Business Continuity

Exit Planning Process: The Engagement Meeting

Fri, 03/17/2023 - 08:00

Written by: JDewing2

Exit Planning is an essential process for business owners who are looking to exit their business on their own terms. It involves a series of steps and discussions that help owners plan their exits and maximize the value of their businesses. 

In last week’s blog, we covered the ins and outs of the Discovery Meeting and what it means for you as the advisor and your business owner client. This week, we’ll review the Engagement Meeting.

The Engagement Meeting is a critical step in the Exit Planning Process. In this meeting, you will have the opportunity to convert your prospects into clients by discussing the goals of the business owner and how you can help them achieve those goals. 

What is the Engagement Meeting?

The Engagement Meeting provides business owners with a valuable opportunity to explore the steps necessary to enhance their business value and exit on their own terms. Throughout the meeting, it is essential to have a client-centric discussion, focusing on the owner’s goals and how you, as the advisor, can assist them in accomplishing these objectives. 

As the business advisor, your role is to help your client envision the process and outcome of the Exit Planning engagement for both themselves and their business. It is only after carefully reviewing their individual circumstances and recommended actions that you should address the matter of fees. 

Let’s look at the three meeting topics within the Engagement Meeting:

  1. Exit Plan design

The first topic of discussion in the Engagement Meeting is Exit Plan design. Business owners can get busy and may forget the details of a previous conversation, but utilizing the illustration created in the Discovery Meeting will help to keep the previous conversation top of mind with your prospect. 

The illustration will also help you to discuss potential plan designs and recommendations, the bird’s eye view of the path to exit, and provide suggestions for action along the path. Ultimately, you will show owners the many moving parts of Exit Planning, and that you have the experience to create and manage the clear action steps.

  1. Working with other advisors 

The second topic of discussion in the Engagement Meeting is communicating and collaborating with other advisors to spur owner engagement. Exit Planning is not intended for one advisor to tackle alone; it requires a team of advisors and experts to implement the recommendations that will guide your clients to a successful business exit. 

For many Exit Planning Advisors, they find that starting with the client’s existing advisors is a strong place to start. It is essential to eliminate any obstacles to the client's progress. This can be done by assessing team member gaps. These gaps tend to change over time as the process proceeds. Taking it one step at a time and adjusting the structure of the team as the engagement progresses will streamline meetings, and thus save time and money.

As BEI Member Eddie Drescher shares, “My job as the Exit Planning Advisor is to try to eliminate any impediments to them moving forward.  Their advisor teams are not usually complete before beginning the Exit Planning Process. It takes time to determine advisor team member gaps, and they usually evolve as the process plays out. I like to take it one step at a time and add/subtract advisor team members as the engagement progresses.” 

  1. Fees and the Engagement Agreement 

The final piece of discussion in the Engagement Meeting is your fee structure. You have spent the bulk of this meeting and the previous setting the stage for where you will bring value to the owner, their business, and the process ahead. 

Additionally, utilize your existing relationships with advisors in your network who will be part of the Advisor Team to explain to the business owner that you can streamline meetings and reduce time and cost, as they are already familiar with your process. 

While discussing pricing with your clients may be a challenging conversation, it is crucial to overcoming concerns regarding the cost of an Exit Planning engagement.

The Engagement Meeting is an essential step in the Exit Planning Process, and provides an opportunity for you to convert your prospects into Exit Planning clients. Through consistent communication, working with other advisors, discussing the Exit Plan design, and determining your fee structure, you will be able to help the business owner visualize what the process and outcome will be for their business. 

Remember, Exit Planning is a team effort, and it takes a team of advisors and exports to implement the recommendations that will take your clients to their ideal exit. In next week’s blog, we’ll dive deeper into pricing considerations when working with clients and strategies for addressing concerns related to the cost of Exit Planning. See you next week! 

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Exit Planning Process: The Engagement Meeting

Strategies for Success: Breaking Down Business Continuity

You're invited to an all-new BEI webinar where we will dive into a crucial aspect of Exit Planning: business continuity. For many of your business owner clients, business continuity planning means simply signing a buy-sell agreement early in the company’s life and filing it away. However, most buy-sell agreements alone cannot support an owner’s primary exit goals; namely, selling the business when they want, for the amount they want, and to the successor they choose.  

Why a Buy-Sell Agreement Isn't Everything in Exit Planning

Fri, 05/13/2022 - 10:35

Written by: mernzen

When Exit Planning Advisors ask business owners what kind of business continuity plans they have in place, the typical response, if they have any at all, is usually along the lines of, “we already have a Buy-Sell Agreement.”  

To the business owner, this agreement checks “solve business continuity problems” off the to-do list. However, Exit Planning Advisors know that oftentimes these agreements create more problems than they solve. A typical Buy-Sell Agreement has gaps that need to be addressed at any given time, which is why it is important that they are not seen as the “quick fix” to business continuity.  

In order to debunk this idea from the perspective of the business owner, Exit Planning Advisors should know the key factors that make up a good Buy-Sell Agreement: 

  1. Current & updated  

  1. Considers correct business value 

  1. Protects the business & the family.  

Current & Updated Buy-Sell Agreement  

Buy-Sell Agreements may not have sell-by dates, but they should. When they are filed away and go un-reviewed in the context of business circumstances and changing desires of business owners, much can go wrong, especially in emotionally charged situations. It is critical that these agreements reflect the realistic goals and resources of the business and owner(s).  

BEI suggests that Exit Planning Advisors review these agreements with owners on an annual basis as part of the fiscal year review. Looking at the Buy-Sell Agreement each year can account for the following changes and key items to include:  

  • New ownership or management and their voting control  

  • Owner’s exit goals given changing economic or family circumstances 

  • Events that are covered by the Agreement  

  • Instructions on how future buyouts will be calculated  

  • How to fund different types of buyouts  

Considers Correct Business Value  

While it is important to review the Buy-Sell frequently, it is also crucial to understand that even when considering various business aspects, Buy-Sell Agreements still fall short of covering all the complexities of a business valuation. Many Buy-Sell Agreements have too simple of a valuation methodology, which can be due to inadequate adjustments that account for business growth, or inaccurate estimates from the owner(s).  

For this reason, BEI suggests having a third-party appraiser determine business value to be referenced in this Agreement. Using outside experts will ensure the valuation is objective and accurate. As an Exit Planning Advisor, every arrangement should begin with an understanding of the owner’s lifetime exit goals and aspirations, as well as the existing resources. This understanding, especially if revealed using tools like that of BEI’s EPIC planning software, will show you and your owner clients if there is an existing gap between the current resources and what is needed to close it.  

Working with owners and their advisor teams to find clarity on these goals, resources and business value will allow for inclusion of these items within the Buy-Sell Agreement and other business continuity efforts.  

The Top 9 Ways to Increase Business Value

Protect the Business and the Family After Selling 

An effective Buy-Sell Agreement must have structures in place to protect the business and all owners in the case of sudden death or incapacitation. Making financial security for the family a priority as well as having sufficient life insurance policies in place are ways that the Buy-Sell Agreement could provide protection.  

Most Buy-Sell Agreements focus on the benefits to the surviving owner rather than providing for the needs of the decedent's family. The question that advisors must ask and help owners resolve is, “If you die, what will replace your income stream for your family?” There are many answers to this question that may lead to the restructuring of the Buy-Sell Agreement so that the descendant's family is supported at the same level of their loved one’s lifetime income. To ensure this, it would be wise to include clauses in the agreement to cover continued income streams and ownership since proceeds from the Buy-Sell are rarely enough.  

In addition, Buy-Sell Agreements should map out how each particular type of buyout would be funded. For example, if there is a life insurance funding a buyout of a deceased owner, is it a sufficient amount? Is the policy owned by the proper party, and are the beneficiary designations correct? In all buyout situations, it is important to at least have some pre-funding and have the Agreement designed to minimize taxes.  

Lastly, it is worth noting that often a business exit is triggered by another lifetime event aside from a death, such as owner’s incapacitation, divorce, bankruptcy, termination, and other disputes. While a Buy-Sell Agreement cannot cover all these transfer paths, advisors must encourage owners to consider these factors so the business does not suffer any severe consequences. 

Conclusion & Takeaways for Exit Planning Advisors:  

It’s important to reiterate that even with the most current, well-thought-out Buy-Sell Agreement, this document is not the comprehensive solution to business continuity. It is not everything, but it can be a vital component of continuity planning if Exit Planning Advisors can work with business owners to:  

  • Review the Buy-Sell Agreement annually to update and modify any changes or additions to business variables. 

  • Ensure the Buy-Sell Agreement reflects an accurate and realistic business valuation, determined by a third party. 

  • Determine how to increase business value based on the gaps that are brought to light by the valuation and desired exit goals.  

  • Take measures that will protect the family’s financial security.  


Check out a recent webinar recording on Buy-Sell Agreements, lead by BEI Founder, John Brown. 

Ready to get started? Schedule a meeting with us today to discuss the components of business continuity and your role as an Exit Planning Advisor.  

Why a Buy-Sell Agreement Isn't Everything in Exit Planning

Transferable Value: The Hard Truth

Fri, 06/12/2020 - 08:00

Written by: eswanson

When Ida and Gary Nella began to think about leaving their business, they didn’t know who to turn to for advice. Neither their CPA nor financial planner had ever raised the topic of Exit Planning. Unlike so many owners, the couple took action. They set up a meeting with a mergers and acquisitions advisor to discuss what their company would likely sell for—in about five years.  With that piece of information, they could make a decision on if and when they wanted to sell, for how much, and to whom.

During their meeting, the M&A advisor (Ramon) looked over their financials and asked questions about the business. All was going well until he told the Nellas that their company had little value to a third-party buyer.

“How can you say that?” Gary asked. “We make over a half million dollars per year!”

Before Ramon could respond, Ida added, “There’s got to be plenty of buyers who would jump at the opportunity to run a company with our profit margins!"

"Your company only has that level of profit,” Ramon began, “first, because you two work 60 hours a week and rarely take vacations. Second, third and fourth, you don't pay a management team, have updated systems, or do any significant marketing. Without the two of you present, there would be no profit, so what would a new owner be buying without you two in the business?”

“But an owner would make $500,000 per year!” Gary reminded Ramon.

“That’s true,” Ramon agreed, “if that owner had your knowledge, had the business relationships you have, and was willing to work as hard as you do.”

Ramon continued, "Private equity firms are the likeliest buyers for companies of your size. The problem here is that they focus on three primary value drivers. First, they look for capable management team members that will stick around after the business is sold. These firms also require that the companies they acquire have up-to-date operating systems and broad customer bases. There are plenty of other value drivers that buyers analyze, but those are typically the top three value-driving characteristics these buyers demand.”

“Plenty of other value drivers?” Ida managed to ask.

“Yes,” said Ramon. “But let’s focus on the first value driver: a reliable management team. Today, you are the management team. Aside from that, the company’s marketing systems are not current and eight customers account for 75 percent of revenue. Unless you build a management team that can address these issues and install other value drivers, you won’t be able to sell the company for much,” Ramon concluded.

After the shock wore off, Ida and Gary decide to hire capable managers. They approached two candidates who were working for competitors and offered to match their current salaries and award bonuses equal to 20% of any increase in annual cash flow. The two agreed to come on board if Ida and Gary documented salary, bonus arrangements and responsibilities in employment agreements. The Nellas happily agreed and had their attorney draw up the agreements. Once the agreements were signed, Ida and Gary were elated. The exit they imagined before they met with Ramon was finally becoming a reality.

In our next post, we see what the Nellas’ attorney recommended they include in those employment agreements and what the Nellas decided to do.


  • The top three value-driving characteristics that professional buyers require are:
    • Strong management teams
    • Current operating systems
    • Customer diversity
  • Businesses that are run primarily by owners tend to lack transferable value.
  • Owners of these businesses seldom have proactive advisors so the advisors who do reach out to them have a great opportunity to help them.


Value Building: The Crisis Vaccination

Fri, 06/05/2020 - 08:34

Written by: eswanson

The COVID Pandemic crisis has affected us all in different ways. There are still many business owners out there who do not want to sell, even though in two previous posts, we suggested that:

  1. Having survived the Great Recession (Strike 1), the COVID crisis (Strike 2) will persuade some owners, especially boomers, to exit their companies before Strike 3—the next unforeseeable economic downturn.
  2. A quarter of all owners who decide to continue to own their businesses do not wish to “exit” their employment. They plan to retain ownership because they like the thought of owning a business more than selling it.

Last week, we highlighted one reason why business owners may not want to sell their business, even after the current pandemic we are in. In this week’s blog post, we discuss the second reason why owners may choose to remain owners; namely some owners need or want the income that their recession-resistant companies provide. These owners realize that whenever they sell, they will have to live on the income generated from the proceeds of the sale. They understand that if they sell their companies today, they won’t receive nearly as much income. Under those conditions, why not retain ownership? That’s the question fictional owner Francesco Buttone asked and answered when the COVID crisis hit.

Why Sell?

At 50-years old, Francesco Buttone owned a business that had recently been valued at $2.5M, using a 5x EBITDA multiple of its annual cash flow of $500,000. Francesco's annual compensation, with perks, was $300,000.

Following the Great Recession, Francesco was determined to develop a recession-resistant company. The Recession had revealed several weaknesses in Francesco’s business: 1) an over-reliance on Francesco for new business, 2) top-heavy customer concentration (six customers generated 70% of revenue) that delivered a serious blow when half of them disappeared; and 3) inefficient and paper-based financial and ordering systems.

To address these weaknesses, Francesco and his advisors focused their attention on strengthening the company’s value drivers. His advisors recommended that Francesco:

  1. Install state-of-the-art operating systems.
  2. Diversify the customer base by increasing the size of his sales staff and revamp the incentive program. They advised this program provide a greater reward for bringing in new customers than for new business from existing customers.
  3. Hire and develop a capable, motivated management team that could manage the company without his presence in the company every day.

Eventually Francesco’s involvement was limited to participating in strategic decisions and customer relationships with a few larger, long-time accounts.

When the COVID crisis hit, Francesco never thought of selling because he knew his business would survive. He also did not want to sell because he knew if he sold the company, his salary would end, its cash flow of $500,000 would no longer be his and the income stream from the net proceeds of the sale would generate less than $100,000 annually.

For Francesco, it was a no-brainer:  Ride out the COVID Pandemic or whatever downturn the economy would throw at him.

Even though revenues would suffer during the COVID crisis and through the recovery period, Francesco’s business was solid. He might choose to spend more time in the business, but he did not have to. The plan to install and enhance value drivers that he and his advisors implemented years ago gave Francesco the option of spending only as much time in the business as he desired.


  • Meet with your clients; determine what’s behind their desire to stay or leave their companies. Direct your efforts and recommendations to achieving their exit objectives.
  • During and after the COVID crisis businesses are ideal candidates for value-building discussions and planning. Talk to your owner-clients today about how you can help them minimize the effect of future downturns.
  • Owners who don’t want to sell are great Exit Planning clients.

forever owner

2 Planning Techniques That Are Differentiating and Show Value

Fri, 01/17/2020 - 09:00

Written by: eswanson

Being different can be a good thing. But when business owners begin to approach planning for a successful future, they want to assure that the planning methods they use aren’t too far beyond the pale. This can be a challenge for advisors who are eager to begin differentiating themselves while still providing high-quality planning advice and services. After all, differentiating just for the sake of it is hardly helpful. Today’s article will provide a few planning techniques that advisors can use to successfully start differentiating themselves while working with business owners toward their goals.

Business continuity instructions

One of the newest and best ways for advisors to begin differentiating themselves is by offering to create business continuity instructions for business owners. Business continuity instructions are more than a Buy-Sell Agreement or any other standalone succession document.

Many business owners tend to have outdated Buy-Sell Agreements. Outdated Buy-Sell Agreements can ruin a business owner’s plans for future success. Business continuity instructions address the issues of outdated Buy-Sells as a matter of course, and they do so much more on top of that.

Consider a solely owned business, for example. If something were to happen to the owner—such as an untimely death or permanent incapacitation—what would happen? Whom would the owner’s family approach about addressing business issues that they may not have any experience with? What would be the next steps for any employees or stakeholders? What happens to the company in general?

Likewise, for a co-owned company, what happens if there’s a falling out between owners? What happens to the business if one co-owner goes through a divorce?

These are big, important questions that have huge consequences if not properly answered. A set of business continuity instructions establishes the processes for how to address the unexpected. Business continuity instructions also go well beyond “What if?” questions. (When faced with a conversation about their deaths, permanent incapacity, or something else that might go wrong, business owners often default to a “never me” mind-set.)

Business continuity instructions help owners discover where the holes in their plans exist. It gives them an understandable, non-technical way to see how they can begin planning for their future success. And it keeps everyone up to date on what the owner’s intentions are for the company, their family, and themselves, all in one place.

BEI provides business continuity instructions software to advisors as part of our EPIC planning platform. Advisors who want to start differentiating themselves can do so while showing value to their clients. It’s a differentiating force because most advisors cannot offer comprehensive business continuity strategies to their clients. It shows value by mapping an owner’s best-case continuity scenario, giving owners peace of mind that the business (and their family’s comfort) has a chance to continue thanks to their planning.


Value Driver planning

A huge and often unanswered question that business owners have is, “How can I take my business to the next level?” Most business owners shoulder the burden of assuring the company’s success, and when they hit a plateau, it can be an extremely frustrating challenge for them. Advisors who can answer this question without bruising the owner’s ego have an easier time differentiating themselves while showing value to their clients. A proven way to do this is through Value Driver planning.

In a nutshell, Value Drivers are aspects of a company that make the company more valuable to strategic buyers. Whether owners intend to leave their businesses within their lifetimes or not, installing Value Drivers makes pursuing their goals for future success much easier. This is because Value Drivers inherently improve the company, which makes it more enjoyable for owners to run. Having an outwardly valuable company also gives owners an out if they ever decide to exit their businesses during their lifetimes.

BEI is the leader in helping advisors establish strong Value Driver planning. We provide the tools, training, and networking that advisors require to identify the Value Drivers their clients must install; create plans to install those Value Drivers; and then implement the strategies in the business.

The biggest challenge in Value Driver planning is gathering all of the appropriate experts necessary. Installing Value Drivers is a multidisciplinary project, and it can look overwhelming to business owners. Advisors who can both advise owners on the elements of Value Driver planning related to their core practice and find the other experts necessary for aspects outside of their expertise do a great service.

They differentiate themselves by having a tangible answer to the “How do I take my company to the next level?” question. They show value to their clients by growing the value of the owner’s company. Value Driver planning is a great way for advisors to show value while differentiating themselves, and BEI positions advisors to do that the best.


  • Business owners want planning strategies that speak to their needs without being one size fits all or too beyond the pale. Advisors who can provide those strategies have an easier job of differentiating themselves and showing value to their clients.
  • Business continuity instructions provide a comprehensive overview of an owner’s planning intentions, which helps them assure that the business and their families can weather any unexpected storms that roll in.
  • Value Driver planning can make ownership more enjoyable while allowing owners to give themselves the option to exit in the future, if they so choose.


3 Ways to Help Family Business Owners Plan for Future Success

Fri, 11/08/2019 - 12:00

Written by: eswanson

A family business can be tricky to plan for. Lots of times, family issues bleed over into the business, making planning for future success a matter of helping owners and their families. A family business creates unique dynamics for successful planning because owners and advisors often need to consider the wants and needs of people other than the owner. Although the business owner is the advisor’s only true client in these situations, owners and advisors should still prepare themselves to tackle issues that affect the family. Here are three things owners and advisors should consider when planning for the future success of the family business.

Keep Ownership Agreements Up to Date

Many owners create ownership agreements early in the business’ life. As the business evolves, many of those owners fail to update those ownership agreements. The most common type of ownership agreement that doesn’t evolve with the business is a Buy-Sell Agreement. Having an outdated Buy-Sell Agreement is especially dangerous for family businesses, and it’s up to advisors to identify and fix the issue. Consider two examples about how outdated ownership agreements can destroy a family business.

Jake Simpson was the sole owner of a custom fabrication company. Each year, he brought in a salary of $350,000 for his family, on top of the health benefits and other perks his family enjoyed. One day, Jake had a sudden heart attack and died.

Jake had created a Buy-Sell Agreement 25 years ago that named his wife, Mary, as the owner should something happen to him. He never updated it, always telling his advisors that he’d do it later. Mary had no experience running a business. So, she immediately called Jake’s advisors and asked them to help her sell it for as much as they could. She informed the company’s key employees in an effort to be transparent.

When Mary told the key employees that she was selling the business, many of them began looking for new jobs and left. Revenue crashed, and Jake’s bank began to call in the company’s debts. Mary couldn’t find a buyer for the business, so she liquidated it for $500,000. After repaying the company’s bank debts, Mary was left with just $200,000, no health coverage, and no income.

In this example, a sole owner put his wife in an impossible situation. By failing to update his Buy-Sell Agreement, he left her stranded without direction. Had Jake’s advisors pushed him to update his ownership agreement yearly, the family business might have survived—or Mary could have at least sold it rather than liquidating it—despite his untimely death.

Now, consider a co-owned business with outdated ownership agreements.

Janelle Black and Sierra White were co-owners of Black & White Distribution. Their business was appraised at $5 million. Each brought home $375,000 in salary. According to their Buy-Sell Agreement, which they created just five years earlier, if one of them were to die, the surviving owner would purchase the remainder of ownership.

While driving home from work one night, Sierra was killed in a car crash. As 50/50 owners, Janelle and Sierra had each taken out a life insurance policy on each other. After Sierra’s untimely death, Janelle used the insurance funds to pay for Sierra’s half of the business. The $2.5 million lump sum wasn’t enough for Sierra’s family to continue living their current lifestyle. Rather than the $375,000 annual salary, Sierra’s family income fell to just $100,000 a year, based on a 4% withdrawal rate.

In this case, the Buy-Sell Agreement worked as planned, yet Sierra’s family still suffered. When an owner’s family relies on the business to maintain a lifestyle, advisors must be sure that owners understand the consequences of their untimely departure from the business. Constantly reviewing the owner’s goals, asking the right questions, and updating any ownership agreements is a good way to protect family businesses.

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Separate Fairness and Equality

When owners of family businesses have children, planning for future success becomes more complex. In many family businesses, some children decide to work in the family business while other decide not to. This can cause owners to confuse fairness and equality when planning for their post-business lives.

Consider a business owner, Joe, who has three children: Doug, Glen, and Jania. Jania has worked in the business for 20 years, growing it from a $1 million enterprise to $15 million. As Joe approached retirement, he planned to transfer ownership to Jania and leave $1 million apiece to Doug and Glen after he died. When the brothers learned how much the business was worth, they demanded an equal amount in cash from their father. They didn’t think it was fair for Jania to receive what they considered to be more money, even though the company’s value was largely illiquid and they had nothing to do with its success.

Advisors can mitigate situations like these by establishing the owner’s goals then creating plans to communicate those goals to the children involved. Advisors are independent and unbiased about fairness toward children, working to achieve the owner’s goals foremost. Advisors can also determine what’s fair in terms of how each child contributed to the business’ success and how any ownership or monetary transfers can reflect those contributions in the context of the owner’s overall planning goals.

Have a Backup Plan

Family business owners often want to keep the business in the family. While this is often possible with proper planning, advisors must encourage owners to have a backup plan.

Advisors can help business owners create a backup plan in tandem with planning for a successful future. The surest way to do so is to install Value Drivers in the owner’s business. Regardless of whom the owner wants their successor to be, all potential buyers/recipients of ownership will want Value Drivers to be present in the business.

Another way is to determine whether the owner’s chosen successor can continue to grow the business. Implementing strong incentive plans is a way for advisors to help owners determine this and reward high-performing potential successors.


  • Family businesses typically face more challenges to planning for future success. Advisors and owners should identify these challenges and address them early in the planning process.
  • Keeping ownership agreements up to date can prevent family businesses from facing surprising outcomes brought out by the owner’s unexpected departure from the business.
  • In planning for the future success of a family business, advisors should know how to explain the difference between fairness and equality, and implement backup plans.


A Surefire Strategy for Success: Business Continuity Instructions

Fri, 10/18/2019 - 12:00

Written by: eswanson

Planning for a successful business future has many potential starting points. Some owners want to start by building business value. Others want to begin by establishing an estate plan. While there are plenty of places for owners to start their planning, many business owners want to start their planning by addressing business continuity.

Whether owners intend to exit their businesses during their lifetime or die at their desks, business continuity planning is important. For owners eyeing a lifetime exit, business continuity planning protects the business from the unexpected; prepares the business, employees, and the owner’s family for the owner’s eventual exit; and keeps everyone up to date on what the owner intends to do regarding the business’ future and beyond. For owners who want to die at their desks, business continuity planning prepares the business, employees, and people the owner cares about for life after the owner’s death.

Advisors are key to successful business continuity planning. There are many aspects that owners must consider as they begin business continuity planning, too many for one person to tackle alone. There’s one surefire way advisors can help owners start their planning the way they want.

Create business continuity instructions

In a perfect world, continuity planning goes exactly as planned: Ownership transfers to precisely the right person at precisely the planned time. In the real world, wrinkles in even the best plans can throw everyone for a loop. Unexpected events such as death, permanent incapacitation, divorce, and owner infighting can leave owners, their families, and their businesses without direction. Advisors can mitigate these common yet unexpected events for owners by installing a set of business continuity instructions.

Business continuity instructions are a non-binding guide for an owner’s family members and advisors that explain how everyone should address personal and business issues that arise from the owner’s unplanned departure. Most owners overlook what will happen to their families if they were to ever lose control of the business. For example, what would their families do to address any outstanding business debts? Is there a plan to sell or dissolve the business so that the owner’s family can access liquid funds? Whom could they consult to fix problems that are likely well out of their wheelhouse? BEI’s Business Continuity Instructions tool, through BEI’s EPIC software, helps advisors get accurate answers to these questions for owners.

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Business continuity instructions anticipate these problems and deliver written solutions and suggestions. They guide family members and advisors through what might otherwise be a directionless time: when they can’t ask the owner—who’s been running the show the whole time—what to do next. Business continuity instructions include aspects like first contacts and actions to take following the owner’s unexpected departure, use of proceeds schedules, and management responsibilities.

Regardless of whether owners intend to exit their businesses during their lifetimes or die working, business continuity instructions are a critical document. They speak to various desires owners often have, such as protecting their families and legacies. They also give owners peace of mind that even if something goes terribly wrong, they have a safety net for their families, businesses, and advisors to address outstanding issues. Of all the tools BEI provides to advisors, few are as universally applicable as the Business Continuity Instructions tool, which provides a comprehensive framework of things for owners to consider and actions to take.  


  • Many business owners want to begin planning for a successful future by addressing business continuity issues.
  • Advisors can work with owners to create business continuity instructions that guide the owner’s family and other advisors in how to manage the business without them.
  • BEI provides a comprehensive Business Continuity Instructions program that guides advisors through creating a strong business continuity plan for business owners.


Why Would Owners Who Love Their Companies Make Plans to Leave?

Fri, 10/04/2019 - 10:30

Written by: eswanson

Many business owners love the companies they’ve founded, whether it’s because of the work they do, the changes they effect, the money their companies provide, or something else. When owners carve out a comfort zone within their businesses, it can cause them to question why they would want to plan for their business exits. “I’ve got 5 or 10 years,” they might say. Some might even go farther, saying, “I don’t ever plan to leave my business!” Today, we’ll look at a few reasons why owners who love their companies should still make plans to leave and how advisors can help them.

Post-business life usually doesn’t get cheaper

For the 90% of business owners who intend to leave their businesses before they die, financial security is an absolute must. While they run the business, they likely pull a salary; use perks like company transport, insurance, and networks; and perhaps take advantage of their personal clout as a successful business owner. Once they exit the business, those things tend to go away.

A strange but more-common-than-you’d-think mind-set for business owners is the idea that they can cut back on their spending once they’ve exited. This is almost never the case. When owners exit by choice, they usually spend at least 75–90% of what they spent when they owned the business. They often want to travel, or lavish their families with gifts, or set their grandchildren up for college: all without the safety net of a steady income provided by the business.

In short, post-business life is usually as costly as life before the exit. Even if owners don’t intend to exit for 5–10 years (which is what many owners say they intend to do), they’ll still need to know whether they can maintain their current lifestyle once they do leave.

Advisors can help owners determine their financial situation in a few ways. They can establish an owner’s goals and estimate what it will cost to achieve those goals. Relatedly, they can help owners determine the gap between the money they have and the money they need to achieve those goals. They can also compare that gap to the company’s current value, then begin installing Value Drivers that allow owners to sell or transfer the business for the amount they want and need.

All of this requires time. So, even if owners love their companies and don’t see themselves leaving them for several years, it’s in their interest to start planning for that eventuality. Because post-business life usually doesn’t get cheaper.

Planning lets owners focus primarily on what they love

Many business owners often find themselves doing things they never imagined doing within their businesses. Some of those unexpected things are things they’d rather not be doing. For example, an introverted owner might find that she needs to be the face of the company. A key focus of Exit Planning is finding the best people for the right job so that the owner doesn’t have to be everything to everyone.

Exit Planning Advisors and their Advisor Teams often address this by helping owners find or train next-level managers. Next-level managers take on many of the responsibilities owners find themselves stuck with. Oftentimes, those next-level managers can handle those responsibilities better than the owners themselves, if for no other reason than the owner simply isn’t too passionate about those responsibilities.

The flip side of this coin is that with proper planning, business owners can do only the things they truly want to do: the things they likely started the business to do in the first place. This can make ownership even more fulfilling and allows owners to focus on the things they enjoy as they begin to wind down their ownership.

Life goes on without the owner

About 10% of owners say that they want to die at their desks. Surely, Exit Planning is unnecessary for them, right?

That’s usually not true. Even owners who plan to die at their desks often have people or causes they care about that the business directly affects. These owners may have family members who rely on the business to maintain their lifestyles. Without proper planning, what happens to them? These owners may want to assure that after they die, their employees still have jobs (or a safety net that gives them time to find new ones). What happens to them without proper planning?

Even if owners plan to die at their desks, Exit Planning is still valuable to them. Their advisors can help them install business continuity plans that can give people they care about direction regarding what happens to the business once they die. They can install next-level managers whose goals and managing styles line up with the owner’s values-based goals. They can even help owners’ families continue to maintain their lifestyles without the business.


  • Owners who love their companies should still make plans for what happens after they exit them, especially if people or causes they care about also depend on the business.
  • Owners who exit by choice during their lifetimes must assure their financial security before they exit. If they don’t, they may be forced into working for someone else after they exit.
  • Advisors can help owners create actionable plans that let owners exit when they want or provide for the people they care about after they die.


Why Business Owners Are Not Prepared for the Unexpected

Fri, 05/31/2019 - 09:00

Written by: eswanson

Over the past couple of weeks, we’ve dedicated time to discussing the nuances of Buy-Sell Agreements. Specifically, we’ve talked about how advisors can make Buy-Sell Agreements less dangerous for business owners, and why Buy-Sell Agreements can be the worst thing for an owner’s financial future when done improperly. We truly believe that helping business owners create proper Buy-Sell Agreements is one of the most important services an advisor can provide. It’s also a great way for advisors to introduce any Exit Planning services they offer to new prospects and current clients.

In this article, we conclude our discussion of the most common problems that typical Buy-Sell Agreements create for the business owners who sign them. These problems can jeopardize the business’ very existence and make it difficult for the owner’s family to maintain its financial security. When owners learn that their Buy-Sell Agreements can destroy their businesses and leave their families scraping by, they usually want to fix them right away. While most advisors don’t know how to fix broken Buy-Sell Agreements properly, skilled Exit Planning Advisors do.

So, let’s examine four more common problems apparent in a typical Buy-Sell Agreement and see how advisors can help solve them.

The Buy-Sell Agreement Doesn’t Address the Situation

Most Buy-Sell Agreements are too simplistic to manage the personal complexities of the owners who sign them and their relationships with the business, any co-owners, and the company’s workers. For example, companies with multiple owners often don’t want to treat all owners in exactly the same way. Another example is how a Buy-Sell Agreement accounts for an owner who is uninsurable (e.g., due to a pre-existing condition of some sort). In family businesses, non-business considerations—such as treating non-business-active children fairly—may affect the design of the Buy-Sell Agreement.

In all of these situations, advisors must move beyond standard Buy-Sell planning. To craft a fitting Buy-Sell Agreement for an owner, advisors should examine the goals of each potential party to a Buy-Sell Agreement and recommend tailored solutions. For example, in a business with multiple owners of varying ages and ownership interests, it may be appropriate to have a simple buy-back agreement for a junior owner that requires a mandatory sale and purchase if that junior owner terminates employment for any reason. For a senior, retirement-inclined owner, a redemption or sale to one or more of the other owners could be designed to initiate a partial buyout now and a total buyout in the event of that owner’s death or incapacitation.

In short, knowing how to plan a proper Buy-Sell Agreement often goes far beyond simply creating one. Proper Buy-Sells are a living document, and advisors must treat them as such (because experience shows that owners will forget about them until they really need them).

The Buy-Sell Agreement Uses a Cookie-Cutter Valuation Formula

When business owners first create Buy-Sell Agreements, they use common valuation methods to determine what the business is currently worth. This can include a simple agreed-upon value or book value. However, these methods are at best inaccurate and at worst harmful as the business grows in value.

Recall that most business owners don’t review their Buy-Sell Agreements at all, let alone once a year. The staleness of these Buy-Sells combined with their inapplicable valuation formulas can leave owners in a lurch when they need their Buy-Sells most.

Ultimately, the best method of determining value as the business’ value grows throughout the years is getting an appraisal from a credentialed business appraiser. At the very least, advisors should base any pre-buyout estimates or calculations that they use for planning or funding purposes on the following:

  • For larger and established companies: a calculation of value from a credentialed appraiser.
  • For smaller companies: a valuation estimate using valuation software reviewed by a CPA or valuation advisor.

Some business owners will resist paying money for a proper valuation. They might say, “I paid for this already, and I won’t do it again.” It’s important that advisors know how to explain why that mind-set is wrong and show that the ROI of getting a proper valuation far outweighs the upfront cost. If advisors don’t do that for owners, no one else will.

The BSA Is Outdated

Buy-Sell Agreements may not have sell-by dates, but they should. When they are filed away and unreviewed in the context of current business circumstances (e.g., changes in value and ownership) and the changing desires of owners (e.g., one owner wishing to transfer ownership to a business-active child), they can produce some ugly surprises.

Owners rely on Buy-Sell Agreements to manage many emotionally charged situations. If those agreements don’t account for changes in the business, they cause huge problems for everyone involved. That’s why Exit Planning Advisors periodically review business continuity planning from the perspective of the business and each of the owners. To do otherwise is to plan for a past that no longer exists, rather than a future that’s inevitable.

The Buy-Sell Agreement Is Poorly Implemented

If insurance funding is lacking or insufficient, or information related to beneficiaries and/or ownership is incorrect, having a Buy-Sell Agreement may be worse for all parties than none at all. To properly implement a strong Buy-Sell Agreement, advisors must be proactive, vigilant, and persuasive.


  • Most businesses become more complex and valuable as they mature. Advisors must urge owners to update their Buy-Sell Agreements to address added complexity and account for significant increases in value. When a Buy-Sell Agreement does not match the complexity of a business, it can create more problems than it solves.
  • Buy-Sell Agreements are valuable tools, but their scope is limited to the exchange of ownership for money. They don’t account for other owner-based issues that arise when an owner dies. Advisors must help owners anticipate and plan for events that Buy-Sell Agreements don’t address, rather than relying on a Buy-Sell to solve everything.
  • Implementation details, like insurance policy beneficiaries, matter. If they aren’t correct, no Buy-Sell Agreement can operate the way its signers intended.

Conclusion to This Three-Part Series on Buy-Sell Agreements

Our goal with this series has been to clarify why it’s so important for advisors to keep their business-owning clients’ Buy-Sell Agreements current. Because even well-drafted Buy-Sell Agreements can do the following, unintended harm:

  • Provide only partial replacement of the deceased owner’s income stream, rather than full replacement.
  • Fail to protect a business from the loss of the personal guarantor (or the owner indispensable to business operations).
  • Provide only partial solutions for surviving and deceased owners (and their families).
  • Ignore or pay lip service to the likeliest transfer events: retirement or another type of lifetime departure.

Given these facts, we think that advisors should approach business continuity planning from an owner-centric perspective. Advisors should ask themselves, “Will this Buy-Sell Agreement achieve the objectives that my client wants to achieve via a planned business exit?” This perspective focuses on the issues that owners hold dear: financial security for themselves and their families regardless of whether they exit during lifetime or at death.

If advisors lay the foundation for planning discussions by first asking their clients about their goals and available resources, owners are much more likely to engage. If advisors make owners aware of how a failure to plan will negatively affect their businesses and families, they are more likely to engage.

When advisors ask to review owners’ business continuity arrangements, they’re looking out for their client’s interests. Owners who understand that are more likely to see their advisors as their most trusted advisors.