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As the leading innovators in the Exit Planning space, the BEI team talks daily to hundreds of advisors across the globe about their experiences with Exit Planning. More specifically, we talk to professionals in a variety of disciplines who are on the fence: sharing their aversions and hesitations about adding Exit Planning to their existing offerings. In digging deeper and monitoring these uncertainties about Exit Planning work, there are common responses that are typically along the lines of one of the following: “I can’t seem to get clients engaged or interested.” “I don’t have the bandwidth to do this myself or the staff available to assist with it.” “I don’t have much Exit Planning knowledge and don’t know what my training options are.” While each advisor has their reasons for concern, we feel it’s our duty to challenge them and knock down the roadblocks of reluctance with proof that Exit Planning can actually elevate an advisor’s existing offerings and broaden their reach. Addressing the Roadblocks  Lack of Clients and Client Interest  Half the battle of Exit Planning work is convincing your owner clients of the importance of planning for their future. Just as you might be hesitant to add Exit Planning to your core services, they are hesitant to admit they should start thinking long-term. The fact is that 100% of business owners will exit their business, whether they planned for it or not. Another fact that will be supported with statistics in the 2022 BEI Business Owner Survey (coming soon!) is that business owners are considering Exit Planning earlier in their ownership cycle than ever before. Not only does this mean that the demographic audience available to you is expanding, but the ways in which you can reach them are changing too. The key is to not throw in the towel too early in the process of seeking clients. Putting in the work to market your service as an effective solution to the problem that owners may or may not know they have might take some time. Some effective ways that BEI Members have found success have been utilizing their BEI license to enact automated e-newsletters, using assessment tools for discovery, installing a referral strategy and leaning into social media for outreach. Lack of Time & Bandwidth  The truth about time is that everyone wishes they had more of it. Just as you may be worried about the lack of time you have to add this service to your offerings, your clients stand by the idea that they don’t have enough time to plan. As their advisor, it is your job to acknowledge and articulate to them the dangers of not planning. By waiting, your client may not build enough business value to sell for their desired amount, they might neglect training next-level management, or some unforeseen death or injury might occur. Both you and the business owner will appreciate putting the time in beforehand versus wishing you had made more of a plan once the transition event happens. After all, the role of an Exit Planning Advisor is to optimize the business owner’s time based on their goals, which in turn, will help to prioritize your own time. From our perspective, there are two solutions that ease time and bandwidth challenges: adopting a repeatable process and connecting with a network of professionals. BEI Advisors adhere to the Seven Step Exit Planning Process and have found value in being able to repeat proven steps with their clients from identifying exit goals to business continuity planning and more. In addition, gaining access to the BEI Network allows for collaboration between advisors across different disciplines to share expertise and strategies. Lack of Exit Planning Knowledge & Training  Lack of knowledge and training typically falls back on having a shortage of time. However, it’s worth repeating that putting the time in will lead to more clients and more profitability in the long run. It’s easy to use inexperience as an excuse to tack on one more thing to your list. But, having a solid understanding of what options are available when it comes to Exit Planning training can determine how to fit it into your schedule. As far as BEI training goes, there are two paths to obtaining the Certified Exit Planner (CExP) designation, the industry’s highest certification to perform Exit Planning services: either beginning with one of three BEI Licenses and then doing the series of courses, or beginning with the series of three courses. To learn more about each path’s pricing, download the info sheet below.

Dear Business Owners…We See You mernzen Fri, 11/04/2022 – 08:00 For over 25 years, BEI has been dedicated to providing innovative and intuitive tools for business advisors to help them differentiate their practice and provide better solutions to their clients. Following suit, we typically address business advisors in our content, aiming to provide support and resources for them to start conversations with owners. However, this time, we are dedicating an article to all of the business owners on behalf of Exit Planning Advisors everywhere. As we talk to hundreds of Exit Planning Advisors each week, we want to share some common sentiments that we hear. Our goal is to assure business owners who might be on the fence about Exit Planning or teaming up with an advisor that you are always top-of-mind to them. Alternatively, this may also be helpful if you are an Exit Planning Advisor who is struggling to connect with clients or get your planning services off the ground. Or, maybe you have been doing this work for so long that this “letter” serves as a humble reminder of why you got started and the gratitude you feel when helping your clients reach their goals. Dear business owner:  We know you’ve got a lot on your plate.  Managing the day-to-day operations of your business is no small feat. It is no surprise that at the end of each hard day, it’s unlikely that you’ve checked a task related to Exit Planning off of your to-do list. We’d be willing to bet that Exit Planning ranks among the tasks that you plan to get to “later.” We can assure you that we don’t want to give you any more work to do. In working with us to create a comprehensive Exit Plan for your business, we intend to take the quarterback role. Meaning, in every Exit Planning engagement, we are prepared to manage the processes, advisor relationships, documentation, and more so that you don’t have to worry about it. In this business landscape, it is not enough to simply have a buy-sell agreement stashed away in your files, and it may cost you more in the long run by delaying Exit Planning any further. We resolve to assist you in building a team of advisors that will collectively map out and execute an Exit Plan that will help you make the most of your lives’ work. The Exit Planning Process revolves around you.  No matter your business, industry, size, or specialty, choosing what goals are most important to you is a crucial first step in Exit Planning. Whether these goals include reaching a target business valuation, ensuring financial security post-exit, developing a strong management team, retaining key employees, or something different, we vow to work with you to decide which goals are of utmost priority. These goals, plus the steps and resources needed to reach them, are what dictate every aspect of an Exit Plan. Exit Planning Advisors who are familiar with the BEI Seven Step Exit Planning Process begin with this goals assessment, and continue on to determine the asset gap and what strategies need to be implemented to improve business value along the way. In addition, it is likely we will work together to come up with a phase-based approach – in which we can select the most important problems that are keeping you up at night – and tackle those first. This way, we can build momentum as we remove some of those headaches from the list in the first phase, making it more manageable to move through each stage. Your priorities matter to us.  As mentioned previously, your goals and priorities matter to your Exit Plan, but they also matter to us personally. When we work with you to establish your values-based goals, we see our role shift from “advisor to the business” to include “advisor to the owner.” Since our relationship is with you, we hope that it will endure long after your business exit is complete. We are invested in your “next great adventure” too. Once the business transition event occurs, we anticipate advisory involvement in terms of making sure your expectations are exceeded and your post-exit lifestyle is going according to plan. We understand the magnitude of a business exit.  For most business owners, the sale or transition of their business is the biggest financial decision of their life. Due to the weight of these decisions, we may play “devil’s advocate” and ask the tough questions. We want to be able to look at aspects of your business from a different perspective. After all, your relationships with vendors, banks, family, employees, etc. are impacted significantly when you are no longer involved in the business. We have also seen firsthand the consequences of not planning. We could share examples and tangible results of clients whose business suffered due to enduring an unexpected life event or an inaccurate business valuation that could have fared better results with Exit Planning. We don’t want to see any of our clients end up in situations that don’t directly align with their Exit Planning objectives. We know you value progress.  Exit Planning Advisors, place high value in the monitoring process. Providing you with checklists and reports to track the movement of the Exit Plan is just as important to us as we know it is to you. We are trained to be able to articulate what things you will need to complete, how the action items consider your biggest concerns, and communicate who is going to implement which recommendations and when. Just like you have dedicated your life to your business, we have spent countless hours growing in our expertise to assist you with this business transition. Let us help you find a better way to plan. Sincerely, Exit Planning Advisors  Whether you intend to leave your business soon or stay involved forever, you need a plan for your future. The best way to create a successful plan is to work with a BEI-trained Exit Planning

Defining Your Differentiator as an Exit Planning Advisor mernzen Fri, 10/28/2022 – 08:00 One of the most common questions asked by advisors looking to expand their work and engage clients is how to differentiate themselves. It’s no question that the marketplace is oversaturated with messages that may be absorbing your marketing efforts. As discussed in a recent BEI blog about marketing goals, there is no one-size-fits-all approach that will magically dub you as your client’s most trusted advisor. However, at the core of mapping out the marketing messaging for your Exit Planning practice is determining what your “differentiator” is. Simply put, your differentiator is the unique value that you provide to your clients. Offering Exit Planning services in itself can be a unique value-add, but there are additional ways to position your value to stand out among your peers and to your clients and prospects. Defining Differentiation  According to a recent article by Hinge Marketing, a differentiator is defined as “a characteristic of your firm that separates you from key competitors and gives you a perceived advantage in the eyes of your target audience.” Oftentimes advisors or professional firms work really hard to come up with their “wow” factor, only to find out that it isn’t hitting the mark. Hinge Marketing suggests that there are three important criteria that should be used to evaluate a differentiator: It must be true.  Are the claims you are making about your firm and your services realistic? What policies, training, or procedures are in place that ensure the deliverability of your differentiator? It must be relevant.   The solution that you provide to clients and prospects should be directly related to the selection criteria they value most when looking for advice. They won’t choose to work with you if they don’t see what role you play in their decision-making process. It must be provable.  What tangible proof can you provide that will legitimize your claims? Prospects want hard evidence. All three criteria above look at differentiation beyond great products and stellar service. Here’s what Michael Kitces, perhaps the most well-known consultant to financial advisors, says about the great service argument: “It’s incredibly difficult to use “great service” as a differentiator. In fact, according to one recent study, 72% of all advisors differentiate on client service. And by definition, when the majority of advisors differentiate on the same point, it’s not differentiating anymore!” Sharing Meaningful Differences  As far as Exit Planning goes, we look at differentiation in two ways. First, there are a variety of ways that you, the advisor, can use yourself and your practice as a means to differentiate. Secondly, which will be discussed in a blog post forthcoming, is an assortment of ways to use your client and their consumer identity as a means to differentiate. The list below highlights a few meaningful differences between you and your competitors in terms of your offerings as an Exit Planning Advisor. Industry Specialization  Clients value advisors that know about their industry. Targeting a handful of specialty areas will help you develop credibility in the spaces that you work with. Be wary of focusing on too many industries as it could decrease credibility. On the other side of the coin, narrowing in on only one industry might backfire with changing economic conditions, so it is best to diversify, earning credibility in multiple areas. Clients also seek relatability. Similar to industry specialization, a role-based proficiency can serve as a powerful differentiator for your practice. Who you have experience working with and what they do in their respective companies can oftentimes be important to prospects. Unique Connections  As an Exit Planning Advisor, you will work with a variety of professional service providers during the course of each Exit Planning engagement. This network that you’ve built can benefit your client and can be used as a differentiator too. For example, if you have a business consultant that has worked alongside you on Advisor Teams, you can present this contact as a resource to clients who may also be seeking consulting services. In addition, your ties to the community or other organizations (charitable or professional) may be suitable as a differentiator as well. For example, maybe your firm has deep roots in a geographical location that could draw in prospects, or, perhaps your working relationship with other firms might separate you from your competition. Unique Offerings  Working with business owners who haven’t yet done much planning for their business exit often have a hard time seeing the bigger picture. As an Exit Planning Advisor, it can be a major competitive advantage for you to use your planning process to stand out. Exit Planning Advisors who are BEI Members have reported success in creating, modifying, and executing Exit Plans using the BEI PlanIt software. This is because this software allows advisors to produce valuable deliverables and unique planning recommendations that are customized to their client. In addition to being able to provide an Exit Planning Process, you can also provide a unique set of information not available to clients or prospects elsewhere. For example, as a BEI Member, you could make introductions to different advisors in the network, exclusive marketing materials, and more. Notable Accomplishments In Exit Planning, expertise is what you sell. Your clients are buying your services because you are solving a problem. In addition, a strong reputation is one of the only factors that can overcome a relationship-building challenge. As mentioned above, Exit Planning Advisors have unique offerings to provide clients. It would be doing yourself a disservice to downplay the training and education that you’ve put in to be able to provide Exit Planning. Staff Credentials It can oftentimes be hard to make the quality of your team a differentiator, but suppose your firm only hires people with exceptional qualifications or training. This could certainly be used as a differentiating factor. As far as credentials go, we have also heard of success that comes from a dedication to continued education or designations. For example, it could be framed

Employee Ownership in the Eyes of Exit Planning mernzen Fri, 10/21/2022 – 08:00 October is Employee Ownership Month and according to the National Center of Employee Ownership (NCEO), this month is dedicated to the celebration of the “undeniable benefits that employee ownership provides to employees, companies, local communities, and the nation.”  As leaders in the Exit Planning space, we felt a responsibility to touch on this subject as employee ownership is a piece in the larger picture that is Exit Planning. Employee ownership has piqued the interest of many business owners, and it is worth exploring and gaining a clear understanding of how it serves as one exit path that an owner could choose.  As is true with any exit path that is chosen, calling upon experts is crucial in implementing a successful business transfer. There are a variety of unique benefits and challenges that come with an employee ownership transition. Partnering with employee ownership experts can help you best identify candidates, determine the feasibility for your business owner clients, and monitor the changing market.        The Employee Ownership Market As the modern-day business landscape is ever-changing, many are unaware of what piece employee ownership has in the pie when it comes to types of business models in the U.S.  As detailed by NCEO in an article based on 2019 data, there are over 14 million U.S.participants on ESOPs, with just over 10 million that are actively employed and covered by ESOPs. A majority of privately-held ESOPs are S corporations, represented largely by service and manufacturing organizations.  Another statistic that shows market growth for employee ownership is that according to the NCEO, an average of 250 new ESOPs have been created each year since 2014. However, the total number of active ESOPs has been on a slight decline in recent years.  Lastly, in a recent BEI webinar presentation, representatives from Project Equity reported on a dramatic shift in the business landscape and exit ath preferences due to generational changes of baby boomer business owners nearing retirement.     Check out the statistics Project Equity shared, plus their take on employee ownership by watching the webinar recording!   

Is Exit Planning Only for Aging Owners? mernzen Fri, 10/14/2022 – 08:00 When an advisor is approached with the concept of Exit Planning, it is common to be met with aversion or disinterest in adding those services to their practice. Perhaps they feel the planning work they do is the same thing as Exit Planning, or maybe they feel their business owner clientele are not in need of those services due to their age or place in the ownership cycle.   However, as data has been collected on the state of the economy and the interests of the modern-day business owner, insights suggest that the market for Exit Planning is larger and more vast than ever before.  Every few years, BEI produces a Business Owner Survey. While the 2022 report is in its final stages of preparation, there is one insight we couldn’t wait to share:  Business owners are thinking about Exit Planning at an earlier age than ever before.  While this might not come as a huge shock, this insight suggests that Exit Planning Advisors will not only be working with business owners who are younger in age, but that they may face new obstacles and a different outlook than in years past.   Business Owner’s Outlook   While the above insight might suggest that younger business owners are in a rush to retire, that may not be the case. In a 2021 study by Wilmington Trust, it was reported that confidence in the future of the US economy has declined, as well as confidence in the ability to gain new prospects for their products and services.  With an emphasis on adopting digital tools and a rapidly changing business landscape, insecurities over technology have accelerated the owner’s interest in Exit Planning and they feel that getting out of their business may be a better solution in the long-term. Business owners are weighing the pros and cons of these factors to determine when the right time is for them to exit, leading them to consider their Exit Plans earlier than ever before.  How Exit Planning Advisors Can Help  Ease Anxiety  The above outlook and insecurities of a business owner are only heightened by the headlines. While you may not be able to fully settle anxieties or quiet the whispers of a possible recession, inflation hikes, wars, labor shortages, the list goes on; the reality is that the economy has both tailwinds and headwinds.  A 2022 mid-year market review by Edelman Financial suggested that these negative headlines don’t often tell the full economic story. For example, it was reported that in the first half of 2022: “Beneath the GDP contraction, consumer spending remained strong and nonfarm payroll gains averaged more than 480,000 per month, remaining the tightest job market in decades, driving massive wage gains.”  Headlines don’t always focus on the good news. As an Exit Planning Advisor, having a firm grasp on data, both current and historical, can help put the state of the economy into perspective for your clients. Encourage them to follow the data, not their emotions. Help Diversify  Exit Planning Advisors can help their clients earn greater value from all of their collective assets. It would be ill-advised to let younger business owners assume that even by contributing the maximum amount to a 401(k) plan each year, for example, would give them enough to be financially independent at age 50.  Encourage owners to diversify their assets and find additional passive income streams to more rapidly generate wealth that will sustain long-term. An advantage of working with an Exit Planning Advisor for a business owner is that they will build a team of advisors who can recommend different diversification approaches. These could include tax strategies, different kinds of insurance plans, or even establishing an estate plan, all to protect their wealth and their family in the future, even when the market rises and falls.  Determine Lifestyle Plans As is true with any business owner in any stage of their ownership cycle, if a younger owner desires to sell their business and retire, it is still crucial to determine what they want their post-exit life to look like.  The New York Times recently reported that millennials specifically dream of stopping work, or doing only fulfilling work, 15 years before their parents did.  However, these aspirations are colliding with the reality that they will likely not be able to accumulate enough savings to do so. Despite the struggle and the means to save more, the 2022 Retirement Insights Survey from TIAA revealed that millennial workers, ages 25 – 39 have nearly 40% confidence in their ability to plan for retirement. This indicates that business owners in this age group will need to be approached about Exit Planning at an earlier stage.  No matter the confidence level, the key for an Exit Planning Advisor is to really nail down what their plans for retirement actually are. Whether it’s the time to travel and spend with their family, the ability to volunteer more, or something else, knowing the dreams and lifestyle needs of a business owner aspiring to exit makes the difference in mapping out strategies to get them there.  Start Now  Having the knowledge that more and more business owners may want to exit sooner, or at the very least have it on their minds earlier, broadens the number of prospects you have for Exit Planning. Targeting business owners closer to the start of their business will only reap more positive benefits by lengthening the time you’ll spend with them doing Exit Planning work.  While every Exit Planning engagement is different and has timelines driven by each owner’s exit goals, time binds all decisions. It is advisable to start planning for an exit at least five years in advance, but 10+ years is even better. Knowing that, as well as the fact that younger business owners want to retire, may broaden your opportunities as an advisor and help you shift focus.    Conclusion:  As mentioned, the Exit Planning Market has expanded (beyond Boomers)

Cash Flow is complex, and it’s vital for business owners to understand it.  The complexity comes from the fact that it is fluid, flows in different directions, speeds, and can go off-course relatively easily.  Misunderstanding cash flow often leads to a reactionary relationship with it. To complicate matters, business owners face cash flow on two fronts: in their business and in their family. Being aware of the interdependency between the two is vital for reaching one’s financial security and goals.  When a business owner can see how changes in their business’s cash flow directly impact their family’s lifestyle, it can be the awakening needed to make the necessary changes for an effective succession. BEI defines a successful transition as one in which a business owner leaves their business on a desired date, for the amount they need, and to the successor of choice.  This success is achieved by addressing five critical elements: Target Departure Date Preliminary Financial Needs Analysis Target Successor Preliminary Business Valuation Future Cash Flow Estimate It is obvious that cash flow is a factor for the last element. However, understanding your business and personal cash flow is critical for all five elements. Target Departure Date  Starting with setting the target date, we know that this is likely to change and is heavily dependent on cash flow.  The owner could be ready to start the transition right away, while the cash flow of the business and family tells a different story. It’s not until they have truly defined their cash flow needs that a date can become solidified. Preliminary Financial Needs Analysis  In doing the preliminary financial analysis, we discover the real need of the business owner during retirement.  When you start developing goals, you uncover unrealized cash flow needs.  While some desires, such as volunteering, are charitable in nature, often the cost of big-ticket items like travel aren’t considered and can’t be overlooked when determining need. Frequently, the perks of being a business owner hides their family’s true burn rate, meaning the business owner and their family do not know what the owner’s real paycheck is.  Often the owner’s draw or reported salary is not one that fits with their current lifestyle. Whether big things like healthcare or a car, or little items such as cell phones, expenses can really add up quickly. In the end, the business owner may find that their lifestyle is thousands of dollars more a month than their initial estimate. It’s this interdependence between business and personal cash flow that often is overlooked and causes a misdiagnosis of “The Asset Gap” or the amount the business owner needs to make in the sale of the business. This misstep can really derail the whole Exit Plan.  Providing a business owner with a realistic lifestyle number can give them the confidence and clarity they need to move forward with the plan. Identifying a Target Successor           When identifying a successor, it’s important to realize that the two parties in the transaction both need to understand their cash flow, especially if it is an internal sale. When passing the torch to a family member or key employee, the current owner is hoping to leave a legacy and have the company carry on for generations to come. To best make this goal a reality, one needs to study how cash flow will change for the business under new ownership, and how owning the business will impact the successor’s personal cash flow. We know the business cash flow is going to change starting with the elimination of the current owner’s income.  Now this may just be redirected, perhaps to the premium on the loan that funded the sale.  We need to understand if the business can take on this debt. Purchasing the company also impacts the successor.  If they have the advantage of using the business to cover personal costs now, how does that impact personal cash flow and lifestyle? On other hand, if the purchase decreases income even for a short period, is that offset by the potential future gains? If the successor has a firm grasp of their own cash flow, these questions can easily be answered and any concerns they may have are easily overcome. Preliminary Business Valuation  In calculating a preliminary valuation, it could be discovered that the profit from sale of the company will not fill the gap that exists for the owner.  It is at this point that business decisions must be made.  Will the owner work longer, change their lifestyle to save more, or try to build the company to increase its valuation?   If working longer is not an option, then you need to look at potential cash flow changes at the business or personal level. Being able to look at what they can change such as adjusting the cost of goods sold, or determining how they can reinvest to grow the business, or even how a revised owner’s paycheck will impact both the business and their lifestyle, is essential to helping the owners make the decisions necessary to have a successful transition. Future Cash Flow Estimate Going hand in hand with the business valuation, estimating the future cash flow needs are also important. A professionally prepared cash flow forecast estimate helps advisors and business owners assess the likelihood of success of various exit paths. In any transition, the cash flow is used as a measure of the value of the purchase and establishes financial credibility for the Exit Plan. It’s the forward-looking planning in the Exit Planning Process that will give your client the confidence in their Exit Plan and empower them to make the best decision for their financial future. Conclusion Coming full circle, we see how ensuring a proper understanding of both business and personal cash flow for the current owner and potential successor during the entire succession process provides confidence and clarity to the Exit Plan. Working to improve cash flow and staying on top of cash flow management while working on the Exit Plan