Succession Planning Challenges: Keeping It Simple and Focused

Advisors who commit to proper Exit Planning know that the most important aspect of Exit Planning is the business owner.

Exit Planning Advisors represent the interests of the business owner, and the primary focus for Exit Planning is the business owner’s wants and needs.

Recently, one of BEI’s Advisors, Glen, told me about an experience in which he had to remind himself who he represented.

Glen had been working with a business owner, Tom, on an Exit Plan for a couple of years. They had recently finished finalizing an employee incentive plan to assure that Tom’s key employees stayed with the company after Tom exited. Tom was clearly becoming fatigued, but he was happy with how the Process had proceeded.

Out of the blue just a few weeks later, Tom told Glen he was considering adding another incentive plan to the mix. Glen was surprised by this and asked Tom to tell him more about why he wanted to do that. Tom said that one of his key employees, Jim, had complained to him about the incentive plan he was offering. Tom told Glen that he was tired of hearing about it, that he couldn’t have Jim leaving, and that Jim said he’d leave if Tom didn’t give him more.

In situations like this, good Exit Planning Advisors must discourage owners from making unwise or harmful decisions due to fatigue. It can be tough for Exit Planning Advisors to do this, because it might seem at odds with the owner-centric approach they take to Exit Planning. But when fatigue and outside pressures cause owners to make decisions they would not otherwise make, the Exit Planning Advisor must act.

Glen addressed this issue by referring to one of the BEI assessment reports he used to determine the best Exit Planning strategies for Tom. These assessment reports don’t diagnose problems that business owners have: Instead, they reflect to the owner what he or she cares about most relative to a business exit. They keep owners focused on what matters to them , not to the people in their orbit.

This allows owners and advisors to address the most important things first, then move to less critical issues later. It also helps prevent overly ambitious employees from essentially holding owners hostage.

Using these assessments, Glen showed Tom what he had said was most important to him, including keeping his current lifestyle intact after he exited and providing enough money to fund college tuition for his five grandchildren. Glen then reminded Tom that because they had started his Exit Plan well before his anticipated exit date, they had addressed Tom’s most pressing issues first. They had also developed systems and other employees to take over the most difficult burdens of keeping the company’s performance strong, whether Jim decided to stay or not. Giving into Jim’s demands could put those goals in peril.

Related: Business Continuity: Succession Planning’s Answer to ‘What If’

After reviewing the goals that mattered most to him, Tom was relieved to realize that if Jim truly intended to leave the company if his demands weren’t met, it wouldn’t affect his exit nearly as much as he had assumed. This allowed Tom to decline Jim’s demands, and prevented him from rewarding more money than was necessary or realistic.

It can be tempting for Exit Planning Advisors to simply do what owners tell them to do. But it’s the Advisor’s duty to make sure that he or she is representing the owner’s interests. When owners make sudden decisions that seem far out of line with their overarching goals, Advisors need to have the tools and initiative to probe their intentions . Doing so helps keep the Exit Planning Process simple and focused on allowing owners to leave their businesses on their terms.