Studies show that most business owners do not understand the tremendous benefits of proactive exit planning. Financial and legal professionals are in a position to guide their clients through this life-changing process. This is the final part of a three-part series focusing on the key elements of a successful exit plan. The following was sourced from an article by Richard Jackim author of The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners.
Starting the Conversation
Despite overwhelming evidence that exit planning is a vital part of business ownership, most business owners don’t create an exit plan. There are a number of reasons why they avoid it, ranging from the deeply psychological to the purely practical.
First, just as most of us don’t like to think about our own deaths, business owners don’t want to think about their exit from their businesses. Even if the business goes on after they exit, many owners feel that they are losing a part of themselves–a part that has provided extraordinary value and meaning to their lives.
As a result, many business owners are afraid to talk about the subject, just as many of us put off making out a will or buying life insurance. Dealing with these subjects somehow makes them more real, which means we have to acknowledge the pain they might cause. It’s basic human nature to avoid the unpleasant, and no matter how smart or successful a business owner is, he or she will almost always avoid painful situations even if they’re necessary for future health.
Second, exit planning is time consuming. Most business owners are swamped with work on a day-to-day basis. It’s no wonder they don’t feel they have time to create a comprehensive exit plan.
Third, exit planning is complex and there are very few resources available to guide a business owner step-by-step through the process. Ignorance of the process, combined with the knowledge that it must be done sooner or later, can create a lot of stress. If a business owner lacks the means to attack the problem head-on, he or she will usually try to put it off for as long as possible.
Finally, studies show that most business owners do not understand the tremendous returns that investment exit planning can provide. A lack of understanding prevents them from weighing the benefits of doing something versus the costs of doing nothing. As a result, they favor the status quo and inertia.
The combination of an intense need for exit planning and an equally intense resistance to doing so creates a great deal of stress and anxiety for business owners. At first glance, these problems might suggest that you should run, not walk, away from an exit planning engagement. Why would anyone in his or her right mind want to tackle a task loaded with so much client resistance?
As financial and legal professionals, we probably know that many of the requests for our services come from business owners who are trying to wrestle with many of these exit planning issues on their own. As a result, we are in a unique position because our clients are already looking to us for answers and advice.
The important thing to remember is that whenever change is imminent and unavoidable–as it is now for retiring baby boomers–if we can help our clients make that change smoothly and painlessly, we become invaluable advisors. By calling attention to the need and helping our clients develop a comprehensive exit plan, we can relieve our clients’ pain. Read Full Article