Assisting a business owner with an Exit from their business is a complex planning engagement. So, how can a single advisor handle this daunting task effectively? The only answer to this question is 'to become aware of Exit Strategy techniques and to coordinate resources to address the client's issues'. Organized thought is your greatest ally in this fragmented and complex planning area.

One of the major points that an advisor can begin to understand is that they are truly in a privileged position to assist with this type of planning. Often times advisors believe that a business owner either knows what they need to do to exit their business, or that the business exit is someone else's responsibility (or, more accurate, opportunity). In truth, there is a lack of reliable information available to business owners today. Therefore, a trusted advisor can open the conversation with any of the questions listed in this Paper and, without being (or claiming to be) an expert in Exit Strategies, can assist their business owners with the most complex financial transaction of their lives.

Advisors do not have to become experts in Business Owner Exit Strategies to assist their business owner clients and prospects. The objective is NOT to master the ART of Mergers and Acquisitions as a prelude to becoming dealmakers for these business owners. The objective IS to initiate conversations on a delicate topic that is of paramount importance to that business owner; to inquire into areas of concern and to provide information relevant to those issues. This is a natural extension of the 'advice-giving' process that advisors enjoy imparting to their clients. We believe that the questions in this Paper will assist you in raising your awareness of this practice area and how you can participate in it.

Asking great questions is the hallmark trait of a trusted advisor. By asking questions that are on point with a client's concerns, that advisor demonstrates understanding and respect for the client as well as sets a proper foundation for the client-advisor relationship. In the process of asking the right questions, advisors position themselves as a knowledgeable resource to that business owner's Exit Strategy formation.

We start with the most important question of all,'What Does the Business Owner Want'? A trusted advisor with the confidence to ask this seemingly innocuous question will be surprised by the conversation that it opens with that business owner. What this question will do (if you let it) is begin a long and meaningful dialogue about exiting that business. The business owner will see you as a trusted source of information that can be gathered and applied to their individual situation. From this conversation, your relationship can strengthen as resources are delivered to answer specific questions and to deliver your valuable service.

Question #1

Question #1: What do you want to accomplish with your Business and Exit Strategy?

What will that business owner do with their time after exiting the business? I can confidently state that every business owner (not entrepreneur -- see our White Paper, The Business Owner versus The Entrepreneur) struggles on at least some level with the transition out of their business and into another phase of life. Because of the large amount of businesses in the United States today that are owned by Baby Boomers, retirement planning is becoming synonymous with Exit Strategy formations. So, there is a good chance that your business owner(s) are looking for retirement as the 'what they want', which equals 'time and money freedom'.

An advisor serves an invaluable role in the business owner's planning when they focus that owner on the question of 'what do they want?' An advisor should never dismiss or underestimate the significance of this question because there are a rare few individuals who will ask the business owner that question and have a genuine interest in providing solutions to make that'want' a reality. Exit Strategy planning makes those 'wants' realities for the business owners because the business owner [all things being equal] is able to achieve 'what they want', once they succeed in achieving 'time and money freedom'.

Question #2

Question #2: Do you know the 'Range of Values' for your Business?

Many business owners do not realize that privately-held businesses are valued on a 'point in time' basis. There are no active markets for the trading of the securities of privately-held companies; therefore, any valuation of a small business will be determined by what 'class' of buyer purchases the business.

Let's walk through an example:

Jimmy Jones has run a kitchen design and installation business for the past twenty (20) years. He is sixty (60) years old and is interested in exiting his business in order to spend more time with his grandchildren. Jimmy knows that in the past other businesses similar to his sold to larger companies in his industry. However, Jimmy has a son, Jerry, who is also in the business and Jimmy is concerned about Jerry's future if the company is sold to an industry buyer. Therefore, Jimmy is also considering transferring shares to Jerry if Jimmy's retirement can be financial secured.

Jimmy begins forming his Exit Strategy by determining 'what he wants'. Jimmy wants 'time and money freedom' outside the business and, secondarily, would like to have Jerry succeed him in the business. Jimmy writes down these wants in as much detail as possible, working with his financial planner to determine his future cost of living after exiting the business.

Meeting Jimmy's defined financial objectives depends upon the amount and timing of the payments that he receives for the business. Therefore, WHO buys the business from Jimmy is a very important consideration for Jimmy's Primary Motive of 'time and money freedom'.

Jimmy can sell the business to an Industry Buyer or to his son, Jerry. An industry buyer will put a higher Value on Jimmy's company, whereas a transfer to Jerry will likely be at a lower Value. Therefore, in this simple (but common) example, Jimmy's choice of WHO he transfers the business to will determine the Value that he receives.

So, Jimmy's Company does not hold one (1) single value. In fact, Jimmy has many transfer techniques available to him and each one of them, theoretically, will yield a different Value (see our White Paper on, 'Range of Values'for Different Exit Strategies). The Company has a 'range of values' and Jimmy's choice of WHO he sells to will ultimately determine the Value he receives. Another way of putting this is that Jimmy will choose the Value that he receives based upon What He Truly Wants. i.e. who succeeds him in the business.

This is a great example of an Advisor not needing to be an Expert. An Advisor should realize that without being a 'Valuation expert', they can still engage in -- and add a tremendous amount of perspective and value to -- a 'Range of Values' conversation.

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