The Golden Rule of Successful Succession Plans

All successful Exit Planning Advisors follow the Golden Rule of Successful Exit Plans: Plan around what business owners want and need from a business exit. These ­owner-centricplans are the key to successful business exits for owners and to thriving planning practices for advisors.

Let’s look at how following the Golden Rule of Successful Exit Plans can benefit the advisors who create them, and drive revenue and clientele to their core practices and Exit Planning practices.

Transactional Planning vs. Owner-Centric Planning

The BEI Seven Step Exit Planning Process has one purpose: ensure that business owners can leave their businesses on their terms. At a minimum, these terms include three goals:

Leaving the business on the date the owner wants.

Leaving the business with enough money to assure financial independence.

Leaving the business to the person or group the owner wants.

These Big Three goals serve as the foundation of all Exit Plans , but they aren’t the only goals. Owners can, and usually do, set additional goals for themselves, their families, their businesses, and their employees. Most owners have what we describe as values-based goals, such as maintaining the legacy and culture of the business post-exit, keeping the business in the community, and charitable and civic goals.

Given the wide-spanning nature of owners’ Exit Planning goals , advisors must work with owners to understand, clarify, and prioritize their goals and aspirations. This requires advisors to ask a series of questions focused on the owner’s wants and needs. Once answered, advisors become laser-focused on achieving those goals and aspirations.

This owner-centric approach is not how advisors typically work. Of course, good advisors work to achieve a specific end that is best for their clients, but this work is often done from a transactional perspective. For example, estate planning attorneys prepare estate plans, CPAs prepare annual tax returns, and insurance advisors provide life insurance to meet a specific need. Once the transaction ends, the business relationship ends or becomes dormant.

The transactional approach contrasts greatly from the owner-centric approach to Exit Planning because in Exit Planning, the advisor’s orientation toward the owner’s exit goals changes and broadens the engagement.

For example, consider an attorney asked to draft an employment agreement for a business owner’s key employee, a manager. The agreement would typically include a description of duties, compensation, and bonuses; employment term and termination; and perhaps a non-solicitation provision and confidentiality agreement. A transactional attorney would draft this agreement in a relative vacuum and move on.

But if that same attorney is involved with the owner’s Exit Plan and is tasked with drafting an employment agreement in the context of owner-centric Exit Planning , the attorney does so with knowledge of the owner’s Big Three goals. This knowledge expands the coverage and intent of the employment agreement, and deepens the attorney’s involvement in planning and implementing a successful exit for the owner.

Thus, using an owner-centric process, the attorney can create an employment agreement that includes provisions that encourage the key employee to act in ways that further the owner’s exit goals . Rather than planning in a vacuum, the attorney plans in the context of Exit Planning, increasing the opportunities the attorney has to work with this business owner based on a deeper understanding of the owner’s needs.

Having this deeper understanding of their clients’ goals lets advisors accomplish two things for their own practices:

It helps advisors build their Exit Planning practices. As they guide their clients toward the exits they want, advisors experience two benefits. In the short term, they collect fees for each Exit Plan. In the long term, they establish their credibility as successful Exit Planning Advisors, leading to referral business for their Exit Planning practices.

It helps advisors build their core practices. Exit Planning requires the services of multiple advisors from multiple roles . This allows advisors who work as Exit Planning Advisors (or even simply with Exit Planning Advisors) to expose business owners looking to exit to their core services, which those owners will undoubtedly need to exit successfully.

This example shows how owner-centric planning changes, broadens, and deepens an advisor’s representation of owners and their businesses. By enriching their representation of owners and their businesses, advisors committed to Exit Planning address the core of their business-owning clients’ wants and needs, while building both trust and a strong Advisor Team .

The Golden Rule of Successful Exit Plans lets owners and advisors reap the benefits of properly executed Exit Plans. With an owner-centric planning process , advisors can turn each client they lose to a successful exit into a client they gain, either within their core practices now, or for their Exit Planning practices later through referrals, positive reputation, and marketing their success .