For the past fifteen years, I have served as a principal, a manager, a transactional advisor, a legal advisor and a financial advisor to privately held businesses and their owners. Over this time period, I have noticed a lack of consistency in how Exit Strategy services are delivered to business owners. This inconsistency exists, even though succeeding a business is one of the most important and complex financial decisions that will be made in that business owner’s lifetime. Proper planning and well timed exits can literally mean millions of dollars in additional Value and Wealth Preservation that is added to a business owner’s net worth and legacy.

Therefore, it is imperative to inform business owners and their advisors of recent developments in – and to provide timely information on – this increasingly important practice area. Few business owners or advisors today focus on developing multi-year ‘planned’ exits from a business. For millions of business owners who are looking to retire or move onto a new phase of life, their exits often times lack the planning that may help ensure achieving that business owner’s personal goals.

Advisors to privately held businesses play a critical role in this Exit Strategies process. Privately held businesses have limited resources. Sometimes there is a lack of capital because the seed money is mostly founder dollars, i.e. personal net worth. Sometimes resources are limited within labor or human resources, i.e. ‘management’, because small businesses have a hard time consistently recruiting and rewarding highly skilled and talented employees. As a result, the typical entrepreneur fills many roles in the business and wears many hats. Often, most of that owner-operators’ time is allocated to ‘tactical’ items rather than ‘strategic’ objectives. This business owner relies on advisors for ‘strategic’ planning. Development of an Exit Strategy is, by definition, a ‘strategic’ initiative that trusted advisors will initiate and design. Then, strong Teams of advisors will execute that Exit Strategy for the business owner.

Today, there is a lack of focus on Exit Strategies. Although this type of planning is growing in importance, it does not fit perfectly within any one of the ‘traditional’ advisory roles, i.e. legal, accounting, financial, insurance, etc. . . . To fill this void, business owners and their advisors require Exit Strategy expertise in designing and executing Exit Strategies, regardless of which discipline is initially presenting the idea. Exit Strategies planning includes a holistic and comprehensive review of the business owner’s corporate, personal, and family objectives. Generally speaking, the advisor who approaches the business owner as a ‘solutions provider’ instead of as a ‘product provider’ will likely spear-head this endeavor.

It’s imperative to continue to raise the awareness to the myriad options available to business owners for exiting their businesses. Business owners can consider ‘internal’ exits to employees, family, or co-owners as well as ‘external’ or ‘third party’ exits to Private Equity Groups, Strategic Buyers, or through the Initial Public Offering (IPO) route. Each exit strategy takes a long time to execute because there is ‘no ready market’ for the transfer of privately held business interests. Further complicating this practice area is the fact that each privately held business is unique. Therefore, a description and/or valuation of each business requires time to assemble. Referencing my earlier comments about a ‘lack of resources’ amongst small businesses, I highlight the fact that it is often the business owners themselves who needs to compile the information required for these reports – in addition to continuing to operate their businesses.

Exit Strategies are hard to design and even harder to execute. One of the best ways to overcome the obstacles inherent in these deals is plain old persistency because a pro-active approach to an Exit Strategy is the only approach to a successful Exit Strategy.

Specializing in Business Exit Strategies, John M. Leonetti, Esq., M.S. Finance, CM&AA founded Pinnacle Equity Solutions, Inc. to provide advisors with the tools they need to incorporate Business Exit Planning into their advisory practices. To learn more about John’s Exit Strategy Services and to receive a FREE copy of his special report, “How To Incorporate Exit Strategies Into Your Advisory Practice”, visit www.PinnacleEquitySolutions.com