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Exit Planning Is Too Important to Be a New Year’s Resolution

Make it a Strategic Priority; Use an Experienced Exit Planner to Get It Done

 By Tim Young and Michael Kenneth

(An unfortunate) FACT: By mid-January, most people have given up on their New Year’s resolutions.

Of course, there aren’t any official statistics on the success of these annual promises we make to ourselves, but the few studies available show the number to be shockingly low.

A quick web search indicates that only 8% of us stick with our resolutions. Some studies say it’s even lower.

So … we implore you … if succession and exit planning are still on your New Year’s resolutions list, take them off. Now. They’re too important to be abandoned any time during the year, much less the first few weeks.

We have a better way to make succession and exit planning a priority. Make it one of your strategic goals that is recognized—meaning recorded and distributed—by company leaders and owners, and its progress monitored throughout the year by your board of directors.

As any successful entrepreneur knows, good intentions don’t get things done. Accountability does.

Why is getting to success and exit planning so hard?

The hardest part of successions and exit planning is getting to the point of beginning a plan. Why is that?

The first reason is emotional. The prospect of an exit acknowledges our mortality, which we fear more than anything else, except for maybe public speaking and entering our golf handicap scores. We’re admitting that the end—because of death or, maybe worse, retirement—is possible. It scares us. And COVID made it even worse.

The second reason is that few people know how to begin exit planning. It seems overly complex. There doesn’t appear to be a clear, step-by-step process for a business owner to make good decisions on the multiple, interrelated topics that need to be addressed.

But it doesn’t have to be that way. As we say, complexity is optional. Help is at-hand for both the emotional and the step-by-step components of succession and exit planning.

Succession and exit planning takes a multi-disciplinary approach

When an entrepreneur manages to overcome the emotional hurdles to exit planning—which typically takes the support of people who have been through the process (all of us here have!)—there is a tendency to seek a comfort zone.

Some comfort may come from existing trusted advisors such as CPAs, estate planning attorneys or wealth managers. However, as adept as these professionals are in their respective disciplines (which we also have!), they are individually ill-equipped to conduct a succession and exit planning process.

CPAs are great tax strategists. Estate attorneys are great at developing estate plans (which, by the way, are not exit plans). And wealth managers are great at diversifying portfolio investments for the long-term. However, none of these disciplines on its own covers exit planning, which operates much more broadly across all of them and others. Over the past two decades, exit planning has become a discipline of its own, which provides a tried-and-true process for developing business succession and exit strategies.

What distinguishes succession and exit planning as a discipline?

Not unlike other disciplines, exit planning distinguishes itself through established processes, procedures, and knowledge and experience sets. To be clear, it doesn’t exclude the accounting, legal and wealth management disciplines, but brings them closely into the fold. In fact, they’re critical contributors to the process, providing their professional and personal insights into the client’s situation. A qualified exit planner leads and facilitates the process, ensuring that each discipline and each related issue is being fully addressed in the best interest of the entrepreneur’s exit goals.

Other professional participants can include human resource and compensations specialists, business operations and IT experts and others, as necessary.

The process begins with questions—deeply introspective questions—not just of the primary owner but other parties who have a vested interest—financial or emotional—in the outcome. These parties can include a spouse, children, minority shareholders and company leadership. Having the right people at the table is paramount.

The goal of the questions is to understand what each stakeholder wants to see as an outcome of the exit planning process and if those outcomes align with those of the entrepreneur, or primary stakeholder. It’s about getting clarity on where everybody is today and where they want to be at exit and beyond. It’s imperative to address any outcome disagreements at the outset. Otherwise, exit disagreements turn into exit arguments or, worse, exit litigation.

The experience and ability to address these issues and create alignment is one of the fundamental and primary value propositions that exit planners provide.

Yes, but do I really need a succession and exit plan?

There’s a short answer to this question—hell, yes!

As an entrepreneur who has built a great business, you’ve largely controlled your own destiny. You’ve also gone through the ups and downs of the marketplace and industry, many of which have been out of your control, such as a world worldwide pandemic. You’ve survived all these things.

Why wouldn’t you also want to be the architect of the final—and sometimes most challenging—mile?


March 28, 2023 in Business Planning, Collaboration, Know your story, Succession Planning

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