Exit Planning: Talk vs. Action

Exit Planning: Talk vs. Action

In our last two articles, we shared owners’ responses to questions about their businesses and their thoughts about leaving them. Specifically, we used The BEI 2016 Business Owner Survey to bust two myths that advisors may mistakenly believe about owners.

In today’s post, we look at whom owners talk to about their exits and which actions the advisors they talk to take because of those conversations.

Owners are talking with advisors about exiting their businesses: Are you one of them?
 

Background
 

BEI conducted owner surveys in 2014 and 2016. In both, owners could pick as many responses as appropriate to complete the following statement: “To date, I have had at least one conversation about my plans to stay in/exit from my business with my ________.”

In 2014, 22% of owners said that they had talked to their spouses or significant others about exiting their businesses. Next on the list, at 9%, was “my business-owner friends.” Compare those response-getters to the professional experts:

  • CPA: 11.79%
  • Financial planner/investment advisor: 9.91%
  • Business consultant/coach: 8.03%
  • Business lawyer: 7.10%
     

That’s not a strong showing for those of us who make our living working with owners.

2016
 

In only two years, we saw a huge change in the rates at which owners are talking to those same groups.

Observations
 

  1. Overall, owners in 2016 demonstrated a greater interest in at least discussing their exits than they did in 2014.
  2. Most owners (including non-boomers) are discussing their business exits with family, friends, and one or more advisors.
  3. If your clients are not talking to you about exiting, they may well be talking to another advisor.
     

Taking (Limited) Action
 

Our next question was, “What actions have you taken so far to prepare for your exit from your business?” We found that although more than half of owners had talked to an advisor about their exits, only 17% had created a written Exit Plan.

Owners responded that they had taken limited steps toward their exits, such as obtaining a valuation, hiring an employee to take over their responsibilities, calculating how much money they would need from the sale or transfer of their businesses, and dealing with ownership succession in their Estate Plans. Based on these steps, it’s safe to assume that owners tended to reach out to advisors who could address each specific need with their professional expertise (e.g., talking to a business consultant about training a successor). This means that owners tend to build their Exit Plans piecemeal rather than constructing a comprehensive Exit Plan with an Exit Planning Advisor.

For example, the survey results suggest that if owners indicated a desire to transfer ownership to a child at death, their Estate Planning attorneys created documents necessary to achieve that goal. There is no indication that the attorneys broadened the discussion or relationship to include lifetime Exit Planning tools, designs, or processes.

Similarly, owners who indicated a desire to sell their companies to key employees likely talked to business appraisers, which in some cases led to a business valuation. From a “typical” (i.e., non-Exit Planning) perspective, those appraisers acted professionally and consistently with their education, training, experience, and professional designation.

The same is true for the business-planning lawyers, financial advisors, and all other professionals who viewed their engagements with owners solely from their professional perspective. We have all been guilty of leaving owners to wander like explorers in uncharted territories, using trial and error to figure out how they will reach the exits they desire.

Seventeen Percent
 

Certainly, some owners are talking to advisors who know how to create comprehensive Exit Plans—maps charting the route from where those owners are to where they want to be. In fact, 17% have created written Exit Plans. They are the lucky few who have talked to advisors who understand that Exit Plans require contributions from more than one professional discipline.

Eighty-Three Percent
 

That leaves 83% of owners who are out wandering the Exit Planning wilderness. This is a huge opportunity for advisors wishing to be more proactive by asking their existing and prospective clients questions such as:

  • Are you confident in your ability to leave your business when you want, for the money you need, and to the person you choose?
    • If not, which steps are you considering to prepare for your exit?
  • What’s the biggest obstacle to your ability to leave your business on your terms?
     

Asking questions like these broadens the discussion with the owners you work with and leads to additional opportunities to represent them in what matters most—ensuring that they can exit their businesses on their terms.

If you are going to talk to owners about their exit goals and plans, you need to be prepared to provide a comprehensive solution, one that extends beyond your area of professional expertise. Successful Exit Plans are the products of a group of advisors from various disciplines working together to reach a client’s goals. No one can create a successful Exit Plan alone, and everyone who understands Exit Planning has a deep appreciation of the value of other professional advisors.

Perhaps that’s why we work so well together.

John Brown
Exit Planning
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John Brown started his career in Exit Planning 30-plus years ago as an estate planning attorney.  He created The Seven Step Exit Planning ProcessTM and successfully teste ... Click for full bio

NBA Player Carl Landry Demonstrates the Value of Persistence in Life and Work

NBA Player Carl Landry Demonstrates the Value of Persistence in Life and Work

Written by: Jon Sabes

When you meet Carl Landry, stand-out college basketball player and nine-year NBA player, you imagine that becoming a professional basketball star was a straight forward run for the 6-foot-nine-inch power forward. 


However, when you go deeper into Carl’s background, becoming a NBA professional was less than certain and little came easily to the 33-year-old from Milwaukee:

  • He was cut from his high school team as a freshman and averaged less than ten points a game when he did play as a senior.
  • He started his college career not at Purdue, but a junior college where it was not clear he would play.
  • When he finally got to Purdue, he tore his ACL in his knee his first year and reinjured it the next year.
  • While his family held a party for him the night of the NBA draft, he slept in the Philadelphia airport after missing a flight following a workout for the 76ers.
  • In the NBA playoffs, Carl had a tooth knocked out, but came back in the same game to make a game-winning blocked shot as the Rockets beat the Utah Jazz 94-92.
     

Landry, who I interviewed on my podcast, Innovating Life with Jon Sabes (www.jonsabes.com), is a remarkable example of the value of “persistence.” In a time where technology creates the image that anything is possible at the touch of a button, persistence is an under-appreciated trait. When I spoke with Carl, I clearly saw someone for whom success has only come through a force of will that made him a NBA player, but it also made him a better player every year he played. That’s the kind of personality that has produced greatness in business as well as sports.

Carl was, in fact, drafted that night he spent in the airport. The Seattle Supersonics chose him as the 31st overall pick and then traded him to the Houston Rockets where he rode the bench for much of the first half of the season. When All-Star teammate Yao Ming was injured, he stepped in and played a key role in the Rockets astonishing 22-game winning streak (the third longest streak in NBA history). And, that season, after sitting on the bench for 33 of the first 36 games, he was named to the All-Rookie second team.

Carl was the first in his family to go to college. “I told myself that this was my ticket out, so I did everything I possibly could to be the best person in school and also on the court,” he said.

His family life in Milwaukee showed him what he didn’t want to do. “Just being honest with you, seeing some my cousins, peers, they went to work for jobs paying six, seven dollars an hour or they didn’t go to work at all and then living off welfare. I didn’t want that.”

When he was first injured, he had to contemplate the end of a career before it even got started. “When you have an ACL tear, it’s over…no more basketball,” he told me. “I said, God, give me health again and I’ll do everything I can to leave it all out on the line and be a successful individual.”

On my podcast, Carl pointed out another interesting lesson he learned in the NBA: Not doing things just to fit in.

“Fitting in was easy,” he said. “Doing everything that everybody else does was easy. If I stood out in some type of way, I’m going to have different results. I’m going to have stand-out results.”


That’s called the “Law of Contrast” and it produces that exact effect of changing the outcomes that everyone else is experiencing.  Carl is smart, he recognized that differences make a difference, and doing whatever it takes is what is required to make real, meaningful differences.

Every off-season for the last 11 years, he has run a camp for kids in Milwaukee where he tells youth his story of hard work and persistence. “I always tell the kids to apply themselves and always be persistent,” he said. “If you dream, apply yourself and be persistent. With hard work, man, the sky’s the limit.”

When Carl says the sky’s the limit he means it.  He is smart to recognize that it’s important to dream big, because if we don’t – we may be selling ourselves short. “You have to dream bigger than your mind could ever imagine,” he said. “I wanted a nice house. I wanted a nice car. I said, and I got all of that. So, what do I do, do I stop now? Maybe I didn’t dream big enough.” That’s a big statement coming from a kid who grew up to be the first in his family to graduate college and go on to be not only a top NBA basketball start, but a good businessman, father and someone who gives back to the community.

I’m convinced that in whatever he takes on as a basketball player or in his post-hoops career, Carl Landry is not going to stop getting better at whatever he does, and in the process of doing so, make the world a better place.

GWG Holdings, Inc.
Investing in Life
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GWG Holdings, Inc. (Nasdaq:GWGH) the parent company of GWG Life, is a financial services company committed to transforming the life insurance industry through disruptive and i ... Click for full bio