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By Josh Patrick
We all want to get things accomplished in our personal and business life that’s important to us. Unfortunately, we often don’t receive the outcome we want for a variety of reasons. Among them are:
- We aren’t clear about what we want in the first place.
- We have not put together a strategy that will allow us to achieve the outcome.
- We don’t have the right people working on the project.
- The people we have working on our project don’t have the technical expertise to help us achieve the outcome we want.
- Our advisers and staff don’t listen to what we want in the first place.
Without having clarity about what you want to accomplish, not having a team with appropriate competencies and, the willingness to put plans into action you have little chance of achieving the goals you want.
John Aardvark has wanted to put together an exit plan for leaving his company. Two years ago, he started to go through the process of selling his business, but pulled back when he realized the amount of taxes he would have to pay would leave him with too little money. He decided to once again try to come up with a strategy to leave but knew that he needed a new team and strategy.
The first thing John needs to do is to first decide what he wants as it relates to leaving his business. He hired a new adviser who specialized in exit planning strategies. The first question his new adviser asked was "If I were to meet with you three years after you left your business, what would your life look like?" He then had a follow up question that was "Why did you start your business and, if money had nothing to do with your sale, who would make a good successor owner for your business?"
After having the two lead questions answered, he then asked John for a description of his team and what their competencies were for helping him to exit his business. John told his new adviser that his accountant was the lead person the last time he went through this process and, his lawyer had a peripheral role, but the taxes killed him, so the lawyer never got involved in the process.
When asked, John realized he did not have a good idea of what the actual competencies he needed for a team to help with a successful exit. In fact, he never really thought about what sort of advice he needed as it related to his exit plan with his business. In addition, he never thought about a conflict of interest that might appear on this subject with his regular advisers.
John realized that if he was to actually sell his business, his accountant and lawyer would be losing most of his business. He never thought about it, but now realized that although he wanted to have his accountant and lawyer involved in the sale, he needed to make sure that the advice he was receiving from them was in his best interest and would help him achieve his goals. Both his accountant and lawyer were long-time advisers and he trusted their advice, but John started to think that he might want to add a few more people to his team.
The first thing John and his exit planning adviser did was identify what the role of his exit planning adviser would be. His new adviser suggested that John consider having someone who would act as project manager for the strategic part of his business and personal life. This person would have the responsibility of helping John reach his goals and make sure the rest of the advisers work toward activities that would help John achieve the outcomes he was after.
After helping John gain clarity about what he wanted from an exit strategy John’s project manager helped John understand how his advisers fit in with his project and his life. He suggested that John consider having two levels of advisers. Those who worked with him on a regular basis and specialists that would be brought in when one of the core advisers did not have competencies John needed for a specific project.
John and his project manager then came up with a list of advisers that he needed on a regular basis.
- Day to day tax advice was provided by his lawyer.
- General legal advice by his lawyer.
- Insurance issues by his liability insurance agent.
- Personal risk assessment by his insurance agent who also worked with him on his retirement plan as well as personal investments.
- The project manager who would be responsible with helping John understand his goals and make sure appropriate strategies were put in place.
John and his project manager then started to put together a list of things that needed to be done as it related to his exit planning. From his last experience, John realized that he didn’t have the correct team in place before he started. So, this time around he decided that he was going to use a more organized approach to leaving his business.
John started talking with his project manager about exit strategies. After the conversation started to progress, John realized that he wasn’t clear about what he wanted besides money when he thought about leaving his business. Since John was fifty years old, he thought that he needed to have a plan in place he could trigger in five years. He also knew there were probably some things he should change in the business before he put it up for sale or left it to successor managers.
John’s project manager suggested that he and John write down a list of all of the things that should be considered as it relates to an exit strategy for John. The list they came up with was as follows:
- How much money do I need before I retire?
- What do I want to have happen to my company after I leave it?
- What do I want to have happen to my key people after I leave?
- What do I want to have happen to my employees after I leave?
- How do I feel about my Customers and what will a sale mean for them?
- Is the best buyer an outside buyer or should I consider selling to my managers?
- What are the tax implications of selling to different parties?
- What sort of risk am I taking and who can help me limit this risk?
- How am I going to spend my time after I sell my business?
- Is there anything I should be doing to make my company more valuable for a buyer?
- Where does my company rank now as it relates to profitability in my industry?
- What should I expect to go through during the sales process?
John’s project manager talked about his list as being a good starting place. However, he pointed out that as this project went further, more questions would probably appear and people with different skills might be needed. The next step the project manager helped John do was put together a list of skills that would be important in helping him craft an exit strategy that would provide a positive outcome for John, his family and the stakeholders in his business.
The project manager thought there would be extra people needed on the team. He understood that John’s present team served him well on a day-to-day basis. The project manager also knew that for John to have a successful conclusion of his exit plan, he would need to have some help from other advisers who would work on specific projects and then leave the team.
John and his project manager decided they needed skills that could do the following:
- Cash flow based financial plans.
- Business valuation services.
- Tax planning services in the sale of a business.
- Analyzing who should be the buyer of the business.
- Compensation design for improving company operations.
- Marketing for improving the Customer base.
- Investment strategists who could help with safe investments at retirement.
When John presented the list to his present adviser team, they told him not to worry because they had expertise in all of the above issues and he wouldn’t need anyone else. John wondered to himself that if his advisers really were good at these skills, why didn’t they offer them two years ago when he tried to sell his business?
When John presented his dilemma to his project manager he was told that his advisers would of course tell him he needed no other people on his team. They wanted to protect their relationship with him. If new players came aboard, they could upset the standing his present team had with John.
John now understood he needed to find a way to analyze the skills of his present team. He also realized that he had no interest in changing the core members of the team but might need to augment his team with some temporary members for his exit planning project to be successful.
The project manager suggested that John and his team take a look at the needed skills and evaluate which player on the team had appropriate skill levels needed for success. The project manger suggested that John use an organized method of looking at the competencies of each of his advisers as it related to skills needed for his exit plan.
He suggested that John evaluate each of the needed skills on the following basis:
- The adviser had never heard of the subject.
- The adviser had heard of the subject.
- The adviser had a vague understanding of the subject.
- The adviser had done some research and exploring on the subject.
- The adviser could make a reasonably accurate explanation of what the subject was about.
- The adviser could provide a very accurate description of the subject in a manner you could understand.
- Your adviser has had first hand or professional experience dealing with the subject.
- The adviser is considered by his local peers at being very competent in the area of the subject.
- Your adviser is highly compensated for their work in the area. Peers, friends and even competitors recognize the adviser as being an expert in the top 5% of their field.
- Your adviser is highly compensated their work in the area. Peers, friends and even competitors recognize your adviser as being in the top 5% in their field. Not only does the adviser have technical ability, but their total knowledge and creative ability allow them to work on the subject on a macro level.
- Your adviser is considered an international authority and is in the top 1% of their field.
John and his project manager looked at his present adviser team and in areas where their present advisers rated less than seven; they would look for temporary outside help for that part of the project.
John felt he was making progress, but he continued having a feeling that using the above score card was good for figuring out what he needed, but he felt that something was missing. He finally realized that someone on his team needed to rate a nine for him to have a great plan. This meant that he would need help in finding that person who could see the whole picture and make sure the other advisers on the team stayed true to his vision.
John thought about his need to having at least one person on his team who was not only highly competent, but had the ability to think about his exit planning process on a macro level. He discussed this need with his project manager and realized that his project manager was the person for the job.
As it turned out, John’s project manager was an expert in working on strategic issues with privately held businesses. He knew from the start that John needed auxiliary members on his team. He also understood that a successful macro strategy such as exit plan will need to have coordinated work with several different types of professionals.
John’s project manager pointed out highly competent advisers knows that teamwork is the only way to help Clients get appropriate outcomes. As a result the more highly competent the adviser, the higher probability that they will work well on a team that helps John receive the outcome he is after.
As you think about strategic projects in your company, make sure that you first are clear in your goals and second have an appropriate team working in your best interest. I encourage you to join John and evaluate your team on their competencies, have a strategy in place to use auxiliary members when appropriate and have at least one member who can work on a macro level with your planning. This will help your outcomes be positive ones.
These examples are hypothetical in nature and provided for educational purposes only. Actual results may vary depending on circumstances.