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What Business Owners Worry About Most (It’s Not Money)

Many aspects guide whether business owners successfully exit, and whether advisors succeed or fail in growing their practices. Today, we’ll look at what business owners worry about most as they exit.

Money Can’t Buy Me Love

A common misunderstanding about both business owners and Exit Planning is that money rules all. Yes, financial security is the bedrock of Exit Planning. Yes, nearly all business owners strive to receive as much money for their businesses as possible. But when Exit Planning Advisors dig into what business owners care about, they often learn that money isn’t the be-all and end-all.

Dan Richards, a faculty member of the University of Toronto’s MBA program, noted that rather than money, the wealthy tend to worry most about three things: their children, their parents, and the health of themselves and their spouses. In Exit Planning, we refer to these aspects as values-based goals, which are goals that aren’t necessarily tangible but that have great importance to business owners.

Typically, it takes time and precise probing from Exit Planning Advisors for business owners to realize just how important family and health are to them. For most owners, their businesses are the driving force in their lives, and they spend much of their time nurturing the business’ success. But when they sit down and confront what matters to them most, owners usually realize that other things outweigh money in importance. Exit Planning can help those owners properly tend to those things. Exit Planning Advisors facilitate that.

Exit Planning and Family

Regardless of the Exit Path business owners take, family often plays a crucial role in decision making. For owners who pursue third-party sales, issues of how to manage their windfalls often crop up. How can they manage their money in ways that benefit their children without spoiling them? What exactly should they do with the money they’ve spent? What will their estates do if they were to die before the sale is closed? Each of these questions is both important and often overlooked by business owners.

For owners who decide to transfer their businesses to insiders—especially family members—they have to consider those questions and then some. How can they treat business-active children and non-business-active children fairly? How can they prevent in-laws from sabotaging their post-exit lives if those in-laws don’t feel that they’re properly represented in the owner’s business exit? What can they do to transfer ownership to a family member and get the money they deserve without damaging personal relationships? Exit Planning can encourage them think about and act on questions like these.

Estate planning and wealth management is Step Seven of The BEI Seven Step Exit Planning Process™. Exit Planning Advisors have the training and tools to address myriad questions about how an owner’s exit can true up the difference between financial needs and family-based wants. On top of the technical-planning advantages Exit Planning Advisors have at their disposal, they also know how to speak to issues relevant to their business-owning clients’ family concerns. Recall that most business owners expect collaboration and empathy from their advisors. When addressing how their business exits affect their families, Exit Planning Advisors have the advantage.

Exit Planning and Health

Most business owners have Type-A personalities. They’re driven to succeed by sheer force of will and tend to think that they are immortal. At first glance, they’ll often tell Exit Planning Advisors that an external reward, such as a maximum sale price for their businesses, is their ultimate goal. But when an Exit Planning Advisor brings health into the equation, in terms of how it can affect their businesses and families, those same owners will often pursue strategies to assure that their businesses and families aren’t hampered by poor or unexpectedly bad health. That’s why many business owners are drawn to Step Six of The BEI Seven Step Exit Planning Process, which addresses business continuity.

In Exit Planning, business continuity is a strategy that allows owners to achieve their business-exit goals regardless of whether they live to see their exits or die prior. It serves to protect the owner’s business and family from the unexpected. Most business owners put a high value on assuring that their businesses and families succeed after they exit (whether they’re exiting from business or life). They also demand that their advisors help them achieve this goal. That’s why BEI created its Business Continuity Instructions (BCI) system within its EPIC software.

The BCI provides Exit Planning Advisors with prompts and questions that allow owners to guide their survivors in the event of an unexpected death or incapacitation. It helps business owners examine who can run the business in their absence if necessary. It lets business owners plan for how their families will be affected by their unexpected death or incapacitation. Most importantly, it gives business owners a concrete method of protecting their businesses and families.

Conclusion

Assuring that business owners can exit their businesses successfully profoundly affects owners, advisors, and the economy. Exit Planning Advisors work to the benefit of all by providing services that facilitate successful business exits.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.   Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this blog/newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog/newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCF is neither a law firm nor a certified public accounting firm and no portion of the blog/newsletter content should be construed as legal or accounting advice. A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.