An Exit Planning Advisor knows that no plan can be carried out alone. A comprehensive Exit Plan involves the collaboration and cooperation with multiple advisors, various delegated tasks, and a long-term strategy to ensure a successful business transfer for the owner client. 

Using the information collected during the data collection meetings, you’ll consult members of your Advisor Team and provide them with a Discussion Draft of the Exit Plan that includes your recommendations. Or, for  BEI Licensed Members who use the PlanIt Planning software, recommendations will be computed based on the inputs provided using data collected and added into the program. 

Regardless of how the planning recommendations are determined, using them to form a Discussion Draft is important as it serves as a chance for owners and members of your Advisor Team to: 

  • Discuss planning recommendations that will allow owners to achieve their Exit Planning goals
  • Allow an open discussion about possible alternatives based on each team member’s background, knowledge, and experience with the owner 

This draft gives owners and advisors an organized and concise point of reference for Exit Planning discussions. The Discussion Draft also helps owners (and advisors) avoid setting unrealistic expectations for the Exit Planning Process and what it entails. 

Step 3: Convert the Discussion Draft into a Working Draft

After owners and all advisors have reviewed the Discussion Draft and offered their ideas and recommendations, you’ll prepare a Working Draft. As the Exit Planning Advisor, you’ll assign recommendations to the appropriate advisors and set feasible timelines and due dates to complete each task and each phase of the plan. Advisors will work directly with owners and/or other advisors to flesh out their recommendations and return them to the Exit Planning Advisor. 

As mentioned above, BEI’s PlanIt software facilitates plan creation and revision. BEI Licensed Members can use templates created with BEI’s PlanIt software to create recommendation summaries.

Step 4: Circulate the Action Item Checklist

The final step in the Representation Process is to circulate the Action Item Checklist. This Checklist is a tool that business advisors use to keep all members of the Advisor Team on task and on time, and matches each task to an advisor with a set deadline.

At BEI, we often refer to the Exit Planning Advisor as the “quarterback” of the Exit Planning Process as it is up to them to make sure every step goes according to the agreed upon timeline. Each member of the Advisor Team completes their assigned recommendations and returns them to the Exit Planning Advisor for inclusion into the Final Plan.

The Bottom Line

Using the Representation Process ensures all relevant factors are considered, and the appropriate advisor is tasked with making and implementing the appropriate recommendations. 

Whether creating a comprehensive plan or a single phase, the Representation Process produces straightforward recommendations for owners and business advisors. It allows owners to choose to directly address a particular concern or engage in a comprehensive process to transfer their company on a date they choose for an amount of cash that achieves their goals.

Reassuring Business Owners during the Representation Process 

It is not uncommon to still be faced with apprehension from owners, even once you have moved into the planning portion of an Exit Planning Engagement. 

For many business owners, it’s crucial to ensure that their business legacy continues after they’ve left the company. This means creating a comprehensive plan that outlines what will happen to the business, its assets, and its employees after the owner departs is essential to securing the desired impact. 

A well-crafted Exit Plan ensures the business continues on with the same level of success that it had under the owner’s leadership while also protecting their personal assets and minimizing tax liabilities.

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