Lawyers, Accountants, Wealth Managers, Insurance agents, Consultants… this is for you.
A group of advisors are having a lively debate over on a Business Succession Group on Linked In about how come business owners don’t do any pre-planning for calamities like the death or exit of a partner or the loss of a key employee.
What are you telling your clients about how to maximize their return on the investment in their business?
Everyone guessed at the reasons for this lack of planning and foresight. The top reasons seemed to narrow down to:
1) Business owners don’t know that they should do pre-planning for calamities.
2) Or, they do know they should plan but don’t have time to get to it.
3) Or, they are waiting for one of their advisors to tell them what kind of planning they need to do.
Which reasons resonate for you?
I think they are all partially true. But there is a bigger reason that is not mentioned in the discussions or the survey.
Business owners don’t see their companies as assets that need to be strategically protected and managed.
Business owners don’t think there is a need to sort out exit options until the year they don’t feel like running the business. And since that isn’t front of mind at the moment, there is no reason to do anything about it. Business owners are short-term thinkers.
Advisors are long-term planners.
Like most human beings, we don’t believe that we’ll be affected by a crisis (death, disease, divorce, failure, lack of energy) until it’s standing at our front door. We force ourselves to buy insurance, but hate talking about risks as it exposes our psyches to fear. Entrepreneurs push fear away.
Advisors deal in risk mitigation. But that’s the extent of their approach toward dealing with fear.
To prepare a business so that it can survive a transition from any source, invited or forced, requires all parties at the table to deal with fear.
- Fear of losing control of a business.
- Fear of losing face.
- Fear of appearing to not know what you should know.
- Fear of getting taken advantage of.
- Fear of becoming irrelevant.
All that fear comes packaged in the topic of Exit Planning, Succession and Transition. It’s usually disguised as resistance, passive or aggressive.
For advisors to help business owners, they have to become better at helping these owners face facts and fears.
So, yes business owners are waiting for their advisors to tell them they need to file this form or fix that problem. They are also waiting to be told how to navigate this next stage of their business life.
The first advisor that shows them the road ahead and how to navigate it will win their trust.
If you are an advisor and are worried about your clients and their business’s future, have a frank talk with them.
Don’t start with “what are your exit plans”. That will press the fear button.
Do start with “do you ever think of your business as an asset, like the stock you own? When should you sell a stock? When it’s right for you, or when the market place tells you selling is the right time?”
Then follow up with “my concern for you is that in the year that you are ready to sell your business, your business won’t be in a transferable state. It takes 2-4 years to make it saleable, or transferable so that you can get that return on investment. What’s important to you about what happens to your employees and your company’s future…?”
Now that’s real risk mitigation: start with questions, not advice. Owners have to start the conversation with what makes sense to them, not what makes sense to the advisor.
What do you think? What has worked and what hasn’t when raising the exit questions with your older business owner clients?