Wednesday, July 24, 2013

Exit Planning Without a Financial Planner – How Dare You!

A financial planner is an integral part of the exit planning process and should be consulted at the very early stages of the process.

Beginning with the end in mind is Habit #2 of Stephen Covey’s "7 Habits of Highly Effective People" and effective business owners know that exit planning must begin with the end in mind.  This means envisioning life after you leave your business and determining what you will need to accomplish your goals.  Identifying what you will need financially and developing a plan for achieving that financial need is precisely how a financial planner helps in the exit planning process.
I recently spoke with Scott Plaskett, CFP, Senior Financial Planner and CEO with IRONSHIELD Financial Planning Inc. in Etobicoke, Ontario (  Scott and his team at IRONSHIELD work with business owner clients to develop a comprehensive financial plan as part of the overall exit planning process.  According to Scott, exit planning is one of the main initial topics of conversation he has with business owners.  It is critical for Scott (and for the business owner) to understand when the business owner would ideally like to exit the business and what he/she plans to do after the transition.

A business owner should involve a financial planner in the exit planning process because, based on assumed cash flow needs after exiting the business (and other key input assumptions), Scott can "reverse engineer" the business owner’s liquidity needs, including the net proceeds required from the business to meet the business owner’s goals.  This helps identify any gaps between what is needed and the current situation.  It also provides valuable information which can assist the business owner in negotiating the sale of the business.

From an exit planning standpoint I was interested in Scott’s perspective regarding what a business owner must be aware of when turning to a financial planner.  In this regard, Scott offered the following 4 key thoughts:
  1. A common misconception – many people look to their financial planner to create wealth.  Business owners however build their wealth through growing their business.  The role of the financial planner is to preserve the wealth that has already been created through the implementation of a comprehensive financial planning strategy.
  2. Estate planning and insurance – estate planning helps preserve wealth when transferring the business to the next generation by minimizing/deferring tax and maximizing liquidity; life insurance preserves wealth through funding a shareholder buyout, replacing lost income or paying estate taxes on death.
  3. Maintaining control – all business owners will exit their business either voluntarily (at at time of their choosing) or involuntarily (due to disability, departure, divorce or death).  A financial plan ensures you maintain control over this process and are prepared for an unexpected, involuntary exit.
  4. Not all financial planners are created equal - choosing the right financial planner is vital; some have experience with business owners and have built their own businesses; some have not; some are fee based; some are commission based.  For further information, check out this free consumer awareness guide on "How to Choose and Work With a Financial Planner You Can Trust" on
Scott recognizes the importance of a comprehensive approach to the financial planning process and has worked with other professional advisors as part of the exit planning process.  In particular, Scott routinely finds himself collaborating with his client’s accountant, business valuator and, at times, a family business advisor, banker and business broker.  Clearly defined roles on the part of each member of the exit planning team, however, is required for effective collaboration.
Knowing when to call upon experienced professionals to ensure that your exit plan is technically sound and will meet your identified goals is critical.  A financial planner is one of the first professionals to speak with.
If you want more information about how a financial planner can assist with your exit planning, contact Scott at  If you have any questions regarding the exit planning process in general or want to learn more about our VSP Exit Starter Program, contact us at


  1. A Financial Planner should be involved from the very beginning to the end. This includes building the foundation of the financial house, drawing the roadmap and recommending basic insurance protection early on to lock in their insurability. Then, we move on to the next stage, which is the accumulation of wealth, revising insurance, revisiting investment, savings and retirement strategies, an on-going process from age 30-60! Finally, we get to the distribution stage and exit strategies for business owners. As I just met with my senior client to uodate his legacy planning, while preparing to celebrate his 92nd birthday, I must add that income planning should be in place up to 100 years old, while asset preservation must pass on to future generations.

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