What is Exit Planning?
When you first hear the phrase “exit planning,” you may have a very straightforward definition in mind. It sounds simple enough. You are planning for an exit.
However, here at Exit Planning Institute® (EPI), we know that there is so much more to exit planning than two simple words. It’s an ongoing and strategic process. Here is our definition, for reference:
“Exit planning combines the plan, concept, effort, and process into a clear, simple strategy to build a business that is transferable through strong human, structural, customer, and social capital. The future of the business owner, their family, and the business itself are addressed by exit planning through creating value today.
Exit planning is not just a plan. It is a strategy rooted in execution that grows value and expands options, enabling an owner to transition the business on their terms when they are ready. It aligns the business, personal, and financial needs of the owner. Certified Exit Planning Advisors (CEPA®) educated the owner on all the exit options and enter an engagement with an exit-option-agnostic perspective as to truly serve the business owner’s diverse needs. CEPAs collaborate with a seasoned, multi-disciplinary team of professionals to support the success of the business owner and use each other’s specialties and expertise to the benefit of the project.”
Naturally, in this discussion, exit via succession becomes relevant for any business. Succession could be from parent to child, from grandparent to child, from owner to employee, and so on. But what is succession planning, and what makes it different from exit planning (if it truly is different)?
What is Succession Planning?
As described, succession planning is a type of ownership transition, often passing the business from one generation to another or internally in the company. It is a complex dance that our 2024 Exit Planner of the Year Amy Wirtz calls the “Cha-Cha of Succession,” and requires keeping track of multiple moving parts and an advisor’s commitment to the Value Acceleration Methodology™.
The “Cha-Cha” indicates a certain finesse in moving between the steps, back, forward, and side-to-side. For families, the struggle of separating their interpersonal relationships from the succession process can be taxing. For any other owners considering an exit via succession, the scenario of giving your business, your most valuable asset, to someone else might feel frightening.
This is why having a CEPA on deck for this process is so important. As Amy describes in our blog, there’s one thing CEPAs can do that ensures a smoother succession journey.
“As an exit planner, the number one thing you must be good at is listening. You have to be able to hear the pain points and the opportunities that owners are presenting, even if they don’t realize they’re presenting them,” she says. “So listening means more than just with our ears. It means with our eyes. It means with our heart. It means with our brain.”
Every succession situation is unique, including the potential wins and hurdles throughout the process. CEPAs and other advisors can also gain unique insights into succession through EPI Academy, including courses like “Preparing Heirs for the Money” and “Family Enterprise Transitions.”
Why the Distinction is so Important
While they might seem similar, exit planning and succession are actually two different things. In fact, succession planning falls under the exit planning umbrella, serving as another potential exit option for business owners seeking an internal transition. When a business owner works with the CEPA through the Value Acceleration Methodology, they are given many more choices when it comes time to either continue growing value or exit.
As a CEPA, there are unique opportunities to specialize in these kinds of exits, ensuring that family business owners and business owners seeking internal options have the “quarterback” they need for their exit planning team.
About the Exit Planning Institute
The Exit Planning Institute® (EPI) is the exit planning market leader, providing education, tools, resources, and the ecosystem to support professional advisors across the globe on all things Value Acceleration. EPI’s offerings include the Certified Exit Planning Advisor credential, the annual Exit Planning Summit, EPI Academy, an extensive Chapter Network, and more.
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