The Role of the Advisor in the Creation of an Exit Plan 

Exit Planning requires financial analysis, modeling, valuation, estate analysis, tax planning, and counseling regarding the best way to promote business value and exit one’s business. Every Exit Planning Advisor needs to put in the work of building a Team of Advisors to work on different responsibilities on behalf of the business owner client. Whether a financial advisor, attorney, CPA, insurance provider, or a professional with a different expertise, each role can be significant depending on the exit path the owner chooses to pursue.

Having a diverse team gives clients the best possible scenario to exit their business on their terms because they are getting recommendations from each advisor’s area of expertise.

The tools and techniques used by each member of the team can vary, but nonetheless, each has a substantial role during each of the step of the Exit Planning Process.

Primary responsibilities of each role, regardless of expertise:

  • Inform and educate the owner about the Exit Planning Process
  • Facilitate the Exit Planning Process by coordinating advisory activities with those of the owner and his or her other advisors
  • Provide the services necessary to ensure the owner’s successful transition from the business.

Based on the expertise and industry of each professional, different responsibilities will be handled during each of the seven steps of the Exit Planning Process. Let's review: 

The BEI 7 Step Exit Planning Process

Step 1: Identify Exit Objectives

For each business owner, choosing what goals are most important is a crucial first step. For some, exit goals may include reaching a target business value, protecting valuable business assets, ensuring financial security post-exit, developing an independent management team, and motivating and retaining key employees. Exit Planning Advisors will work with business owners to identify what goals are of highest priority and determine what steps and resources are needed to reach them. By taking steps towards these values-based goals, the business owner will move closer to reaching overall Exit Planning Objectives.

Read More on Values-Based Goals! 
operating systems 

Step 2: Identify Business & Personal Financial Resources 

In addition to identifying which goals the owner wants to achieve, it is equally important to determine what they have today, namely, the current value of the business and its current and projected cash flow. The business owner and the Exit Planning Advisor use current business value and projected cash flow to determine which planning tools are best suited to move closer to the desired objectives, and what kind of Asset Gap the business has, if any.

Simply put, the Asset Gap is the difference between what business owners have currently and what they must have to support their post-exit lifestyles. There are four aspects that typically determine whether a business owner has an Asset Gap and how big that Asset Gap is:

  1. The current value and expected growth rate of the business.
  2. The future performance of non-business assets (i.e., investments).
  3. The amount of money the owner expects to spend after exiting.
  4. The life expectancies of the owner and the owner’s spouse.
diversified customer base

Step 3: Build & Preserve Business Value

Based on the first two steps, Exit Planning Advisors have the knowledge (and the EPIC planning design software) to make specific Recommendations to help grow existing business value, protect existing value from the actions of others, and preserve company value by minimizing income taxes. Based on the company’s needs, these Recommendations could include installing or updating financial reporting systems, aligning employee performance with the attainment of profitability goals, or protecting proprietary information through covenants not to compete with key employees.

To learn more about improving business value, check out our top 9 ways to Increase Business Value! 

The Top 9 Ways to Increase Business Value
proven growth strategy

Step 4: Selling to a 3rd party 

If the desired exit path is to sell the company to an outside third party, Exit Planning Advisors design strategies to improve the likelihood of a successful sale, minimizing the taxes you will pay upon the sale, and maximize your sale price and terms. If clients choose instead to retain ownership or transfer the company to insiders, advisors will skip this step.

Due diligence in pre-sale planning will help owners avoid the common deal killers, such as: 

  • The belief they can sell their business today for enough money to satisfy their financial needs and wants. 
  • The failure to reconcile their need for value with the market's perspective of value before going to market. 
  • An exclusive focus on top-line sale price.
Top 5 Deal Killers
recurring revenue

step 5: Transferring Ownerships to Insiders

Insiders can be defined as children, co-owners, or key employees. Oftentimes at the onset of planning, insiders do not have the financial resources to pay owners what the company is worth. If the desired exit path is an insider transfer, this step would include creating a detailed plan to ensure that the business owner receives the money they need from the business to achieve financial security, minimize the risk of non-payment, and ensure that the owner maintains some amount of control until paid in full.

One way to increase the success of an insider transfer is to work towards a goal of increasing transferable business value. Download the below case study to review a real-world example of a business that took steps to increase business value before the transfer. 

Case Study: Schumacher Steel
good and improving cash flow 

As part of the Exit Plan, Exit Planning Advisors help to coordinate business continuity with the owner’s lifetime objectives. The purpose of this is to ensure that the goals, such as transferring the business to the desired successor or having one’s family receive full value for ownership, are met whether they survive to see the business exit or not. The modern business landscape, and the Exit Planning industry, has plenty of variables and business owners must have plans in place so they are prepared for the unexpected.

While Exit Planning Advisors are not expected to have the experience and knowledge to help owners solve every challenge that arises, one important challenge that advisors can address is that of evaluating business risk. Download the PDF below to learn more about starting the conversation about business risk. 

How to start the conversation about business risk
demonstrated scalability 

Value Driver #7: Demonstrated Scalability

In this step, the Exit Planning advisors coordinate the business owner’s estate plan with the objectives set in step one. The design emphasizes tax efficiency and ensures that your family receives the amount of annual income necessary to satisfy the financial security goal set in step one.

competitive advantage 

Advisor Roles by Industry

BEI provides comprehensive Exit Planning practice-development tools, education, and ongoing support to advisors like you to create Exit Plans for your clients. By becoming a part of The BEI Network of Exit Planning Advisors, you’ll gain access to a wide range of benefits, including an established process that differentiates you from your competitors, lets you easily manage your clients’ Exit Plans, and helps your clients achieve their exit objectives.

Over 400 firms and 2,700 advisors worldwide use BEI's tools and resources to help their clients achieve their goals. When you join this elite group, you will have great success with your clients. BEI supports a wide range of industries, each of which play a substantial role in a business owner's Exit Plan. 

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Click Here to Download More on BEI Members by Industry

Click any of the blocks below to see what specific responsibilities that each member of the Advisor Team takes on based on their expertise. 

Role of Financial Advisor       Role of Insurance Provider      Role of the Attorney       Role of CPA

Exit Planning adds additional benefits to each core practice:

  1. Extends reach of core practice – new pool of prospects, core work can boost credibility and trustworthiness in Exit Planning too.
  2. Encourages Smooth Transfers of Knowledge to Young Advisors – access to Exit Planning software and training videos gives younger advisors a baseline knowledge
  3. Streamlines core work while building a book of business
  4. Differentiates the Advisor’s practice – provides a service that not a lot of people are offering

Check out the podcast recording below, "Protect, Preserve & Pass Along Wisdom."