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BUSINESS WEALTH SOLUTIONS,LLC
Joan M. Ridley
Pres., CFP™, CEPA, CBI


2911 Turtle Creek Blvd., Suite 300
Dallas, Texas 75219


E-MAIL:  info@businesswealthsolutions.net
PHONE: 214.692.9192
FAX: 214.523.9001

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How I Came to Be An Exit Planner
My Story and What It Means for You

By
Joan M. Ridley, CFP™, CEPA
Certified Exit Planning Advisor


Exit Planning – What Is It

Exit planning is a dynamic process that is designed and implemented by an Exit Planner who coordinates all the needed resources and professionals, collectively called “the team”,  that are required for the business owner to successfully transition ownership of his or her business, regardless of the strategy he or she selects.

This process usually includes the following team members:

  • Tax preparer and tax planner of, but not limited to, estate tax, income tax, capital gains tax, ordinary income tax, sales tax, and franchise tax
  • Estate planning attorney and corporate attorney
  • Business consultant to properly position the business before starting the exit planning process, regardless of the exit strategy
  • Investment planner 
  • Financial planner
  • Investment Banker/Mergers and Acquisitions or Business Broker
  • Insurance sales professional
  • Business valuation consultant


There are several ways for an Exit Planner to deliver services.  These are largely dependent on the planner’s compensation model, natural skill set, and other factors. Some advisors will recognize the need for Exit Planning, but will outsource the actual exit planning process while maintaining a role on the exit planning team.   Others will maintain the role of Exit Planner, and will also play a role on the team.  Still others might be the designated Exit Planner while maintaining no role on the team.   My firm, for instance, usually occupies the role of Exit Planner and business consultant, if needed.

There are at least 34 ways to transfer business ownership but generally the options are: sale or gift to a family member(s); sale to employees, management, or to an ESOP; sale to an outside third party; sale to another shareholder; or gift to a charitable trust. Sometimes a combination of these strategies is the best ownership transition method, depending on the owner’s goals and the circumstances.  

How I Became an Exit Planner

The entrepreneurial gene

All of my grandparents, aunts, and uncles on my mother’s side of my family owned their owned business. In fact, one is 89 and is still working.  She loves working with her clients and I’m certain that’s what keeps her so young. I observed at a very young age that that side of my family had a different way of looking at life and at the world. They were independent, determined, optimistic, stubborn, resourceful, and didn’t take “no” for an answer. They worked hard and they played hard. They never quit until the job was done and they had a lot of satisfied and loyal customers to prove that their dedication and hard work was appreciated.  I favor that side of the family.  Clearly, I inherited their “entrepreneurial” gene. 

I once had a real job … but not for long

My entire career has been devoted to financial services.  I was employed by an insurance company right out of college where I was put in charge of adjusting claims for a large real estate developer. I left 18 months later to become a Realtor®, realizing that I was fascinated by real estate and I needed to be my own boss. I was immediately successful. It seemed that I had a talent  for marketing and marketing strategy, which made me a natural at listing and marketing property. I loved what I did and took great pride in the service I provided for my clients. As interest rates skyrocketed in the late 70’s, I began to be concerned that my clients might not be able to afford the homes they wanted to trade up to, especially if the husband or wife became unable to work or lost his or her job.  It seemed natural to do cash flow projections for them before I listed their home, and, I questioned them about their life, disability, and health insurance, and, their ability to save for retirement on one income. It became apparent to me that I had found a new direction in my career. I had grown weary of working 100 hours a week while my analytical side was largely unchallenged. And, the thrill of  maintaining the position as one of the top 5 agents out of the 7,000 members of the D.C. Board of Realtors®, a position I held for 5 years, was waning.  So, it was time to move on.

Financial planning ...after the fact 

I earned my CFP™ designation while working in a financial planning firm. After nearly three years, I established my own firm.   I developed an expertise in the issues of the already retired. Many of my clients had been business owners, but had left their business before I met them.   Most had evidently not done any planning before exiting. They had done little or no estate planning, and what they had done had largely been improperly drafted or was obsolete. Their cash flow planning did not take into consideration gifting, inflation, taxes, medical, and long term care needs in retirement. The estates of many widows and widowers, many already incapacitated, were at risk for paying unnecessary estate tax at their passing.  Since many were mentally incapacitated when I met them, they could not execute new documents, so, I had to work with any documents they did have. In many cases, Uncle Sam eventually benefited from their lack of proper planning when their families and favorite non-profits could have benefited. Worse yet, lack of proper planning often resulted in unnecessary family strife and justified sadness about the outcome.   

Many clients, before they became clients, had sold their business interests to younger family members or to outside third parties and were dependent on them to repay notes held by my clients. Tragically, many issues I saw could have been and should have been addressed before they transferred their business ownership.  

My first financial planning practice was merged with a prestigious firm in Washington, D.C. in 1989.   I became the fourth partner. We sold that practice to IDS American Express (which we quickly renamed and rebranded as American Express Financial Advisors, now known as Ameriprise). I moved to Dallas a year later and established another practice, continuing to expand my expertise in post-retiree issues.   That practice was acquired in late 2000.  I assisted with the transition for a period of time and still remain in contact with the principal of the acquiring firm and through him, my former clients. 

Turning a business into cash

After leaving my career as a financial advisor, I began working with business owners in a mergers and acquisitions firm.  Even though that firm had a track record that far exceeded the industry’s, I observed that they looked at least 50 to 100 businesses before agreeing to accept an assignment to sell one.  They turned down those businesses that were not, for one reason or another, positioned to sell. My question was, what happened to the other business owners whom they had turned away? Many had attempted to gift or sell to other family members or to third parties before meeting our firm.  Clearly the owners wanted to transfer ownership.  Who was going to help them, and, who was going to help them correct the issues that were making their business untransferrable?  Many eventually listed with firms that were not very discriminating about the assignments they accepted.  Either way, many of those business owners did not experience a successful exit.  Some would meet with an early demise before they had done any effective estate planning, favoring Uncle Sam over their heirs or non-profits as a chief beneficiary. They either had to keep working, or, they could liquidate any assets and simply shut down their operation. 

Find an experienced guide whom you can trust

I also observed that many of these business owners I encountered who had engaged a mergers and acquisitions firm did not have what I called a “trusted advisor”.  There was no point person who truly understood their needs.  All had a CPA and an attorney who seemed to be focused on his or her own role and not the big picture.  Most had an insurance agent and maybe a stock broker.  But they did not have anyone who had the expertise in both personal planning and business planning, and, one who truly understood, or cared about, what the business owner wanted to accomplish, or the lifestyle he or she envisioned after business ownership was transferred.  

Don’t try this at home

It was at this time that I began to think about how to help business owners successfully transition ownership.  I recognized that there was plenty of help for the firms with $50MM+ in revenues, but what about those with revenues between $5MM and $50MM. There appeared to be no one to provide what I now call “Exit Planning”.    While many might have been cash flowing well, they did not realize that without recurring revenues, infrastructure, and a whole host of other aspects (called value factors), their business was not properly positioned to transfer to a third party, and maybe not even to employees or family members.   Most had no idea what they would net after taxes and fees, much less what they needed to net. Many had not protected themselves, their families, and employees from the risks associated with the death, disability, or long term incapacitation of the business owner or key people.

In 2003, Exit Solutions, Inc, which later became Business Wealth Solutions, was established.  The new name was adopted to better reflect what we do - grow and harvest a business owners’ wealth.  That means that we recognize that a business is a major part of a business owner’s total net worth.  If business value is not sustained and growing, then the majority of a business owner’s personal net worth is compromised. Because of my 20 years as a personal wealth advisor, I saw the business as a major asset, and not just a source of income for the business owner.

That asset merits all the attention and investment in professional advice as do other assets on the business owner’s balance sheet. In fact, it should receive more attention and regular investment of capital to keep it viable and growing because, of all the client’s assets, it is the one asset the client has nearly total control over.   It is his riskiest investment but it also holds the promise of a higher return, but only if it is managed well and if the owner receives the right advice.   While no one can control the market, competition, interest rates, availability of capital, and taxes, a business owner can control his or her strategic plan and its execution that drives value.  A business with a well-drafted well-researched and properly executed business plan should be able to withstand all those risks, while taking advantage of opportunities that others turn away because they lack such a plan.

What This All Means For You

If you are a business owner who is looking to grow profitability and value with no aspirations to leave your business any time soon, or, if you wish to leave your business in the next five years, today would be a good time to take steps to protect and grow your largest asset, and, to plan for how you will turn that illiquid wealth into liquid wealth when the time is right for you. If you are an advisor to business owners and wish to expand your services, there are some excellent resources available to you. 

I recommend that both business owners and advisors read John Leonetti’s book, Exiting Your Business, Protecting Your Wealth. It is the most comprehensive resource I know of. While substantive, John presents technical concepts so that they are easily understood, even if the concepts are new to the advisor or business owner.  It will open your eyes about the challenges that face business owners and their advisors while offering practical solutions. 

If you are an advisor who is interested in offering Exit Planning to your clients, consider becoming a member of Pinnacle Equity Solutions. Visit the group’s website www.pinnacleequitysolutions.com to see all the services available to members. You will benefit immensely from membership, even if you ultimately decide to outsource the actual Exit Planning process, while remaining on the Exit Planning team. I also recommend that you join another quality organization, the Exit Planning Institute. Visit that organization’s website at www.exit-planning-institute.org.  Read Richard Jackim’s and Pete Christman’s book  The $10 Trillion Opportunity. I am active in both organizations.  Both offer quality services to their members.     

To learn more about my firm’s services, please visit our website at www.businesswealthsolutions.net for more information.  I am available to speak before groups about how to grow and unlock business wealth. Please go to our website to see what speaking engagements are already on our calendar and to sign up to receive our complimentary newsletter, Intro-Guides, and other helpful information. Visit our website often to learn about new services that are currently in the works. 

We offer a complimentary two hour meeting to business owners.  Please call us at 214-692-9192 for a time convenient for you.  During that meeting we will learn about you, your business, your goals, and concerns and get you started in developing a plan to grow or unlock your wealth.  

If you are an advisor to business owners, I would be pleased to meet with you personally to answer your questions about this new discipline and to help you with your decision–making process about becoming an exit planner or an Exit Planning team member. If you decide to outsource the Exit Planning process, we would be pleased to take on that role while you remain a valued team member, keeping you advised and involved every step of the way.

 

Joan M. Ridley is president of Business Wealth Solutions, a Dallas-based advisory firm that consults with business owners about how to successfully grow and leave their business. Visit our website at www.bwsllc.net. Call us today at 214.692.9192 for a complimentary meeting to learn how we can help you get where you want to go.

Copyright 2009 Joan M. Ridley

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