An advisor with expertise in exit planning can play a critical role in preparing a business owner for an effective transition — whether the change is planned or not. Exiting a business may take the form of a sale or planned handover to a younger generation, or it can result more suddenly due to a divorce or death. Whatever the circumstances, the advisor is responsible for helping a business owner identify and eliminate risk and maximize the value of a business prior to the owner's exit. By offering an outside perspective and serving as a leader and a partner, an advisor can help make the process as smooth and successful as possible for business owners.

Offer an Outside Perspective

While owners are the experts when it comes to their own business, an external perspective can be very valuable. An advisor can highlight areas of potential risk and opportunity that could have a significant impact on the business's market value or the business owner's future.

Perhaps one of the most important steps in the process is determining the value of the company, and an advisor can provide context to help business owners assess the overall state of the marketplace. Encouraging business owners to look beyond just the growth of their company, and factor in industry trends and the broader economic climate, will give them an idea of what might impact the future sale of their business. Consulting with tax professionals and obtaining an informal valuation of the business are also important parts of the preparation. A trusted advisor can guide the business owner through all of these steps.

Because advisors approach the business with fresh eyes, they can also identify issues that the owner may not have considered. For example, the owners may not be thinking about their estate planning needs yet, or the intricacies of transferring the business to their children or grandchildren. The advisor should also raise the possibility of an involuntary transition. If circumstances arise that require the business owner to exit the business earlier than planned, it's important to consider how that would be handled.

And, last but not least, proper documentation cannot be overlooked. When preparing a business for a transition, it's essential to encourage business owners to review all the important documents of the business (e.g., financial records, equity ownership records, etc.) and ensure they are organized and safeguarded.

Provide a Reliable Source of Leadership

While preparing for a sale or other exit, the owner must also stay focused on running a successful company. That's where an advisor can step in to lead the exit planning process, freeing the owner to concentrate on their day-to-day obligations.

Helping the business owner assemble the right team, based on the owner's circumstances and goals, is a key leadership opportunity for an advisor. The owner will likely already be working with certain professionals, such as a CPA, an insurance agent or a wealth manager. Suggesting the addition of an estate planning attorney and business attorney will help round out this lineup.

In addition, it's important for one advisor to provide oversight to the general team, helping to manage the larger project of preparing a transition or exit plan. With so many individuals with varying areas of expertise and advice, having one advisor to lead the group, coordinate all efforts, prioritize actions and resolve any potential conflicts is invaluable.

Serve as a Long-Term Partner

Once the transition of the business is complete, that doesn't mean the owner is no longer in need of support and advice. Part of business transition planning includes the phase after ownership, determining likely scenarios and making adjustments as assumptions about the future become reality. At this point, the advisor might evolve into the role of a long-term partner, aiding the former owner in adapting to new circumstances.

This might include referring the former owner to a wealth manager, if one is not already in place, to provide guidance as the value of a business is converted from equity to liquid and investable assets. If the former owner is interested in getting involved in a new venture or opportunity, the advisor can also connect him or her to recruiters, or to networking opportunities for boards of companies or non-profits. Finally, with a business transition may come lifestyle adjustments, such as having more time available to pursue personal or family interests. Here, a reference to a life coach may help facilitate this dynamic shift.

Conclusion

The transition out of an ownership position can have significant impacts over many areas of a business owner's life — from financial and estate plans, to how he or she spends time and energy each day. An effective advisor will provide insight and support in each of these areas, helping to anticipate and plan for all forms of business transition.

  • Disclosure

    This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.The Bank of New York Mellon, Hong Kong branch is an authorized institution within the meaning of the Banking Ordinance (Cap.155 of the Laws of Hong Kong) and a registered institution (CE No. AIG365) under the Securities and Futures Ordinance (Cap.571 of the Laws of Hong Kong) carrying on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities.The Bank of New York Mellon, DIFC Branch (the “Authorised Firm") is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorised Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE.The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 225 Liberty Street, New York, NY 10286, USA.In the U.K. a number of the services associated with BNY Mellon Wealth Management's Family Office Services– International are provided through The Bank of New York Mellon, London Branch, 160 Queen Victoria Street, London, EC4V 4LA. The London Branch is registered in England and Wales with FC No. 005522 and #BR000818.Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA, which is registered in England No. 1118580 and is authorised and regulated by the Financial Conduct Authority. Offshore trust and administration services are through BNY Mellon Trust Company (Cayman) Ltd.This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors. This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such. BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland. BNY Mellon Wealth Management, Advisory Services, Inc. is registered as a portfolio manager and exempt market dealer in each province of Canada, and is registered as an investment fund manager in Ontario, Quebec, and Newfoundland & Labrador. Its principal regulator is the Ontario Securities Commission and is subject to Canadian and provincial laws. BNY Mellon, National Association is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA") and the BMA does not accept responsibility for the accuracy or correctness of any of the statements made or advice expressed herein. BNY Mellon is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA") and the BMA does not accept any responsibility for the accuracy or correctness of any of the statements made or advice expressed herein. Trademarks and logos belong to their respective owners. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation.©2017 The Bank of New York Mellon Corporation. All rights reserved.