Wealth Managers Starting To Recognize the Challenges of Helping their Business Owner Clients Exit

I frequently talk to wealth managers who provide an array of services to business owners. They often say they provide ‘succession’ planning, but from what I can see, that discussion has more to do with tax and estate planning than ensuring a  business will actually find a buyer.

Succession planning does nothing to enable a business to be sold!! They are missing out on a game-changing, perfect storm opportunity.

Wealth managers get paid for managing liquid assets. A business is an illiquid asset. I imagine the wealth manager hopes that one day they will be managing the windfall from the sale of that illiquid asset. Hope without action is a recipe for disappointment.

Imagine you manage $2 million in liquid assets for a business owner client. The total value of all her assets is $20 million. That 10% is all that is available to the wealth manager. He hopes to eke out a 4-6% return on the liquid portion.

Her business might be worth $18 million on paper but unsaleable. Imagine guiding her to the help she needs to make her company saleable. And then a buyer comes to call. She signs the deal and suddenly, her liquid net worth is not $2 million, its $20 million overnight. You’ve just grown assets under your management by 900%!!!!

How often do you get that rate of growth today?

But this sweet scenario is not going to happen just because your clients own successful businesses.

Wealth Managers who really want to make a difference in their business owner clients’ lives need to be far more proactive in delivering the facts of life about selling a business:

  • 90% of owners who attempt to sell fail to do so after three years on the market, according to a private survey by a major investment bank.
  • Of 2.8 million owners who predicted in a study by PWC they would exit within 5 years back in 2007, Capital IQ reports that 199,497 actually closed the deal.
  • Most owners believe they can sell their successful businesses when they want for what they want because the company makes money for them. They have no idea the company is unsaleable in its current form and has not been clearly informed what to do and how to make the changes that make it attractive to buyers.
  • There is $10 trillion in funds waiting in the wings to acquire businesses that have been made saleable. There is no demand for unsaleable businesses.

I commend the very few wealth managers like Mark Tepper at Strategic Wealth Partners for writing about and educating his clients about what it truly means to exit a business. It requires personal, professional and organizational transformation.

It requires that wealth managers step into the game as guides, quarterbacks, advisors and planners.

Wealth managers have a tremendous opportunity to help their clients become Ultra High Net Worth individuals. Each wealth managers must make a choice. They can wait and see if the clients in their portfolio beat the odds and find buyers.

Or they can learn about what it takes to make a business saleable and then help their clients face the fork in the road – one fork leads to wealth generation. The other fork leads to a closed business and a far different financial future.

I think it is a wealth manager’s duty of responsibility to present the facts to their clients and help them get educated. It will pay off for both dramatically and is a highly profitable and differentiating strategy.

If you want to learn how to have this kind of conversation with your clients, give us a call at 206-395-3530. If you want to learn what it means to transform an unsaleable company into a saleable and in demand company worth 2 times or 3 times what it is today, so you can speak knowledgeably with your clients, then you need The Make Your Business Saleable Resource System.

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