One of the reasons, I chose to earn my Certified Exit Planning Advisor (CEPA) credentials was because I’m a business owner. As an owner, I know I won’t be in charge of this company forever. After all, I’ve already started and sold two other businesses along the way. Knowing what I know now, I could’ve made more if the proper exit plan had been in place when I chose to sell. According to Peter Christman, one of the co-founders of the Exit Planning Institute, the exit planning process is very much like a three-legged stool. He states that those three legs are what make an exit plan viable. Christman wrote the book, The Master Plan: Exit Strategy For Successful Business Owners, focusing on this overall idea.
The first leg of the stool is maximizing the value of your company. Stats show that 80% of individual business owners’ net is tied up in their company. Then obviously it is key to maximize that. To be candid, financial “experts” that only want to focus on stocks and bonds to reach a goal for a business owner drive me crazy. They don’t realize the gold mine a client that is a business owner is sitting on. Stocks and bonds are only going make up 20%, if that much, of investment choices for a business owner. Why not focus a financial plan around their biggest asset—the business.
The second leg to work on when it comes to the exit planning process is a personal financial plan. Not only is it important to maximize your business’s value, but it’s equally imperative to make sure your personal finances are in robust shape as well. Here’s the thing, if you sell the business or transfer to a next generation or charity, it’s necessary to have enough assets to care for yourself. If you can’t do that you’re not ever going to be in a position to sell. Think about it. Do you want to sit on a stool with a lopsided leg?
Finally, that last leg of the process to work on a life plan. You’ve heard the stories about the moms that pour everything into their children and when all their babies are grown, they are lost. A business owner is no different. Your business is your baby! It’s all too easy to allow our identity to become our business. So, after you sell your business, you have no idea what to do next. Know what’s next for you! Don’t become a part of the 75% that regret selling their business. GET A PLAN!
Here’s is what an exit plan is going in to do for you. Utilizing these three “legs” of the exit planning process will save you in the long run. Instead of the exit being basically a transaction of, “Hey, I found a buyer let’s get this company sold,” you will have years and years of planning that has gone into it. That will make your business as profitable as possible and exponentially more attractive to a potential buyer.
The next step the process is to meet with a planner. Their job will be to help you coordinate and level out those “three legs on the stool”. It may be an attorney, it may be CPA, a CFP® or a CEPA. You need someone out there with the credentials to assist you as a “master planner” for the whole process. Whoever the person is, make sure they are not a novice and have gone through the routine before.
The process for your exit planner will look like this:
For leg one of the stool, the planner’s responsibility is to find consultants or value advisors to help you grow your business. You may end up with three, four or five different types of consultants working as value enhancement advisors. Their sole purpose is to maximize the value of your business. Many times, consultants can fill this need with various niches.
Next, when they begin working on the second leg, or your personal finances, they’ll connect with your attorney, CPA, and CFP® (if they aren’t the same person). Each of these professionals plays a vital role in keeping you on track to reach your goals financially. Your “master planner” will coordinate with them for a financial check-up. If your finances are in shape then they’ll move on to helping with the next leg. Leg three, this is where life planning advisors or life coaches come into play. Also, charity or philanthropic desires come into play
Finally, in the last leg, life planning advisors or life coaches come into play. It’s important to let them know your charity or philanthropic desires at this point too. This is where the rubber meets the road and all your desires come into play.
Whenever you work with this three-legged principle, you’re ultimately working with a quarterback. They guide your team into the end zone. Trust me when I tell you each of these positions (CFP, CPA, attorney, CEPA) think differently, move differently, operate differently and have different roles, yet are vital to a healthy financial strategy. Which is exactly why you need a “master planner” involved. Somebody who can grab the bull by the horns and move you through this process. They will help you ultimately cash in on your greatest asset—the one you spent your entire life building. You could attempt to do it yourself, however, as a business owner you might get frustrated. You’re an expert in your field, not law or tax. You don’t speak law, you don’t speak tax. Get a “master planner” and you’ll undoubtedly be ready as you head into the next phase of life.