"What If" Exit Planning for Your Business Clients

Submitted by Maddie Ernzen on Fri, 05/06/2022 - 9:02am
"What If" Exit Planning for Your Business Clients

"What If" Planning for Your Business Owner Clients

Exit Planning oftentimes helps owners prepare for the unexpected. 

“If you take control of those things you can, you are better able to negotiate the unexpected.” – Judy Sheindlin

The modern business landscape, and the Exit Planning industry, has plenty of variables. Unprecedented occurrences can happen at any given time. With the COVID-19 pandemic, we saw how many businesses were unprepared for sudden changes in the market. Businesses that had plans already in place for disruptions to supply chains and contingency plans for the economic impact on their business fared better in the long run. They controlled the things they could and shifted their organization to fit the situation that couldn’t be controlled.

No business owner wants their business to suffer because of their own failure to plan for all possible scenarios, especially when their own involvement in the business is concerned. That's where continuity planning comes into play. As an Exit Planning Advisor, you know firsthand what it takes to coordinate planning efforts that include a variety of considerations, risks, stakeholders, and timelines.

A continuity plan is defined as "a plan that creates a system of prevention and recovery from potential threats to a company.” In the business landscape, there are a variety of unexpected events or circumstances that could have a drastic impact on owners’ exits from their businesses.

External Unexpected Events 

There are several unexpected events that could occur that are completely outside the control of a business: a war, a new pandemic, or a natural disaster, to name a few. As mentioned above, COVID-19, for example, disrupted global supply chains. The travel restrictions literally brought the travel and hospitality industries to a standstill.

Natural disasters and wars can have the same type of impact. If a business sources its raw materials from an area in the midst of a natural disaster or political dispute, the entire supply chain is in trouble. Ultimately, these disruptions can negatively impact not only your client’s business, but also their Exit Plans. They may want to delay their exits until the situation resolves and business operations are stabilized, or they may decide they can’t invest the time that is needed to recover and exit sooner.

As ‌an Exit Planning Advisor, it is crucial to ensure that you do sufficient contingency planning so that your business owner clients know how to handle these external circumstances, how to best pivot their plans during those times, and how to protect their business, their families, and their employees. Look for areas in the business where there might be an overdependence on a particular customer, supplier, or business partner. Any disruption in their business can take a toll on your client’s entire business as well, which has a direct impact on the transferable value of the business.

Internal Unexpected Events 

Internal unexpected events include deaths, divorces, co-owner disputes, and more. Such events can come unannounced and disrupt business in no time. Unfortunately, most businesses are unprepared for the unexpected. Owners have some degree of control over these events, but oftentimes it’s the timing of them that can be unexpected.

For example, the sudden death of a CEO or any top-level executive can have massive consequences to the leadership of the business. Similarly, the divorce of a major stakeholder can cause the splitting of stakes and could create an additional undesired shareholder. In addition, any legal disputes could quickly become a PR nightmare that hurts the company's reputation, which in turn impacts business value.

While an owner may have a buy-sell agreement in place that they believe will handle such scenarios, they often fail to prepare for more complex issues and the agreements aren’t reviewed often enough to be effective. But what happens when a co-owner leaves during their lifetime, and not by their death? This leaves some gaping holes in most buy-sell agreements and opens the door to opportunities for you to help your clients.

Continuity Planning & Exit Planning

As a business advisor, you must help your clients see how Exit Planning can help to cover all the bases. At the core of Exit Planning is being able to keep a business running through unexpected events and without the owner at the helm. Exit Planning ensures that your client can exit the company once it has reached its potential. However, it also puts proper “Plan B” initiatives in place to mitigate risks and put processes in place to help with emergencies.

Business Continuity is at the core of Exit Planning. It answers the “What if...” questions that owners are often unprepared to handle successfully.  You are in the driver’s seat for your client, guiding them through the roadmap you have created for them to reach their desired exit goals. It is up to you to ensure that you have the necessary strategies in place so you and your client know what to do if and when you hit any speed bumps.

To learn more about preparing your clients for the unexpected, schedule a meeting with us today.

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