Closing the Gap

Every Exit Planner advisor knows that one of the first steps of the Exit Planning process is to figure out the gap between what a business owner currently has and what he/she might need by the time they finally exit the business. What assets can help contribute or might be a liability? Do you have the right management team in place? What are the areas to focus on first to ensure we are able to close this gap?

The Unintended Consequences

The decisions owners make when running or deciding the sell their business don’t only impact them. Their decisions will impact their entire staff, customers, and family. Don’t let the unintended consequences of their decisions impact their business or their key people.

In this podcast, John Brown and Elizabeth Mower discuss the consequences your business owner clients might face and the people that need to be informed of all major business decisions. 

The Exit Planning Process: Phase One 

Fri, 08/06/2021 - 08:00

Written by: JMongaras

The essential foundation for any business decision or event—hiring employees, launching new products, purchasing equipment, etc.—is planning. Planning is also the foundation for the projects we, as professional advisors, propose or undertake for our business owner clients. 

In the first phase of the BEI Exit Planning Process, we establish a solid foundation for gathering accurate information. To build that foundation, BEI advisors conduct a thorough analysis of the business to gain a clear picture of an owner’s goals for the business and themselves. They then collect accurate information related to an owner’s existing resources as well as the resources needed to achieve their goals and aspirations. BEI Members have access to lists of specific questions to ask owners to gather the information they need.   

Accurate Information for Advisors 

Regardless of the project, we undertake for our clients, we need accurate information to do our jobs effectively. If, for example, you are a financial advisor/planner, it’s essential to know the value of an owner’s assets. If you are an insurance advisor, you must know how much cash the business and the owner’s family would need to continue should the owner die before a planned exit. If you are a CPA, you are better equipped to help minimize taxes and determine how much the company will need in cash flow or financing if you know the owners’ goals. Accurate information will help develop the right plan for your clients.  

Learn how to improve your planning process with BEI's Planning License 

Accurate Information for Owners 

Certainly, advisors benefit from accurate information, but our clients rarely recognize the value of that information to them, primarily because we don’t tell them! We’ve found that even owners who are not actively thinking about their business exits benefit from:

  • Articulating what their wants and needs are 
  • Finding out how much money they’ll need to meet their goals 
  • Learning whether they currently have the money necessary to meet their goals

With your help, owners who do not yet have the financial resources necessary to meet their goals, gain the additional benefit of understanding the size of the gap between where they are today and where they want to be when they leave their companies.

If you are not yet comfortable conducting the first phase of the Exit Planning Process, much less telling an owner about its benefits, that’s understandable. You may not have experience asking the questions that lead to the information you need to complete the first phase. If that’s the case, we’d be happy to talk to you about the questions, education, and tools that we provide BEI members. 


  • Sound owner-based planning begins with: 
    • A deep and accurate understanding of owners’ goals for the business and themselves 
    • The collection of accurate information about owners’ existing resources 
    • An analysis of whether owners have the resources necessary to achieve their goals and aspirations 
  • Accurate information benefits advisors and owners. 

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Differentiate Your Practice by Asking the Value Question 

Fri, 06/11/2021 - 08:00

Written by: eswanson

Ask business owners whether their businesses are growing fast enough, and the answer will likely be no. That answer presents problems for both owners and their advisors. 

The Value Problem for Owners 

Problem 1: Put simply, most owners will not attain their long-held goals and aspirations for their businesses and themselves unless they own valuable companies. 

Problem 2: One or more roadblocks impede their efforts to grow business value.  

The Value Problem for Advisors 

Problem 1: BEI’s surveys of owners tell us that most don’t ask their advisors for ideas and help to overcome their roadblocks to growth. 

Problem 2: We believe that few advisors (unless they are business consultants) reach out to help their owner clients grow business value because our professional training did not give us the tools to help them address their greatest challenge: grow their companies at the pace necessary to achieve their dreams.  

The Question for Advisors 

What will it mean to you and your owner clients if you did acquire the knowledge and skills to help them to grow business value, minimize business risk, reduce taxes, and reach their goals and aspirations?  

  1. You will create a strong differentiator for your practice.   
  2. You will also create a revenue source that supports the growth of your practice at the pace you would wish to attain. 
  3. Most importantly perhaps, you will make a measurable difference in the lives of your clients. Let’s talk about that in more detail. 

Differentiate Your Practice to Make a Difference 

Once you acquire the tools to help your clients build business value, there are four steps to differentiating your practice: 

Step 1: Identify the value roadblocks that keep your clients up at night. 

Step 2: Tell them how you can help them overcome a single roadblock. 

Step 3: Engage to work with them to address the single roadblock. 

Step 4: Repeat. 

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Step 1: Identify the Problem 

When we ask owners to identify their biggest value-building challenge, some can give an immediate response. For others, we’ve found that a short, simple assessment both introduces owners to the most common roadblocks and helps them point us to their most pressing concern. Most of BEI’s Members use short-form assessments at their initial meetings with owners. One such assessment statement is:

“The current value of my company meets or exceeds the value I’ll need to retire comfortably.” Please indicate your level of agreement using 0 1 2 3 4 5 with zero meaning you strongly agree and five meaning strongly disagree.” 

Step 2: Offer to Overcome the Problem 

If owners indicate that business value is inadequate (0, 1, 2 or 3), Members ask: 

  1. What steps are you currently taking to grow value? 
  2. If value is not growing fast enough for you to reach your goals, what are you doing to increase the pace of growth? 
  3. Would you be interested in learning about some ways I can help you to increase value more quickly? 

Step 3: Address the Problem 

We’ll be discussing specific actions you can take to help your clients increase business value in future posts. It is central to much of the effort and work Exit Planning Advisors undertake. 

Step 4: Repeat 

Once an owner’s most pressing issue is resolved, BEI Members move on to an owner’s next issue. This helps create momentum and alleviate the overwhelming stress of trying to assess all problem areas of the business at once. Focus your efforts on one roadblock at a time.  

Value Conversations Lead to Engagements 

Asking owners direct questions about the issues that prevent them from growing business value (and by extension achieving their most important goals) has immediate benefits including: 

  • It demonstrates that you are more than just a CPA, financial advisor, or attorney focused solely on traditional representation: You are interested in your clients’ well-being.  
  • You are different than your competitors because you have initiated a conversation that few owners ever have with their existing advisors. 
  • These conversations about value lead to engagements. 

Of course, you must have the knowledge necessary to discuss and recommend designs and tools that drive business value. Over the course of the next few weeks, we will discuss the topic of understanding and recommending specific Value Drivers. 


  • Think of your profession for a moment. What tools or training does your profession give you to help owners grow their businesses? 
  • Asking owners to identify the roadblock that prevents their companies from growing at the pace they desire is a conversation they’ve likely never had before.  
  • The ability to suggest specific ways to increase business value is a key, perhaps the key, to differentiating your practice from your competitors.  
Follow us on LinkedInFacebook, and Twitter to stay up to date on all current Exit Planning news and trends.

Image of Man Facing a Wall with Question Mark illustrations

How to Increase Business Value

Fri, 06/04/2021 - 08:00

Written by: eswanson

Have you ever worked with a business owner that is the head salesperson, primary customer service rep, office manager, accountant, and janitor? Many small business owners have to wear many hats to be sure their business survives and eventually thrives. However, it can be difficult for some owners to pass along those important responsibilities to others in the workplace. As an advisor, it is your role to remind clients that they need to delegate their responsibilities to other key employees in order for a business to build transferable value.

Building Transferable Value

Transferable value is what your owner client’s business is worth, to someone else, without them in the business. Owners have to learn how to spread out their responsibilities to key employees to make the business run more efficiently during an ownership transition. Many small business owners try to manage all aspects of the business rendering the business worthless to the new owner. Taking the time to focus on a few of these critical Value Drivers should greatly enhance the business's transferable value and the overall transition process.

Common Value Drivers that Influence Transferable Value

A company with strong Value Drivers can demand (and receive) a higher multiple on the same amount of EBITDA than can a company with average Value Drivers. Value Drivers are specific business characteristics that drive growth. While each business is unique, there are nine characteristics that sophisticated buyers (e.g., private equity firms) look for when evaluating business value.

Next-Level Management

Next-level management appears first because it is the most important Value Driver. The others are ordered by how likely they are to affect business value, according to BEI Members.

Next-level management is the mother of all Value Drivers. The management team your clients start to build today will be the team overseeing the growth of the business and in the other areas that drive value for the business. Not only do your clients have to attract and hire this management team, but then they must also retain them through the transition of ownership. This can be accomplished through well-thought-out incentive plans.

This is not to say that your client’s current management team couldn’t bridge the gap between where the owner currently is and where they need to be to sell. With proper training and incentives, the current team in place could be the trusted team to help achieve your client’s business goals.

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Operating Systems Demonstrated to Increase Cash Flow Sustainability

The establishment and documentation of standard business procedures and systems demonstrate to potential buyers that a business can maintain profitability after the sale and after the original owner leaves.

Demonstrated Scalability

Could your client’s company improve its profit margins if it increased its revenue? This could be more difficult for certain businesses but not impossible. Brainstorm with your owner clients on potential avenues.

Diversified Customer Base

Potential buyers typically look for a customer base in which no single client accounts for more than 10% of total sales. The company could be considered a high-risk investment if a few of the top customers generate more than 40% of the company’s overall revenue.

Proven Growth Strategy

Developing a growth strategy helps attract potential buyers. A growth strategy could consist of the development of new product lines or augmenting existing ones, market plans, growth through the acquisition of other companies, expansion into new territories, or increasing manufacturing capabilities.

Recurring Revenue That is Sustainable and Resistant to Commoditization

It goes without saying that sustainable recurring revenue is a highly valued driver for any buyer. Having pricing margins resistant to commoditization is another significant opportunity for business owners.

Good and Improving Cash Flow

Help your business owner clients think of creative ways to improve cash flow in their business today. Simply offer ways to operate the business more efficiently: increase productivity and decrease costs. This Value Driver alone may not allow your owner client to achieve their objectives, but it’s an easy place to start. The success of this Value Driver heavily depends on the operation of the other Value Drivers you choose to focus on with your clients.

Competitive Advantage

Competitive advantage is the product or service that a company offers that is better or cheaper than its competitor. Find out why your client’s customers buy from them instead of their competitors and publicize this.

Financial Foresight and Controls

Many companies lack reliable financial reporting to the extent that buyers can’t determine what the company has or track the source of its revenue. This problem can typically be corrected, but not overnight. Additionally, sloppy financial reporting could indicate other underlying problems to a potential buyer, increasing the risk of the sale.

Another factor that plays a part is that without proper forecasting, the current stakeholders, key employees, management team, original owner, and new owner have very limited insights into the strategic growth plan.

Start Planning Today

Rome was not built in a day, nor is transferable value. Review some of these Value Drivers with your business owner clients and find out what is most important to them. The sooner you start these conversations on creating and growing transferable value with your business owner clients, the better.

Follow us on LinkedInFacebook, and Twitter to stay up to date on all current Exit Planning news and trends.


Money Isn’t Everything for Business Owners

Fri, 03/26/2021 - 08:00

Written by: eswanson

During the past couple of weeks, we have reviewed the benefits of setting goals as well as discovered a few different types of goals to set with your business owner clients. Now that we have established how to set foundational and universal goals with your clients, we can tackle the third goal type: values-based goals. 

Values-Based Goals 

For most owners, a successful exit is not just about the money. While every owner will need to establish the common goals of departure date, chosen successor, and post-exit income, many will also have less objective goals that are equally as important. These values-based goals tend to be non-monetary and less tangible than the universal goals. 

Values-based or “aspirational” goals are often the most influential of the three types of goals because they are related to an owner’s personal values.  These goals often influence the exit path and successor choice by putting the company in the right hands to continue the culture and values and of the exiting owner. 

Some common values-based goals that you will want to explore with your clients include: 

  • Family harmony 
  • Owner legacy 
  • Acknowledging employees 
  • Taking a business to the next level 
  • Minimizing taxes 
  • Maintaining culture 
  • Community involvement 
  • Quality retirement 
  • Charitable intentions 

This type of goal can also often be overlooked. Unless advisors help owners uncover their core values early in the process, they often remain subdued throughout the planning process. These core values will inevitably emerge just before the ownership transfer. At that point, it is often too late to address them, and the transfer process stops, or the owner’s goals are unfulfilled. 

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Why Are Values-Based Goals Important?  

Understanding what values are most important to a business owner as they consider the continuation of their business without them will help create the path they need to be on. Whether they are focused on supporting their employees or giving back to the community, clearly defined values-based goals will help determine if a particular exit path lends itself to a more successful outcome. 

Values-based goals are "softer" but more emotionally compelling. Considering most owners have a strong emotional attachment to their companies, there is no surprise that emotionally driven goals can have a huge impact on the future of the organization. An exit path that reaches your client’s exit deadline and financial goals but puts your client’s employees at risk for losing their jobs and has an impact the local economy may be a values-based deal breaker for your client. Knowing these non-tangible goals from your client early in the process will save you and your client time and establish clearer expectations for what the owner really wants.  

How to Establish Values-Based Goals 

Ask questions! The only way to understand what is truly important to your business owner clients is by diving in and getting them thinking about their priorities. Generally, Exit Planning Advisors kick off this discussion by asking owners to: 

  • Describe their vision for their companies without them. 
  • Describe their vision for themselves without their companies.

Visions can be difficult for owners to clarify and quantify, so as their advisor, you will sometimes need to push them to think a little harder about the future they want for their business and themselves. Ask them a series of follow-up questions to get to the heart of what they value. For example: 

  • Why do you wish to maintain the company's culture after you exit the business? 
  • What aspects of the culture do you want a buyer to maintain? 
  • Do you have ideas on how to accomplish that? 

Only upon fully understanding an owner's aspirational goals can advisors begin to recommend the appropriate actions to achieve them. 

In addition to clarifying the owner's vision, asking questions establishes the advisor's interest in achieving their clients' wishes. When owners are confident that their advisors understand and take a personal interest in working with them to reach their aspirational goals, they are far likelier to engage them and move forward with a process that achieves all their goals. 


Defining goals is the first step of a planning process that can set you up to creating a successful exit strategy for your owner clients. As you work through and set these goals with your owner clients, you should also be working through the next step in the Exit Planning Process: determining resources. When these two steps are completed, you can then proceed through the rest of the Exit Planning Process to create a Comprehensive Plan or work on a Phased Plan to resolve your owner’s hot-button issues first. Either way, you and your client will now be aligned and in agreement with what the goals are moving forward.  

Follow us on LinkedIn, Facebook, and Twitter to stay up to date on all current Exit Planning news and trends. 


Setting Foundational and Universal Goals

Fri, 03/19/2021 - 08:00

Written by: eswanson

In our last blog, we discussed the importance of the goal creation process and the vast number of benefits business owners and their advisors can expect to see from this process.  Now, let’s dive into what kind of goals you can help your business owners create.  

The goal-setting process helps your business owner clients understand what they need and what they want to attain before they leave their business. Their foundational goals will help them track what must happen before they exit. These goals typically stay consistent throughout the planning process. Their universal goals will help them achieve what they want.  Universal goals can fluctuate based on the changes that the owner wants. Help guide your owner clients to consider what they want their life to look like after the sale of the business.  

Foundational Goals  

First and foremost, the primary goal of Exit Planning is to figure out a way for owners to gain the financial independence they need outside of the business. This is the financial security owners must attain before exiting their business to maintain their lifestyle, not necessarily how much they want.  To get an accurate representation of what your owner client’s foundational goals should look like, encourage them to be precise, accurate, and realistic.  

When engaging clients in Exit Planning, every action you take with owners stems from the goal of financial independence. Unless business owners can exit their businesses with enough money to support their post-exit lifestyles, they cannot adequately pursue their other goals.  

As experts, you should show business owners three reasons why financial independence is the most important goal in Exit Planning. Your clients having financial independence means: 

  1. They can sell or transfer ownership of their businesses with enough money to fund their post-exit lifestyles indefinitely. 

  1. They have enough after-tax money from their business exits to never have to work again unless they choose to. 

  1. They can still provide for their families if they die, before their planned exit date. 

In short, financial independence gives business owners the freedom to provide for themselves and those they care about after they exit their businesses. 

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Universal Goals 

Another type of goal to help your business owner clients set is universal goals. This type of goal will help your clients decide what they want to achieve upon exiting. They are called universal goals because almost all owners want to achieve these goals upon their exit.  

We suggest that you begin by asking your owner clients these three questions to help uncover their specific universal exit goals. 

  1. After you leave the business, how much money do you want each year for the rest of you and your spouse's life? 

Whether you are an experienced financial planner or have one on your team of advisors, it’s critical to make the distinction with your clients between their financial needs and their financial wants. Many owners can leave their businesses today and meet their financial needs after they exit. However, most owners will want a lifestyle post-exit that requires growing their business value, which takes time. Having the expertise to advise owners on the financial gap between their needs and wants can make all the difference in the success of their Exit Plan. 

  1. When do you want to leave your business? And what does "leave" mean? 

Owners often have a desired departure date in mind. Often that date is based on some calculation of their readiness to step away from the business they’ve built and the time they think it will take to plan their exit and transition the ownership. The departure date from the business is one of the goals that is most often revised by owners due to the fact that it is typically secondary to their financial goals. 

  1. Who should be the new owner of your company? 

All owners must decide who they want their successor to be. By asking your clients the right questions in the beginning of the planning process, you can determine the advantages and disadvantages of each exit path and help your clients make an informed decision. As you move forward with your clients, they may gain some clarity on what they want to accomplish for themselves and their business and shift their decision. This is not uncommon and with proper planning, their wishes for the business and their exit won’t be completely derailed.  


Each of these goals are critical to the success of the overall Exit Plan. Don’t overlook these or rush these steps as they lay the foundation for the rest of the Exit Planning activities you will undertake with your clients. 

Tune in next week to get a closer look at the last type of goal we recommend you help your clients create: values-based goals. 

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