My Lawyer Told Me Not to Do It! - Partners31: Specializing in Health and Human Services

My Lawyer Told Me Not to Do It!

Group of LawyersMany business owners have called one of their brokers or advisors to complain that their lawyer (or CPA or financial advisor or insurance professional) told them that they should not even think of transferring their business to their child and key employees, but they want to do it anyway.

If you’ve made this type of call, I hope your advisor answered with the same definitive “Maybe” that fictional owner, Dennis Bradenton, received.

Case Study

When Dennis called his accountant to complain, the accountant immediately kicked off the business Exit Planning Process. As an advisor skilled in Exit Planning, Dennis’s accountant did not limit the scope of that process to probing Dennis’s choice of successors. Rather, she started asking Dennis the first questions every owner must answer when thinking about departure:

“When do you want to leave?”

“How much income or money will you want or need?”

“What do you want to do for your key employees and for your other children?”

The accountant quickly involved Dennis’s other advisors (insurance professional, attorney, and financial planner) to brainstorm the many questions and strategies that required Dennis’s input. This Exit Planning Advisor Team asked Dennis a number of questions beginning with an examination of the financial resources available to Dennis.

As the Advisor Team immediately pointed out, it is one thing to design a business exit via a transfer to a management team; it is quite another to ensure the owner’s financial objectives are met in the process. The Advisor Team had to know how Dennis defined his financial objectives to determine the size of the gap between his existing financial resources (both personal and business) and the amount of cash he could expect from a transfer of his business to his desired successors. Only then could Dennis’s Advisor Team answer Dennis’s original question (Can you help me to transfer my company to the successors I choose?) with a firm “yes” or “no.”

Dennis is not the only owner who has asked an exit question that can be answered only after the three basic Exit Planning questions are resolved. There is a natural tendency for owners (and may be for some advisors who lack experience in exit planning) to focus on the desired outcome and on the route they believe will facilitate that outcome before they know exactly where the owner wants to go. The philosopher Seneca wisely warns, “When a man does not know which harbor he is heading for, no wind is the right wind.”


About Risa Baker

Risa is Managing Director of PARTNERS 31. Her natural enthusiasm and years of industry experience will successfully guide your business, whatever its size or specialty, through every aspect of exit planning, from strategy to sale.

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