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Do your business clients have an exit plan in place?

Last weekend, viewers all over the world sat on the edge of their couch waiting to see which of the four Roy children in HBO’s dramedy Succession would inherit their father’s media conglomerate. While made with dramatic effect, this scenario can play out in everyday family businesses. The show serves as a timely reminder for business owners and small to medium enterprises (SMEs) to start thinking about their own succession plans.

Insights Jeremy Jones, Pitcher Partners 25 October 2019
— 2 minute read

Unfortunately, drawing up a comprehensive exit plan is something that many business owners simply don’t get around to. Some are procrastinating or assume a written or verbal discussion will suffice. Others are blind to just how quickly their circumstances can change.


Many SMEs are ill-equipped to achieve their optimal exit outcome, whether that be selling the business on, transitioning ownership to other family members or maintaining a partial stake in the enterprise.

While approximately 67 per cent of business owners will rely on selling to fund their retirement, fewer than one in five business owners have an exit plan in place.

What can complicate succession plans, and often delay the process, is the question of whether keeping the business in the family is the right thing to do.

We know that running a family business can be tough — mentally, emotionally and, sometimes, even physically. Many parents and children can work together successfully as colleagues, but when the parents’ exit strategy doesn’t include the children taking over the family business, the assumed clear waters become muddied.

Where there is a significant amount of money involved, parents are often forced to review who is best placed to run the business into the future. It can then become apparent that their children are just not up to the task.

This is especially pertinent if parents are presented with the option to sell a portion of their business to a third party and maintain a vested financial interest in its ongoing profitability.

As advisers, we have to remember that each business has different characteristics and different considerations, just like a family itself.

Equally, we should assess the requests of the owners carefully. It’s a key skill of any adviser to gain the trust of their client and draw out their real desired outcomes.

If the business owners realise that their exit strategy does not include their children taking control over the business, emotions can run high. This is particularly so where there is an expectation or precedent of the business being passed down.

This is where having a trusted financial adviser in the fold can help.

Your adviser can attend family and business meetings to explain the financial complexities of what their clients have decided to do. Importantly, the adviser can explain these decisions without being clouded by emotion.

In many cases, parents really want what’s best for their family, and often plan to share the benefits of any wealth created through growth of their business with their children.

The best financial advisers are those who will place the long-term needs of the business first, and will guide their clients towards the best strategic outcome for them.

For example, a client may say to us, “Look, it’s all about my family, and I want to set them up… how do I do that?”, which may require a different strategy than simply exiting with the most money.

Ultimately, the burden is upon the adviser to have the wellbeing of their clients at the forefront of their mind. It’s about trying to work out the best solution for the client, and sometimes that is about putting maximum profitability to the side.

An adviser to a family-owned business should also consider all aspects of the exit, especially the aspects that their clients may not have considered. Advisers can play a crucial role in finding the best way to transfer assets, while still allowing the exiting business owners to realise their future needs.

We need to be able to read our clients and understand their intentions to help them achieve the outcome they want. This understanding often comes from cultivating a genuine, trusting relationship with our clients over many years.

Jeremy Jones, partner, Pitcher Partners Brisbane

Do your business clients have an exit plan in place?
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