DIY vs. Expert Planning

Jun 18, 2019

Why do most business owners choose to work with expert planners vs. doing their business transition planning by themselves? After all, they’ve built a successful business, why don't they design and implement their Exit Plan themselves?

The truth is that once a business owner understands the basic Exit Planning process, they could build a personal Exit Plan, and yet most choose to engage expert advise and experience in this effort. Just as anyone can buy all the ingredients and follow all of the same steps that a Michelin-star chef uses to create a high-quality dish, a business owner can gather all of the tools and follow the steps of creating an Exit Plan. But without specialized training, a deep understanding of each nuance, and the patience and discipline to adhere to the process even when things go awry, any attempt at recreating a Michelin-star meal or creating an expert Exit Plan can leave both stomachs and wallets emptier than need be.

Most business owners choose to engage expert planners because they understand that transitioning or exiting from their business is the most significant financial event of their lives.

Below we will lay out the differences between DIY planning and an expert designed and implemented plan. As owners or advisors create an Exit Plan, they must collect five important pieces of information:

·      The owner’s target departure date.

·      A preliminary Financial Needs Analysis.

·      The owner’s desired successor.

·      A preliminary valuation of the company.

·      A future cash–flow estimate.


Let’s look at the differences between DIY and expert planning in several different areas of Exit Planning.

The Owner’s Target Departure Date
While creating an Exit Plan, it is important to have an idea of the timing the owner has in mind. If the owner can’t provide a time frame for leaving the business, the Exit Planning process will flounder. Without a stated departure date, no one can create a road map to a successful exit.

DIY Planning
When owners try to implement DIY planning, they find that they often fall prey to the “five-year rolling Exit Plan.” This occurs when owners push back their target departure dates because their plans hit a snag, the business requires the owner’s undivided attention due to an emergency, or the owner cannot find a buyer who will pay what the owner wants. The target of transitioning out in “five years” quickly can become 7–10 years.

Expert Planning
The Professional Exit Planner keeps things moving forward by using a holistic approach to the process. Exit Planners know which advisors can fix a problem and what can be done to keep things on track. They know that continually moving the departure date back will undermine the entire planning process. They can keep the business owner focused on the target.

A Preliminary Financial Needs Analysis
Any comprehensive Exit Plan requires a Financial Needs Analysis, prepared by an appropriate professional. This analysis helps owners set and assess their financial and personal objectives. This analysis is NOT a financial plan. It makes no investment recommendations. It will tell owners and advisors how much money the owner must receive from the transfer of the business to achieve financial independence. As such, it is critical in determining the design and timing of the owner’s exit.

DIY Planning
The DIY owner may overlook things, especially if that owner isn’t a financial professional. A few seemingly small omissions here and there can turn into a significant gap in sale proceeds, which can affect the owner’s quality of life in retirement. Additionally, most owners have limited access to appropriate financial advice and may be hesitant to even ask for it.

Expert Planning
Exit Planners know which issues are important. They have templates and lists to refer to. Based on their experience and understanding, they can do a Financial Needs Analysis that correctly states what the owner needs from the sale of the business. Expert Exit Planners can give owners the peace of mind of knowing that they have prepared for the most realistic scenario regarding their financial needs. Owners don’t want to leave this item up to chance.

The Owner’s Desired Successor
Owners and advisors need to know the owner’s most likely choice to create a strategically focused Exit Plan. The number of possible successors is limited. There are advantages and disadvantages to each choice:

·      A child or children (or other family members).

·      A co-owner or co-owners.

·      One or several key employees.

·      An unrelated third party.

·      An ESOP (Employee Stock Ownership Plan).


DIY Planning
Commonly, DIY owners won’t see the pros and cons of each possibility because they are too close to the action. They may want to sell to a specific successor regardless of the downsides. This myopic view could spell disaster.

Expert Planning
As the business owner’s Chief of Staff, Exit Planners can advise owners on better choices if their first selections could be troublesome. As a disinterested third party, Exit Planners take a long view of the situation. They don’t have any sentimental preferences, making their advice especially valuable if the successor is a family member.

A Preliminary Valuation of the Company
A preliminary valuation of a company, prepared by an appropriate professional (CPA or CVA), gives advisors and business owners a fairly good idea of how much a company is currently worth. Knowing company value allows owners to receive full fair market value when they leave. The valuation also tells the advisor and owner how much business growth needs to occur to meet the ultimate financial objective at the departure date.

DIY Planning
Many owners will use hearsay, industry standards and incomplete information to value their companies. This self-determined value could be significantly higher or lower than the real value, causing owners to either expect too much or sell short.

Expert Planning
Exit Planners can provide advice and counsel, coupled with the professional advice of a valuation specialist, to assure that the sale price is realistic and that Net Proceeds and maximized.

A Future Cash–Flow Estimate
Advisors and owners must estimate future cash flow as they create an Exit Plan. A professionally prepared cash-flow forecast helps advisors and business owners assess the likelihood of success of various Exit Paths. It also prevents the Exit Plan from running into dead-ends and establishes the Exit Plan’s financial credibility.

DIY Planning
Business owners are experts in running successful enterprises. Their experience in forecasting future cash flow accurately may be limited. There are many facets to consider, from the general viability of the marketplace to the availability of raw materials used in the manufacturing process. The process is as much art as it is science.

Expert Planning
Exit Planners use tools and financial resources to assemble a realistic forecast. They look at things the business owner wouldn’t begin to consider. In short, the advisor will produce an accurate, authentic report that a buyer will accept more readily than one produced internally.

Initially business owners may feel that going it alone will be quicker and more economical than working with an expert transition planner. However, with more business owners than ever before facing the transition of their business over the next 5 years, you may find as other owners have that a team of coordinated expert advisors can save you time, money, and create greater peace of mind. To assess how prepared you are to successfully transition your business, take our Free CORE Transition Planning Assessment. For more information on CORE’s Exit Planning Services Click Here. To set up a no obligation 55-minute exploratory session about your transition planning Contact Us Today

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