Eleven Reasons Advisors Don't Have a Succession Plan

All of us who work with business owners have heard the excuses owners use to put off doing the things that they know they should do but just don’t see as pressing. Whether you are a CPA, attorney, financial advisor, valuation analyst or any other type of professional, you’ve made important and timely recommendations only to have owners agree in theory, but not in action.

As Exit Planners, we too run into “Inert Owners,” but we understand the reasons owners fail to act and have tools to move owners to act in their best interests. In this article, we outline the three principle owner responses to Exit Planning in no particular order.

Category I : They simply don’t want to create an Exit Plan.

Category II : They have no urgency to create an Exit Plan because of one or more false assumptions they’ve made.

Category III : They don’t know how Exit Planning works.

I. Thank You, But No Thank You

Owners who simply don’t want to create Exit Plans fall into two categories:

Reason 1 : Those who fear the unknown.

Reason 2 : Those who do not want to retire.

In the first category, we find owners who don’t know who they’d be if not the owner/manager/hub of their company. Others don’t know what they’d do with their time if they couldn’t fill their days as they do today.

In the second category are owners who truly love what they are doing and, no matter how much someone offered to pay for the company, they’d still come to work every day. We also find those who simply cannot imagine anyone else doing a better job managing their company. Most of the owners in this category, however, are those who are making more money from their company than they can from any other type of investment.

II. False Assumptions Suck The Urgency Out Of Owners

Here again there are two categories not of owners, but of assumptions. The first set of poor assumptions relate to time, the second to dollars.

Time-related False Assumptions

Reason 3 : The most common mistake owners make in thinking about their future exits is that they assume that when they are ready to go, their business will be ready for them to go as well. We could write a book about the errors in that theory; in fact, we have—John Brown’s Exit Planning: The Definitive Guide .

Reason 4 : Related to that assumption is the optimistic view most owners have of the time it will take for their businesses to grow to the amount of cash flow and value that can support their post-exit lives.

Reason 5 : Owners underestimate the number of years they (and their spouses) will live after the day they leave their companies.

Dollar-related False Assumptions

The natural optimism of owners is evident in the assumptions (all of them false) that they make about money. Specifically, they:

  • Underestimate the amount of income they’ll need to sustain comfortable retirement ( Reason 6 ).
  • Overestimate the likely return on their invested assets ( Reason 7 ).
  • Overestimate the value of their companies ( Reason 8 ).
  • Overestimate the net proceeds from sale/transfer of their companies ( Reason 9 ).
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    III. What The Heck Is Exit Planning?

    In this last group, we find those who either:

  • Don’t know that there’s an organized, owner-centric, proven process to help them reach financial security and all their other goals ( Reason 10 ); or
  • Don’t know that there are professional experts who can help them without pushing them toward one exit path ( Reason 11 ).
  • Those are eleven reasons why an owner may not move forward with planning—when you know they should. To encourage owners to overcome fears and false assumptions and take action, we’ve found that the best, and usually the only, successful strategy is to provide owners, on a consistent basis, accurate, useful information on Exit Planning. The information that you provide over time—this is not a one-time conversation—must convey that planning with you improves the odds of reaching their goals, decreases the time they will spend spinning their wheels and will give them more time to do the things they enjoy.

    As an advisor interested in helping owners achieve their goals and aspirations, you can wait for owners to pick up the phone and call you for assistance. Or, you can launch and maintain an information campaign—some would call this a marketing campaign—to foster awareness of owner-centric Exit Planning. Without effective content-based marketing and engagement tools your ability to get owners to move off the dime is challenging at best.