The Missing Piece: Mistakes to Avoid

By Jon R. Theriault, CFP®, CKA®, MBA

Many wealth management firms work with business owners, but very few financial advisors have real world experience when it comes to business succession and exit planning.

Early in my career, I spent over 13 years working with owners of privately held businesses, helping them navigate the complex and often emotional process of selling their companies. My experience as a mergers and acquisitions (M&A) professional provided me with unique insights into the process of selling a business, and the applications have continued to evolve over time from a wealth management perspective.

Case in point, about a year ago I was asked to be a guest speaker at an exit planning event. The other speakers on the panel were still actively involved as M&A advisors, something I’m now a decade removed from. But when asked what I would do differently if I were to start my M&A career all over again, I shared what I believe are two critical mistakes often made by transactional advisors.

The first has to do with not fully preparing the business owner, and his or her family, for what life will look like after a sale. This is often a consideration but is limited to performing a financial retirement analysis only. Once it appears financial security may be available at a certain purchase price and deal structure, most advisors stop there. We believe this is just the beginning of the exit planning conversation, as there are still many important and introspective questions to ask.

For instance, what will they do with their time when they are no longer working? How will they cope once their career identity changes? Has their family discussed what their new life together will look like? These types of questions, especially the last one, push past the transaction itself and may create a critical conversation or planning opportunity long before a sale takes place.

Another major mistake is to not actively involve a business owner’s spouse in the planning process. I refer to this as a failure to consult with the passive shareholder. In working regularly with couples as a Certified Financial Planner™, not to mention being married for over 17 years, I have developed an even greater appreciation for how major family decisions are made. Unfortunately for many business owners and their M&A advisors, the needs, priorities and concerns of a shareholder’s spouse are often not fully understood. As such, the likelihood of a successful transaction decreases significantly.

The sale of a business ultimately comes down to acceptance of price, terms and legal conditions between a willing buyer and seller. But in my experience, it is wise to pay close attention to the many subjective variables that can be found on the softer side of exit planning. At RS Crum, we understand this process from all angles and appreciate that the sale of a business is not just the culmination of something special, but the start of something new.