4 Key Business Advisors Needed for Exit Planning

Exit planning is a lot like preparing to climb Mount Everest; few people can do it on their own, and even less succeed.

Have you ever heard of the saying, “jack of all trades and master of none?” The saying can be applied to exit planning, meaning no one is an expert in all aspects of this process.

However, several key business advisors can guide you through the succession planning process. Ensuring you walk away feeling confident that you made the best decisions for both you and your business. Wondering who the key business advisors are that we recommend as you start exit planning? Read on!

Who are the Top Exit Planning Advisors

Attorneys: Risk management is one of the most important roles of an attorney. Typically, new companies sign agreements with vendors, suppliers, strategic partners, distributors, government agencies, employees, and many other partners. Attorneys can also help business owners decide the proper entity for both tax advantages and personal liability protection.

When companies have more than one owner, they can draft agreements if there is a change in ownership due to death or retirement. Most owners do not have the specific knowledge to understand legalese, or to know if they are being taken advantage of within the agreement. Attorneys are a great exit planning advisor to have available as they can recommend other professionals or agencies for the company to use.

Regarding company succession, one of the most important and often missing documents is the buy-sell agreement. For companies with multiple owners, issues can arise if one is unable or unwilling to continue working, would like to leave the venture or if they wish to retire. While a buy-sell agreement is best prepared in the beginning, it’s never too late to draft this paperwork if it does not exist.

Attorneys also play a critical role for business owners during exit planning. They can facilitate the merger, sale, transfer of interest, purchase or change in operations and ownership. For example, there are numerous important components of a transaction that legal advice is critical for, including representations & warranties, closing conditions, covenants after closing, and restrictive covenants after the closing. Understanding the intent of these components and the overall agreement is critical and not something that most business owners are equipped to handle on their own.

Investment Banker or M&A Advisors: How can investment bankers help business owners with the sale of their company?

Investment bankers are key business advisors as they can help the owner objectively understand and determine the valuation of their company. They can coach the owner on how to position the company to potential buyers to maximize value. They will also identify and market your company to a broad spectrum of qualified financial and strategic buyers that the owner may not know or know how to approach.

Investment bankers can help increase the value of the transaction by preparing and running an auction process. During this process, multiple buyers can bid against one another. The investment bankers are there to help ensure you receive the best price and terms.

It is through competition that the owner can be sure to obtain the highest and best value for the company. The investment banker can negotiate on behalf of the owner and, if the need arises, can be more assertive in bargaining while not damaging the owner’s relationship with the acquirer.

If the owner doesn’t have the time to dedicate to managing the entire sales process (which on average takes 6 to 9 months) an investment banker is an ideal aid. They will allow the owner to continue running the company throughout the sales process.

Wealth Managers: Wealth managers guide owners through the steps necessary to prepare for the financial ramifications of selling their businesses. This includes assisting them in understanding the tax liabilities associated with the sale and preparing them for the personal impact of selling a business.

The proceeds from the sale of the business are a representation of your life’s work. Therefore, it is important to develop a wealth management plan that matches your priorities, maintains your current lifestyle, and ensures your financial independence.

One of the major obstacles to effective planning is the gap between the perception of wealth and the reality of wealth. This is where a wealth manager can help by working with you to establish objectives for your wealth management plan. It should consider your interests, needs and concerns, acknowledge philanthropy involvement, incorporate your heirs’ interests, and consider your estate plan in a timely, effective, and tax-efficient way.

Finance Professionals and Accountants: Many owners believe they can simply put their business on the market when they are ready to sell. Unfortunately, that is just not the case. Envision a homeowner sprucing up their house with a fresh coat of paint to make it more appealing to potential buyers before putting it on the market. The same idea applies to business owners who are preparing to sell. Even if you’re not planning to leave the business any time soon, sprucing earlier rather than later is always better.

Financial professionals and accountants are a key resource during the planning and staging process. They can help the owner get their business ready to sell and can advise them on how to set key metrics, developing analytics, and ensuring financials tell the whole story of the business.

Very rarely do owners understand the amount of work that goes into answering a buyer’s questions. During due diligence, buyers will often ask for a significant amount of information. It is imperative to have the right people answering those questions, and finance professionals and accountants are those people. They can respond to the requests so the business can run effectively throughout the entire process.

What are the Next Steps in Exit Planning?

It’s never too early to start the succession planning process. For more information on how our team of finance and accounting experts can help ensure that your business is ready to sell, contact us today.