In this edition of Behind the Scenes, we interview Lawrence K. Bogar, AEP, AWMA, ChFC, AAMS, LUTCF, an associate member of MRA Advisory Group. Lawrence provides comprehensive continuation planning services for business-owning individuals and families. Lawrence designs and implements personal and risk management programs. Knowing that many family-owned businesses fail to survive to the third generation, Lawrence also designs exit, continuation, and succession planning for small to midsize privately held businesses.

Why did you decide to work with business owners to help them exit?

Lawrence: I started out in a firm that specialized in estate planning and risk management for individuals. When the estate tax basically went away in 2010, that eliminated most of my customer base. When the tax came back, it was still high enough that it wiped out 85% of the customers I worked with. I was at an age where retirement wasn’t an option, so I had to ask myself what Plan B was going to be. It turned out that a majority of the clients I worked with were also business owners. They had assets they wanted to and needed to transfer from one scenario to another, from one generation to the next. I saw a need with those clients in transitioning the business. I was already helping them with estate planning and risk management, so it was just a matter of pivoting to focus on the business transfer itself.

Things change quickly and you must be able to pivot what you are doing with clients in order to be successful and to show your value to them. Just in the last year and a half, we went from talking with clients about transitions, exiting their business, business continuation, and now we are focused on talking to them about survival. No one was prepared for a shutdown. With businesses going through bankruptcy or closing their doors entirely, it’s requiring new demands and we have to try and stay ahead of that.

Tell us about an unexpected challenge you have encountered working with business owners. How did it impact you or your practice and how did you overcome the problem?

Lawrence: One of the biggest challenges I face is actually getting the business owner or owners to understand that one day they’re going to leave the business. They will either walk out or be carried out, but either way they are going to go out the door. Most think that they will live forever, or they will be involved in the business forever, and so you to get them thinking in realistic terms.

Then once you get them to understand that they can’t continue forever, the next thing is looking at if they created a "value business" or a "lifestyle business". With businesses that manufacture a product, there is the business, but there are also assets that you can sell and transfer ownership to. But there are also businesses where the owner is pulling as much money out of the business as they can, but they may not have the assets to sell that would allow them to continue the lifestyle they maintained by running the business. That’s a very big challenge because then you have to work with them to restructure the business and build that value they need. 

Another challenge that I see that has to be overcome with planning is blended families. One of the first cases I had years ago was a gentleman that built an entertainment complex with a nice restaurant. He didn’t want to hear anything about estate planning or Exit Planning. Well, as it sometimes goes, he unexpectedly passed away. As we found out later, it turned out he and his wife had separated 20 years prior, but never legally divorced. The woman he had been with for 17 years and built the business with didn’t have legal ownership of anything. To make matters worse, the son that took over the business had no knowledge of how to run the business. Six to nine months later, the son had run the entire business into the ground.

That situation helped me realize that you have to really dig deep past the surface-level conversations because things can get complicated quickly. That was an area I really had to work on because I am a technical person, and so by nature, I want to check things off a list and move on to the next. I really had to learn how to appreciate, understand, and work with the emotions of the owners and the families. On paper, everything may have been done right but tapping into the emotional drivers of the client is where your value is provided. The earlier you discover those drivers and any landmines in the path, the easier it is for you to deal with it.

How has your involvement with BEI impacted your practice?

Lawrence: BEI is the backbone. For me, you cannot get the job done properly without the infrastructure that BEI provides. EPIC is the foundation that gives me everything I need in a software platform and spreadsheets. I’ve seen cheaper versions and other companies that have tried to produce something that will get it done, but they are lacking. BEI saves me the headache of trying to invent the infrastructure I wasn’t qualified to do.

How has adding Exit Planning to your practice broadened the work you do with business owners?

Lawrence: The conversations with owners shift because you have to get them thinking about things differently than they did while building and running their businesses. I always pose the question, what happens if you’re not here for the next month? If their answer is they’ll close the doors, then the business isn’t worth anything without them. Then you have to get them thinking about 90-95% of their family’s net worth is tied up in the business, and if that goes south it can be life-altering for the entire family. Almost every owner will tell you what they pay themselves is what they live on, but the reality is most owners have expenses that go through the business. So, I always tell people, "I need to know what you actually require to maintain your lifestyle to then determine whether or not the value of your business will provide you with the resources that you require to maintain that lifestyle.” Whatever lifestyle an owner wants after exiting can have a roadmap to get there, but you need to be very clear where the starting point is.

Do you have any advice for another advisor in the industry?

Lawrence: The first thing I would say is that you truly want to develop your relationships with other centers of influence like accountants, attorneys, risk management people, etc. The caveat is that the longer-serving COIs have relationships they are already comfortable with, and they are already winding down. You need to find new people who are in the same boat you are, looking to grow their practice and develop new clients. Have lunch with an attorney you're looking to build a relationship with, or with a CPA you're looking to build a relationship with, or evaluation specialist, or a risk management person, or a prospect. That is an investment of your time.

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

In this week’s blog, we interviewed Kathleen Hoye about the complexities of inside transfers. Kathleen Hoye is a Consulting Principal at MCM CPAs & Advisors in Louisville KY, where she directs their Family Business Advisory Services. She is a Fellow of the Family Firm Institute where she holds an Advanced Certificate in Family Business and Wealth Advising and is a Certified Exit Planner through the Business Enterprise Institute. Kathleen has 25 years of experience providing technical assistance to businesses of all sizes and industry sectors as an economic development professional and practitioner.  

Why did you decide to work with business owners to help them exit?  

Kathleen: We invited John Brown to speak at one of our events when I was directing the Family Business Center (FBC) at the University of Louisville back in 2017. Since the FBC primarily focused on educational resources for the family business community, I had him come out and speak about the Exit Planning process. John’s approach in ensuring a successful exit is to focus the process on the current owner. An owner-first, versus a family-first or legacy approach, is not the typical way in which family business advisors approach transition.  

John’s approach offered a single point of focus for really all the succession work that I was already doing with families up until that point. It presented an opportunity to get families aligned by focusing on making sure that mom or dad could retire successfully. From there, I sought to better understand what the current owners really wanted, and how they wanted their succession plan to take shape. I was then able to help owners understand how potential plans could affect the rest of the family. Many of the organizations I worked with had the misconception that the standard Exit Planning model was too dismissive of family dynamics or legacy considerations, but this was merely a different pathway to get there.  

Tell us about an unexpected challenge you have encountered working with business owners. How did it impact you or your practice and how did you overcome the problem?  

Kathleen: One of my biggest challenges is applying the Exit Planning model to family firms with multiple owners. It’s not uncommon for me to work with more than four different owners, get them all to agree on an exit strategy, and still meet the needs of the enterprise. I often feel like I am playing three-dimensional chess.  I am currently working through a plan right now with a group of eight sibling owners and I have been interviewing them individually to understand each of their goals. The planning process is a lot more time-consuming and complicated when you are working with multiple owners with different goals, motives, and aspirations.  

Another challenge I come across regularly is the misalignment of family members. I will start an Exit Planning project only to discover the chosen successor wants nothing to do with owning the business. There's this notion of predictive trust where you think you know what someone is thinking, or what they're going to say, because you've known them for so long. So, you never really bother to ask or verify. This is exactly why you need objective, third-party team members to come in and ask the obvious questions about the family’s concerns. 

How has your involvement with BEI impacted your practice? 

Kathleen: I have found that I have to educate my clients while I am marketing my practice If an owner or their advisor is ill-informed of the current tax changes, potential exit paths, or how to construct a proper buy-sell agreement, an owner could be putting a lot more at risk than they think.  

I have especially found the BEI newsletters to be a great tool to help educate my current clients and a great way to attract new clients. I customize the newsletters to only send out family business-focused content. I use the BEI Resource library frequently, whether it's looking up an article on compensating key employees or creating a business continuity plan.  

Because of COVID I haven't had as many opportunities to go to in-person conferences, so I get a lot of value from being involved in the monthly virtual practice groups. We come from different backgrounds, and that perspective helps when we run different scenarios past one another and talk about ideas.  

How has adding Exit Planning to your practice broadened the work you do with business owners? 

Kathleen: Expanding my practice to include Exit Planning services has definitely opened up the opportunity for more referrals because there are people that don't even consider themselves to be a family business coming through my door. Because I now have my CExP certification, I can help with a standard transfer, but what I have found is there is a family element in just about every business transition, even if they don't consider themselves a family business. 

For example, recently I was presented with a classic estate planning project where the spouse has voting control of the business in the event of the owner's death. Like we have seen time and time again, the owner and his wife never had that conversation. Once they realized that the wife didn’t want voting control, they had to come up with an alternative plan. I have learned to always consider what the unintended potential impact on the owner’s family may be based on their current transition plan.  

What advice would you give a new advisor? 

Kathleen: I still haven't been able to crack the code on how to get all the owner's advisors to the table at the same time. It’s challenging to not let the group of advisors fall into silos with the business owner in the middle. My advice would be to establish yourself in the quarterback role with all the team members as quickly as you can.  

I would also suggest networking with as many people in other related disciplines as you can. Learn about how they approach a business transition. Keep reading, stay curious, and participate in networking opportunities where you can be part of the discussion. 

Nobody works hard their whole life to build a business only to have it destroy their family. It's extremely important that business owners have someone who knows how to bring the family together and have those essential discussions, and create an atmosphere where people can weigh in to buy in. Even if an owner may not think their business is a family business, their decisions are going to invariably affect their family one way or another. That’s why you hear people say “Communication is the Holy Grail” when it comes to business-owning families.  

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

In this blog series, we discussed how you, as a business advisor, are the guide in your owner client’s journey. You have the task of understanding their challenges, formulating a plan, and now you must call your owner to take action to execute said plan.  

In most great stories that inspire us, the protagonist won’t act on their own to solve their problems. They must be presented with a challenge by an outside force, and they need a little push from their guide to commit to making a change in their lives. Olympians, for example, don’t win gold medals overnight. It takes years of training, dedication, and an overwhelming amount of encouragement from their coaches to reach their goals. Their coaches provide them with a strict plan to keep them on track. As a coach, it is your responsibility is to make sure your hero is hitting their marks, dedicated to the process, and preparing to take action to reach their own business goals. Remind them every day why they hired you to take them to the finish line.

A good guide, or coach, will remind the client that they understand their challenges and aspirations. When you meet with a client and get an understanding of where they are today and where they want to be, you’ll want to find a connection with that owner. Whether you have been in the owner’s shoes before or have worked with other business owners in similar positions previously, show your clients empathy and remind them of your many years of experience. Give them data or testimonials from other business owners that you have helped get across the finish line. Prove that you are qualified to help your client achieve their goals and live the life they have always wanted.  

Help Customers Avoid Failure 

Humans feel the pain of a loss twice as intensely as the comparable pleasure of a gain. Because of this, owners work incredibly hard to avoid losses in whatever way possible. Help your clients understand what is at stake by not engaging you in your planning process to help them exit their businesses successfully. What do they have to lose if they decide not to work with you? Highlight what your clients are going to risk if they do not act today! Share stories of clients that waited too long to act and the resulting hardships they faced. Show your client the cost of not doing business with you. Without preparation, it won't matter if they don’t make it to the finish line – they may not even make it into the race!  

Happily, Ever After 

Highlighting what is at risk is important. However, you must keep the balance between positive and negative messages. An effective way to do this is to paint a picture of a successful outcome with a client. Highlight what they can achieve with your assistance. You are the guide to help transform your clients and achieve their goals. No longer are they a mediocre athlete. With your plan, motivation, and experience, they are now an Olympian standing on the podium receiving their gold medal. Help them envision what being the hero for their families, their businesses, their employees, and even their communities would mean. Never assume that your prospects and clients understand the value of the solutions you are offering them and how it can change their lives forever. You have to tell them explicitly.  

Give them an example of an experience you had in the past with a business owner “just like them”. This owner had a similar business and goals for the exit of their business. Explain to them in detail what the plan was and the ultimate outcome. What was that owner able to gain from taking action and working towards their goals with you as their guide? Ask your current client how they would feel if they were to address some of their own challenges to reach their goals.

As a bonus, you have the satisfaction of knowing your part in helping them get there. There is nothing like seeing your clients achieve the life they have worked so hard to have. And the cherry on top for you? Ensuring your clients achieve success also enhances your referral rate.  

Character Transformation 

You are assisting in the transformation of the main character in this story. The hero in your story would never have been able to get through this frustrating journey without your guidance and expertise. Don’t underplay that. Depending on their exit path, your business owner clients are transforming from an overworked business owner that is too busy working in the business to think too much about the future, to enjoying the fruits of their labor by positively impacting the lives of those around them and exiting towards the lifestyle of their dreams.  

Takeaways 

• Share data, testimonials, and statistics of other planning work you have done with clients. 
• Call your clients to action by telling stories of clients that waited too long and of clients that worked with you to reach their goals. 
• Be sure to highlight what negative outcomes business owners can expect if they don’t act and choose not to work with you.  
• Balance this statement though with the positive effects a business owner can expect to experience when they decide to work with you. 
• Don’t assume that your prospects or clients understand the value you are going to provide them – tell them!  

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

In the classic movie, Wizard of Oz, Dorothy finds herself in unfamiliar territory wanting nothing more than to return home to Kansas. Glinda, the Good Witch, guides Dorothy and helps her avoid the villain (the Wicked Witch of the West) and reach her destination, the Emerald City. Dorothy is given three simple steps to follow to get home: 

1. Follow the yellow brick road 
2. Go to the Emerald City 
3. See the Wizard of Oz 

In the end, Dorothy follows the steps she is given, faces unexpected adversity along the way, and ultimately discovers that she had the power to go home within her the entire time. Dorothy was her own hero. 

When you are working with clients, the same concepts apply. You must first decipher their end goal and then give them simple steps with how to work with you. What is their “yellow brick road” that will lead them to where they want to be?  

Which Path to Choose 

There are often many paths a business owner can take to achieve any number of their goals. As we mentioned in our last blog, asking the right questions is critical to determining which path to take. At surface level, the path might seem straightforward. It’s only after you ask the questions that you uncover underlying issues an owner might not feel comfortable admitting at first. Unless you are aware of what obstacles an owner is facing and what their goals are, you could be guiding them down the wrong path.  

Sign up for our FREE Exit Planning Toolkit to get a list of questions to ask your prospects and clients at this stage of the planning process.

Be sure to identify what is most important to your client so you can recommend the right exit path. Maybe they have strong family values and would like to have their children take over the business one day. Maybe your client wants to ensure that their employees receive ownership stock so an ESOP (Employee Stock Ownership Plan) might be a path to investigate. Not every yellow brick road is right for each owner.  

What Is The Process? 

This is the time to start evaluating your client’s gap. Where are they today and where do they want to be when they are ready to exit their business? Once you have collected as much information as you can from your client about their business and their goals, you can start laying the bricks for their path. Prioritize what steps of the process need to be completed first. What is most important to your hero? What keeps them up at night? Solve these issues first so your owner can have more time to focus on the remaining steps.  

While putting together the recommendations for your client, also think about the “what if” scenarios. Along Dorothy’s journey, for example, she runs into some unexpected hurdles. She was taken by the wicked witch, she was attacked by some terrifying flying monkeys, and her original plan to return to Kansas didn’t work as planned because she missed the hot air balloon. Turns out with some help from her guide, she was able to overcome these challenges and reach her goals anyway. She had the strength, determination, and problems solving skills the entire time, and didn’t even realize it! Her guide just gave her an alternative way to get there. Have a continuity plan in place for those unexpected scenarios.  

Similar to planning an exit path, Dorothy also meets a lot of companions along her journey. Each member of her team also benefits from helping Dorothy reach her goals. The Tin Man needs a heart, the Cowardly Lion needs courage, and the Scarecrow needs a brain. In every Exit Plan, you will need the help of many other advisors that are all trying to help your client achieve their goals. Be sure you have the right team in place that has the same goal in mind.  

Have An Agreement 

Now that you have established your team, be clear on exactly what each step of the journey entails. Who is involved, what are the deliverables, and what are the deadlines? Where are you laying each brick in the road and where are you trying to go? It is your responsibility to ensure each member of the team understands and commits to the plan. As the guide, you are committing to helping this advisor team through each step of the process to achieve their goals. The entire team is trusting that when something goes wrong, you will have a backup plan already laid out.  

Your client and the team of advisors must agree to stick to the deadlines or risk not getting to the Emerald City and seeing their dreams come to fruition. Clearly communicate the steps of the process, the expectations you have of them, and the expectations they should have of you. Repeat the priorities to them often. When you have an agreement on the priorities, you won’t lose sight of the goal.  

There’s no place like seeing your clients realize their goals are achieved, and the satisfaction you get from being a part of that process means you reach your goals too. Tune in next week to discuss the final steps in the hero’s journey! 

Takeaways  

• Uncover as much information you can to create the right plan. The more information you have the clearer the path will be.  
• It is critical to have a clear path laid out with specific deliverables, deadlines, which team members are involved in each step, etc. 
• Be sure to always have a contingency plan in place for when unexpected scenarios arise.  
• Get the right team on board that all share the same goal.  
• Have an agreement in writing of the clear path and what each team member is committed to completing. 

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

Frodo never would have been able to destroy the ring and save the Shire without Gandalf. Luke Skywalker would have never defeated Darth Vader without training from Yoda. In every great movie, there is a main character who finds themselves faced with a dilemma. It is often clear, or they learn through failure, that they need assistance to overcome this challenge and achieve their goals. Somewhere along the way, they meet a guide, their “Yoda”, to help them overcome their problem. This guide sets them on the right path and gives them a clear call to action to achieve their goals. It is only then that the main character can be their own hero by deciding to take the guide’s advice and discover success.

Exit Planning often follows the same series of events. A business owner realizes they have some area of the business they find challenging. They then call in an advisor to help them solve their problems. The best way that advisors can approach the planning work and engage them in additional areas of planning long term is to give the owner a path that empowers them to be the hero in their own exit story.

Often advisors think the best approach to marketing their practice is by sharing all the wonderful skills they have. The reality is the best way to have the greatest impact on the owner is understanding what they want and what their challenges are. Then you can implement a repeatable process that guides them to achieve their goals.

Understand Your Main Character

Every owner wants to exit their business one day and get what they think they deserve for the blood, sweat, and tears they put into their business. Most owners have worked many years, sometimes their entire lives, to build those businesses. They want to get what the company is worth and sell the business on their terms. On the surface that may seem simple. However, “on your terms” can have a wide range of definitions and require different planning scenarios. To really be a guide for these owners, you must ask questions to understand the other goals they have and the problems standing in their way, and then relate that back to the process you can provide them.

Asking the right questions is critical to uncovering their internal and external problems and the burdens keeping them up at night. Some examples to get the conversation started are:

• What are your expectations of us working together? What would you like to see get accomplished?
• What are your concerns in the business right now?
• Tell me why solving this problem is important to you.
• How would it feel if you didn’t solve this problem?
• If you could change anything in your business today, what would it be?

Format your questions to get meaningful responses from the owner about their biggest struggles and their feelings on how overcoming these challenges will impact the business and their lives. With this knowledge, you can show them a plan and how you can be their guide to success.

Who is the Villain?

Every great story has a villain. There comes a time in every story where the characters need to come together to fight a common enemy. The “villain” in your client’s journey is often their own misconceptions of the planning process. With Exit Planning specifically, many owners don’t understand the process or think they can sell their business tomorrow for as much as they believe it is worth. This is simply not the case. Exiting a business takes time, a healthy understanding of the process, and experts on your advisor team to help along the way. As the guide in this journey, your primary role is to help fight this villain by educating owners on the process, highlight their desired timeline, and introduce them to the right resources.

Even Yoda Wasn’t a Lone Guide

Becoming a helpful guide in this story starts with understanding your client’s exact needs. By understanding their goals, expectations, and timeline, you can establish the right path to guide them down. But remember that even the greatest guides with the clearest paths need assistance. You don’t have to be an expert in every aspect of the business or the recommendations for that business. Bring in experts to your Advisor Team when the situation warrants it. Having a stronger, more robust team will only make the journey that much more seamless.

How do you bring this all together to show the business owner you are the guide for them? Start with empathy. Show that you understand what they are feeling and that they don’t have to do it on their own. Remind your prospects and clients of the many years of experience you have and give them examples of the many owners you have assisted in the past. Tell them how previous clients have been able to go to their employees, families, and communities and be the hero that solved all the problems – but only with you as their guide.

Takeaways

• You will have a stronger marketing message for your practice by first truly understanding your clients and their needs.
• Ask many open-ended questions to thoroughly understand their problems and who their villain might be.
• By showing empathy for your client’s problem and emphasizing the authority you have to be able to solve these problems, you will have credibility as the guide on their journey.

In this segment of Behind the Scenes, we interview John Dini, Founder and CEO of The ExitMap®, on how he has made some critical changes to his practice to ensure he receives the information he needs to properly create an Exit Plan in a timely manner.

John is a consultant and coach to hundreds of business owners, CEOs, and presidents of companies, with over 12,000 hours of delivering face-to-face, personal leadership and Exit Planning advice. He is a serial entrepreneur but prefers the term "chronically unemployable." John is the author of the award-winning books "Hunting in a Farmer's World; Celebrating the Mind of an Entrepreneur" and "Your Exit Map: Navigating the Boomer Bust", as well as "11 Things You Absolutely Need to Know About Selling Your Business", now in its second edition. He is also the creator of The ExitMap®, a proprietary Business Exit Planning System with affiliates throughout the United States. He holds a Bachelor of Science degree in accounting from Rutgers University, an MBA from Pepperdine University, and seven additional certifications in Exit Planning, behavioral analysis, management, facilitation, and coaching.

Why did you decide to work with business owners to help them exit?

John Dini: I was the most successful operator of The Alternative Board® peer groups in that organization's history, managing up to 15 Boards of business owners. One of my contract facilitators was a business broker. When he bought a company, I purchased his business brokerage. I quickly discovered that most owners were poorly prepared for the transition from their businesses. I began designing an assessment system to better screen potential listings. While creating The ExitMap, I attended a BEI Exit Planning Boot Camp, and quickly realized that Exit Planning was far more suited to my behavioral style. I gave up business brokerage in 2012 to pursue Exit Planning full time.

Tell us about an unexpected challenge you have encountered working with business owners. How did it impact you or your practice and how did you overcome the problem?

John Dini: After coaching over 400 owners, there is not much that is unexpected anymore. But when I first started my career, I quickly realized how frequently I had to chase down basic information from my clients. There always seemed to be something missing or a long delay from the client retrieving the information I needed to move forward.

I take several steps to handle this better. First of all, everything I need is communicated in writing. I have found that this eliminates any confusion and makes it easier for me and my clients to stay organized. Then, I make it very clear that our next meeting will not even be scheduled until I have had a chance to review and, if necessary, analyze the information. I have also learned to copy my associate on every email so she can follow up regularly to remind the client of what we need. This is a simple yet effective way to keep the process in motion.

We also changed our process so that our engagement letter almost always has installment billing. We send out a notice that if we are delayed due to client turnaround, billing will continue. It’s surprising how many clients do not send materials until they get the next invoice. Since implementing this process, we rarely have a problem with projects getting delayed.

How has your involvement with BEI impacted your practice?

John Dini: Through the many years working with BEI, I have gathered an immense amount of knowledge. I do a lot of very straightforward planning now for my clients. I work with about half Main Street and half  Mid-Market owners. There is always something new to learn more about and expand my skill sets even further to give my clients the very best possible solutions.

Do you have any advice to give an advisor new to the Exit Planning industry?

John Dini: Focus on building a relationship with your referral sources. We offer an assessment debriefing for our referral sources to conduct with their clients at their own office. This assessment helps put the client at ease and the referring professional is in the position to provide the client additional value. Typically, our referrals transfer their trusted advisor relationship to us as they are learning about the broad scope of Exit Planning. By the end of the meeting, they usually think of another client that would find value from speaking with us or one of our referral sources.

What contribution to the Exit Planning world are you most proud of?

John Dini: We just completed the first comprehensive survey of Exit Planning practitioners in the USA. Over 3,000,000 Baby Boomers are preparing to transition from their businesses. A professional subspecialty has developed to meet their needs. This survey encompasses accountants, attorneys, consultants, coaches and other advisors. This Exit Planners survey is the first comprehensive look at both the industry and its practitioners. Get your copy today!

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