In Today’s Business Ballgame, Do Your Clients Want Out After Strike 2?

Fri, 04/24/2020 - 08:00


Today, most of our successful business owner clients are now facing the second economic crisis of their careers. Strike 1, of course, was the Great Recession of 2008 to 2012. That recession, struck without warning, or should I say without awareness because there was plenty of warning? After it ended, many companies took years to recover and resume business as usual.

The novel COVID-19 pandemic truly struck the world without notice, and once again owners unwillingly and without any fault of their own, were confronted by a second great crisis (Strike 2). This crisis has hit the economy faster and harder than the events that triggered the Great Recession from 12 years ago. We still can only guess how long this crisis will last and how long it will take businesses to recover.

There are some things, however, we know for certain.

  1. Many owners who have endured two great recessions will likely be unwilling to face a third (Strike 3).
  2. A majority of owners (70%) are unsure or pessimistic about the U.S. economy and concerned about business sustainability since the onset of the COVID pandemic.
  3. Owners who are working to stem their losses have not yet created or finalized their recovery plans. They need a path to move forward.
  4. Advisors skilled in Exit Planning can and should help, probably in ways owners do not expect.

The Exit Planning Advisor’s Role in a COVID-19 Economy

You are in a position to help your clients deal with their business challenges—even as you manage your own. Perhaps many of your clients will assume that business planning, especially Exit Planning, is not worth their time until they figure out how to move forward as the economy recovers. We submit that they are mistaken.

Owners have to act immediately to battle the effects of the COVID crisis. Yet it is also true that most of our time, effort and recommendations as Exit Planning advisors are directed to growing businesses so that their owners can exit on their terms. That goal is perfectly suited to owners in crisis or in times of crisis and prosperity.

Getting Owners to Act

We suggest that you organize and schedule a planning meeting with your clients and their chief advisors to discuss strategies to restart their businesses and regain lost value. If a client already has a written business plan, use this meeting to review it and realign it to the new economic environment. If a client does not, this is an ideal time to create one because they are focused on the future.

Whether a client has a business plan or not, your meeting should include the following agenda items (adapted from BEI’s year-end planning meeting agenda).

  • Owner Objectives
    • What are the owner’s goals for the business?
    • Have goals changed since this crisis hit?
    • What are the owner’s goals once the crisis passes?
  • Preserving Value
    • Has the owner applied for all available government programs?
    • If the business continues to be profitable, discuss and recommend appropriate tax minimization tools and approaches.
  • Protecting Value
    • What steps can be taken to protect the owner from business creditors?
    • Is there a risk a key employee could leave and take key accounts, customers, or vendors?

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  • Promoting Value
    • What actions will increase or restore company cash flow and value?
    • Has the owner engaged with the management team so that all of its members are aware of the owner's commitment to sustaining and growing the business long term?
    • Discuss possible methods (or modifications to existing incentive plans) to reward the management team and other important employees for improving company performance. Set performance standards that restore business cash flow and value. Tie these standards to also achieving the owner’s financial security exit goals.
  • Other Value Drivers
    • Operating Systems: Are they effective, efficient, and up to date?
    • Diverse Customer Base:  Is the company’s customer base sufficiently diversified?  If not, the loss of a few key customers may spell disaster for the company and its owner.
    • If the business is stronger than its competitors, discuss the possibility of growing the business through acquiring weaker competitors.
  • Business Continuity Wealth Preservation and Estate Planning
    • What must be done to make sure that, if the owner dies or become disabled, the business will continue with minimal disruption to its cash flow? An owner’s unexpected and unplanned death when the business and economy are weakened would be the worst result imaginable for the business and the owner's family. What protections should be considered or strengthened to prevent adding this additional disaster to the COVID Crisis?
    • What will the consequences be to the business if the owner were no longer there? If a company relies on its owner's abilities or financial statement, the loss of that owner could also mean the loss of the business. Life insurance is an obvious solution.
    • If an owner has a larger estate, discuss gifting business interests while the business value is temporarily depressed.

This meeting agenda is the starting point for issues that you know to be relevant to each client. Because the topics are relevant, wide-ranging and owner-centric, discussing them can bring owners a sense of order in an uncertain time.

Note to BEI Members: Use the EPIC planning software to produce dozens of appropriate recommendations for each of the items listed on the agenda.

With your guidance, the COVID Crisis has the potential to motivate owners to take the actions necessary to create businesses that permit them to exit on their terms —before they face Strike 3.


  • Owners may be struggling with how to deal with the COVID Crisis. Schedule meetings with your owner-clients and offer assistance in overcoming the economic effects of the COVID Crisis.
  • Owners need to act swiftly. Using the organized approach we’ve described will provide them the road map to do so.
  • Your clients will appreciate your advice and help to restore value as a first step to exiting their companies on their terms. They want, more than ever, to exit the batter’s box before the pitcher throws another strike ball. Use the agenda in this post to help make that happen.