I was recently at a conference where after I told people what I did they kept referring my work to business succession planning. I kept correcting them to say that I did business exit planning as part of my work.
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After this happened five or six times I realized that most of the world either didn’t know or didn’t understand the difference between the two. This might be one of those issues where you might think I’m tying myself in knots about slight differences in the use of language. My belief is that language matters and in many cases slight differences in language makes a huge difference.
Succession planning concludes there will an internal transfer in the business. When I hear the term succession planning I think about passing a business to managers or children. Most of the time in a privately held business succession planning means passing the business to children.
The problem when an advisor uses this language is that they assume what you want to do with your business. Instead of going through a process of helping you understand what’s in your best interest as a business owner they make an assumption about what you want to do.
Exit planning is a process where you get to choose how you want to leave your business. The reason I refer to myself as an exit planner when I work with clients on end of business issues is because it allows a much larger variety of choices and options. Exit planning at its best is also a collaborative effort between the owner and their advisor or advisors.
Exit planning puts the owner in charge of deciding what method works the best for them. A good advisor will have developed great listening and questioning skills that help the owner understand what works the best for the business owner when it comes to planning a business exit.
The best of all is business relationship planning. This allows even more options for the business owner to choose. Instead of only having a business exit strategy we add the possibility that the owner might want to just use a wind down strategy or a passive ownership strategy. Both are on the road to leaving the business but neither puts a finite time frame for when this might happen.
I’ve come to believe that having an interim step on the way to leaving a business is not only a financial prudent thing to do but helps with the owner getting mentally ready to leave their business. In many instances mental readiness is much more important than financial readiness.
What about you? What sort of advisor would you want to work with: One that does succession planning, exit planning, or business relationship planning?