To leave or not to leave

During a recent interview, I asked a roofing company owner whether he had an exit plan in place for leaving his company. His response was an all too common one: "Yes, my accountant handles that."

After our discussion, he discovered his exit planning adviser really is not an exit planner—just a great accountant.

What is exit planning?

Exit planning is an emerging profession that incorporates fragmented information into one holistic plan for a business owner to successfully exit his or her business. Many advisers claim to be exit planners, but a successful exit planner combines the strategies of many advisers.

An exit planner is trained as a process consultant to move an owner's goal into a matching path that meets the owner's financial target; protects his or her wealth with a comprehensive, holistic result; and replaces the owner. An exit planner juggles the owner's goals and scattered information to arrive with one document that guides the owner down a business exit path for a desired outcome. The process focuses on three areas: the owner's personal, business and financial wealth.

In a separate execution phase, an exit planner also can coordinate different disciplines and professional advisers, including attorneys, accountants, estate planners, insurance advisers, financial planners, business consultants and others, into the exit plan's production and execution.

It's a holistic process

As a business owner, you may feel a little disjointed with the different discussions among your advisers. The conversations usually are focused in their specialized areas, providing fragmented aspects of an exit plan. A holistic solution should encompass the following eight disciplines:

• Business planning: Planning for the timing of your business' sale, cash flow strength and business value drivers
• Business transfers: Planning for the various tax implications to you, your business and estate
• Contingency planning: Planning for what will happen to your business stock and family if you die unexpectedly—particularly in terms of a buy-sell agreement
• Estate planning: Planning for how your business will transfer your privately held stock to your children and future generations in a tax-efficient manner by protecting your wealth in trusts (This is an important conversation to have with your attorney to protect your wealth against estate taxes.)
• Financial planning: Planning to replace your income during retirement with harvested investment from your business in the context of your primary asset—your illiquid business (a critical component for meeting your financial needs)
• Mental readiness: Preparing for the when, who and how particulars of your exit and mentally seeing yourself as being useful in another endeavor outside the business
• Succession planning: Planning to replace yourself with the correct management team and to move them into leadership with the next business generation
• Valuation analysis: Analyzing your company's worth within the range of values (This analysis should only be completed by a certified valuation analyst and is key to meeting your value gap and replacing your income after you leave the business.)

A successful exit plan incorporates these eight disciplines into one comprehensive report. The report should define all the options to determine the best fit for your goals and navigate a path out of the business. This combined information will give you the best overall result once the exit is complete.

Why choose an exit planner?

Using the eight disciplines listed, as a process consultant, an exit planner moves you down the exit path to reach your goals and achieve the best result. An exit planner:

• Provides you with a proven systematic process rather than an isolated, specific solution
• Considers all your goals and challenges from a holistic perspective, rather than from a narrow view, that can be coordinated and fit into a larger solution of many moving parts
• Patiently moves you through the process as the information unfolds and advances your thinking to eventually navigate a path out of the business and into your next stage of life
• Moves you past certain milestones and holds you accountable for information, promises and time to maintain momentum on the exit path to your goals
• Coordinates and juggles information, moving past roadblocks

It's your legacy

You probably are entering into the largest financial event of your life when you try to harvest the wealth trapped in your business. You want the best information to minimize the risk, make the correct decision, and understand your financial and strategic control issues to replace your income. The exit planning process protects your hard-earned wealth and legacy.

When interviewing potential advisers, ask them about their specific training and certifications and, importantly, how many exit plans they have delivered and their outcomes, as well as their recommendations. Is the adviser recognized in the industry to be a professional in the exit planning area?

Remember, you still are running your business during this process, and working with an exit planner will help you find all the fragmented information and combine it into one comprehensive document to deliver the best exit solution.

Kevin Kennedy is president and chief executive officer of Beacon Exit Planning LLC, Elmira, N.Y.