How Business Performance and Health Affect Exit Planning

Fri, 09/13/2019 - 09:00


There are many businesses that are successful right now whose owners don’t feel any urgency to begin Exit Planning. This might partially explain why only 17% of owners have a written Exit Plan. When owners are comfortable where they’re at, despite not having a formal Exit Plan, they may struggle to plan with a longer view of their business futures. They may ask, “Why change what works?”

According to Chuck Hollander of Red Flag Advantage Business Consulting, strong businesses are a marriage between performance and health. During the BEI 2017 National Conference, he described the difference between business performance and business health as follows:

  • Business performance is the business’ ability to win today.
  • Business health is the business’ ability to win tomorrow.

Many successful businesses have indisputably strong business performances. Fewer of them have similarly strong business health. For example, many successful businesses meet or exceed various expectations based mostly on the owner’s presence. If that owner were to leave unexpectedly (via death, injury, or otherwise), the business would most likely suffer, if not fail altogether. In this example, the business may have a strong performance. But its health—its ability to win tomorrow—is in jeopardy because if anything were to go wrong with the owner, it’s likely that things will go wrong with the business.

Compounding that challenge is the fact that most owners are incredibly optimistic about themselves and their businesses. They may say, “We can worry about that when it’s time.” But the time to worry about the business’ health is now, especially if owners, their families, and others rely on the business to support their lifestyles.

Let’s look at three ways that advisors help owners marry business performance to business health and reframe the conversation.

Pinpoint problems without interrogating

Business owners typically don’t answer to anyone. They’re the boss, the decision maker, the interrogator. Owners whose businesses have consistently strong performances may question why they need an Exit Plan at all. Exit Planning Advisors approach this mind-set by pinpointing problems without interrogating the owner.

This doesn’t mean that they don’t ask questions at all. On the contrary, they ask probing questions that speak to the owner’s needs. Exit Planning Advisors motivate owners by guiding them toward identifying their problems themselves. They may ask an owner, “What is your biggest challenge?” or “What does independence mean to you?” These kinds of questions put the focus on what the owner thinks, rather than on what the Exit Planning Advisor does. More importantly, they tend to reframe the conversation with a focus on business health (i.e., planning for the future of the business, which includes the owner’s inevitable exit).

Calculate consequences

Once the owner has self-identified what they think are their challenges, based on the Exit Planning Advisor’s probing questions, the Exit Planning Advisor has a base to work with. At this point, Exit Planning Advisors can begin to calculate the consequences of owners’ inaction.

For example, an owner may say that for 30 years, their business has provided their family with a lifestyle they could have only dreamed of when they founded the business and that changing what they do wouldn’t make much sense. Rather than debating the owner, an Exit Planning Advisor might respond, “You’ve spent 30 years building this successful business. Is it protected?”

Even without going into vivid detail, the advisor has begun to help the owner calculate the consequences of not having an Exit Plan. The owner may begin to think about threats or risks they’ve ignored for years, because those threats and risks haven’t yet affected the business or simply because they don’t have a solution to address them

By calculating consequences, Exit Planning Advisors shift the owner’s focus to the business’ long-term health and how its health can affect the people and things the owner cares about most.

Contrast current solutions with recommended solutions

Once the Exit Planning Advisor has pinpointed the owner’s problems and calculated the consequences of not addressing them, they can provide recommendations. Exit Planning Advisors determine what the owner’s current plan is before they offer up a different plan. The owner’s current plan may help the business win now, but without a formal Exit Plan, it’s more challenging for the business to win tomorrow, especially if the business relies on the owner (as many of them do).

When contrasting, successful Exit Planning Advisors refrain from injecting their opinions. Rather than saying, “We’re going to do X,” they ask owners, “Based on what you’ve told me, what do you think about doing X?” Asking owners their thoughts about their plans for their futures gives them the agency to marry the success they’re having now to the success they want to have in the future.


  • Successful business owners may not feel an urgency to change what works. Exit Planning Advisors work to reframe that objection by focusing on the business’ long-term health and how that health affects owners and the things they care about.
  • Advisors can’t solve problems that owners don’t think they have, even if those problems are obvious to the advisor.
  • Successful advisors pinpoint problems, calculate consequences, and contrast the owner’s current solutions with the advisor’s recommended solutions to demonstrate value.