Planning for retirement can be overwhelming. It can be even more formidable for owners to leave the businesses they have built.
James “Jamie” Hilton is a Newport-based financial adviser to high net worth individuals. He heads The Hilton Group at UBS Private Wealth Management. He is also a certified exit planning adviser who is leading free workshops on “How to Exit Your Business” throughout the Ocean State. Dates and times will be posted on his website at advisors.ubs.com/thehiltongroup/Events.htm.
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PBN: What is an exit strategy and who needs one?
HILTON: Anyone who plans on retiring probably needs an exit strategy. Some might say the only reason to start a business is to sell it. At least that’s the mindset of a serial entrepreneur. But I don’t know of anyone who’s healthy who would want to die at their desk. For some, their business is so much a part of their life, it’s hard to disentangle.
Fundamentally, a good exit strategy is good business strategy. If you operate a business that is attractive for someone to buy, it probably has a good operating model, sells good products and turns a profit. Ultimately, that business is not dependent on who the owner is.
PBN: Why would someone need professional help for an exit strategy?
HILTON: I once read a quote from Red Adair, a professional firefighter who put out oil well fires. He said, “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.” Not every business owner thinks they need an M&A [merger and acquisition] attorney, an investment banker, or a tax planner. But probably more owners need those services than they think they do!
Interestingly enough, if you ask a business owner what their business is worth, they immediately can give you a number. A more difficult question is “What does the market think your business is worth?” Often those two answers don’t coincide. The real question to ask is “What does an owner need to do to get the number that the owner thinks represents a good value?” That’s because some businesses are just not ready to sell.
PBN: What does a certified exit planning adviser do?
HILTON: Different CEPAs focus on different parts of the owner’s exit strategy. There are many CEPAs who work primarily in value acceleration, helping the owner to get their business in shape so that it’s ready to bring to market.
My area is helping owners prepare themselves to understand what they need to realize from the business financially in order to sustain their lifestyles and prepare for the next phase of life. About 75% of owners regret selling their business a year later. Most of the time it’s because they haven’t thought about what they would do with themselves.
PBN: What qualifies someone to be a CEPA?
HILTON: You take a course – and there’s a lot of course work. Then you take a proctored test. I probably studied for over a month. The Exit Planning Institute does the education process, the testing and issues the certification. You don’t have to be an attorney, or a banker, or a private wealth adviser to take it. In the classes you’ll meet CPAs [certified public accountants], lawyers and other financial advisers. Many CEPA students just want to be in the business. Having the certification helps you understand the nuances to be a better financial adviser.
PBN: In your role as a CEPA, who are your clients? If they attend an exit strategy workshop, what can they expect to learn?
HILTON: The bulk of our clients are C-suite executives or private business owners. I’m teaching five workshops this year throughout Rhode Island. The first was on June 2 in Newport. The next is June 15 in Warwick. Additional sessions are being scheduled for Westport, Westerly and Providence.
We’ll discuss key considerations, risks and opportunities for business owners to know before, during and after a planned business exit. And we’ll focus on maximizing business value pre-exit, the top seven ways to structure a sale or transfer, and strategies for maintaining lifestyle and wealth post-exit.
Sam Wood is a PBN staff writer. Contact him at Wood@PBN.com.
