During BEI’s advisor training sessions, advisors often want to discuss the resistance they get from owners when they try to get those owners to plan their exits. Advisors ask us for an easy, reliable way to convert reluctant owners into eager planning clients. We can and do provide a go-to solution, but first, it is important to understand why owners don’t feel a need to begin planning now.
What Owners Tell Us
The BEI 2016 Business Owner Survey asked owners what was preventing them from planning for their exits. Of many possible responses, the most common was, “When I’m ready to exit, I’ll take the necessary actions.”
Yet, a whopping 80% of owners indicated that they believe that their successful exits will occur as a result of “planning and action items that I implement.”
So, the vast majority of owners understands the need to plan just not right now, and not until they are ready to exit.
Until business owners are convinced that preparing their businesses for their exits must begin before they are ready to exit, they will continue to delay action.
The Unprepared Business
The problem, as we advisors well know, is that few businesses are ready to continue successfully without their owners at the helm. We also know that, in most cases, it takes years of planning and action to prepare businesses for their owners’ exits.
Owners recognize the first part: 75% of our survey’s respondents told us that they would exit today if assured financial security. In other words, they know that their businesses aren’t ready to be exited, but they still do little or no Exit Planning. BEI Member Marko Mijuskovic echoes this point: “Owners know what they need to do. They just don’t examine it up close or think they need to do something today. I tell them, ‘This is your final exam. Will you eat steak or Top Ramen for the rest of your life? Let’s do the work.’ And they do.”
Clearing the “Not Today” Hurdle
Advisors need to correct the misperception that owners can prepare their businesses for their exits in the time between when they decide they are ready to exit and closing the sale. This requires that owners understand three things:
1. The size of the gap between the resources they have and those they’ll need to exit on their terms.
2. The time and effort it will take them to develop sufficient resources to exit on their terms.
3. That Exit Planning and action can (and usually must) focus on growing business value and cash flow—a benefit to them no matter when they exit or which Exit Path they choose.
This last issue - growing the strength of the business—is at the core of Exit Planning for most businesses and owners, and of what you can do to help them. Your role/value in growing and strengthening a business is the message you must communicate clearly. You aren’t fighting a battle against cost or a belief that planning is unnecessary: You’re fighting a battle against unfamiliarity. You must inform and demonstrate to owners that their ability to leave their businesses when they are ready to exit requires planning and action now. Only by acting now can they be certain that their businesses will ready to be exited when they are ready to exit.
"What We’ve Got Here Is a Failure to Communicate.”
Certainly, meeting with owners (as the initial contact point) to discuss the many benefits of Exit Planning is helpful, but BEI Members find that consistent communication with owners on various Exit Planning topics is more effective, and far less time consuming, than multiple face-to-face meetings. Overcoming the misperception that owners can wait until they are ready to exit to begin preparing their companies for their exits requires consistent, methodical, repeated communication. Content must focus on how Exit Planning (with you, of course) benefits them.
“If you have an important point to make, don’t try to be subtle or clever. Use a pile driver. Hit the point once. Then come back and hit it again. Then hit it a third time—a tremendous whack.” –Winston Churchill
Our most successful Members deliver firm-branded Exit Planning information to hundreds of owners and advisors (often 500+) two or more times per month. In providing Exit Planning content and accurate information to a large number of targeted recipients, they dispel the misperceptions that allow owners to delay.In conclusion, owner inaction is caused by our failure to communicate.