There are many rewards and unique challenges in being the personal financial advisor to wealthy business owners. It requires an advisor to have a certain level of expertise. 

He or she must make an investment of time and be willing to serve in a unique way, well before the business owner becomes a profitable client. Since most business owners don’t wait until they are ready to sell their company to find a quality advisor, successful advisors will already be working with their business owner clients years before the owner sells. Many of my clients were financial planning clients for well over 10 years before they had much of an investment account. You can’t expect to develop a relationship with business owners, and earn their trust, just weeks or months in advance of their business sale! It happens, but it’s rare.

I made my transition to financial and investment planning after working for many years with business owners. First, I was a partner in a small venture capital firm, and later I worked as a consultant and part-time chief financial officer to businesses. It was through my conversations with entrepreneurs that I realized how much I loved dealing with these dynamic personalities. We would discuss their personal finances and work-life balance—how they balanced time growing their businesses with the needs of their families. Each also faced very different issues and stressors as they exited their businesses and transitioned to the next stages in their lives. 

If you are looking to grow your business owner clientele and help see them through a successful transition of their business, here are several tips and strategies to consider.

Both Advisors And Clients Must Get Started Early

One of the benefits of taking on business owners as clients early, long before they decide to sell, is that you have time getting to know them. This allows you to build an amazing level of trust while helping them frame the decisions they will make about selling.

As I approach that conversation, I begin by asking my clients thoughtful questions around building business value, succession planning and their long-term strategic goals. These are low-stress conversations that plant the seeds for the future thinking that will impact how well the sales process and transition of their company will go. 

Help Your Client Get Clarity

As advisors, our job is to help our business owner clients get clarity well in advance of initiating the sales process. We must help them maintain focus on what their goals are for the process, for themselves, their employees, successors and their family. 

Many advisors coach their clients to “know where you’re going to before you leave or run from where you are.” While that’s a noble goal and appropriate for some personalities, I find that many owners will never find out what is possible for the next stage in their lives until they make the decision to sell. In fact, fear of the unknown keeps them from selling when it’s in both their personal and economic interest to do so. When my clients tell me they have no idea what they are going to do, I smile back and tell them that it’s perfectly acceptable. Why not make finding out “what’s next” their first project after the sale (and a well-deserved vacation)? Position it as a fun, open and exciting journey. 

Manage Clients’ Stress

It’s important to remember that your client will likely be very inexperienced at the process of selling a business. Having personally experienced the stress, I can speak from experience when I coach my clients through the process and tell them what stressors they may encounter. For example, selling can unleash emotions that make it hard to move forward. 

Few business owners are prepared to make the journey unscathed. During the negotiation process, your clients will face immense psychological stress, but if it’s managed well, it can actually be productive and bring focus to the process. If not managed well, clients can find themselves with impaired concentration and a deterioration in judgment. Many of these transactions can end up being one-year “death marches.” Deal fatigue will set in, mistakes will be made, and regret will prevail. 

Build A Team

The key to a successful team starts with experience and competency, and ends with your client clearly communicating his or her expectations so that the team understands what they need to bring to the table. Getting an experienced team that has “seen this movie before” is instrumental to reducing the stress and allowing your client to stay focused on primary goals. The team your client will need through the sales process may be partially in place—accountants, lawyers, business valuation experts, investment bankers, etc. 

Hopefully you have already developed a close relationship with the client’s CPA, as this will be invaluable in demonstrating what it means if the client does a stock sale or an asset sale. A good lawyer will advise on the impact of non-compete clauses. The sales broker or investment banker will have the necessary experience with your client’s industry or market. You’ll find that valuation experts/consultants as well as competent deal attorneys will pay for themselves many times over. If these talented professionals are not already in place, the advisor’s role is to make the appropriate introductions to individuals that will be part of their team. 

A good team will understand the importance of spending enough time and focus on the “letter of intent.” Many of these letters are created just to find out more about your clients’ business even if they have no real intention of actually closing. Rookie teams often make the mistake of focusing on the total dollars instead of the details of the offer. 

Once it’s been signed, the letter of intent shifts the control of the process from the seller to the buyer, and feeling less control often causes stress for business owner clients. Only an experienced advisory team can think through all the details like deal structure, business risk, tax savings and earn-out calculations that ensure your client is going to reach his or her goals. 

Additional Pointers For Business Transitions

Based on my years of experience working with business owners and helping them transition their businesses, here are some additional tips I’ve found helpful:

•  Remind your client that it’s a marathon and not a sprint. 

•  Make sure your client fully understands that buyers pay a premium for certainty, which translates into consistent customer revenues and relationships. It also means a clear understanding of relevant leadership succession. Address succession well in advance of a letter of intent or a leadership uprising. 

•  Having a financial and estate plan in place is invaluable. Many clients don’t appreciate that advance financial planning will translate into permanent tax savings. As advisors, we understand these strategies. It’s imperative they are addressed early in the process so the team understands the client’s goals. 

•  The sales process can be very iterative as the specifics of the transaction evolve. Have an analytical tool that ties the deal structure into the CPA’s tax analysis and your client’s financial and estate plan so the client clearly understands the ramifications of changes that get made after the letter of intent is signed. And, of course, there always are changes. 

•  Make sure you have addressed your firm’s long-term competency for investing your client’s sales proceeds. The financial and estate plan should already have the relevant investment strategies for your client’s accounts, trusts and other charitable entities that may have been created as part of your client’s planning. Your clients will be moving from regular cash flow to portfolio withdrawals, and probably won’t understand the investment portfolio at the level they understood their businesses. Show them how their overall strategy, allocations and accounts tie into their long-term goals as well as their regular cash-flow requirements. 

As you can see, competently working with business owners, especially through the process of selling their businesses, requires exceptional skill, care, teamwork and advanced planning. Before marketing yourself as a business owner specialist, be sure you’re willing to make a personal investment of time to have your tools, team and techniques in place. 

After all, you don’t want your clients to ever think that, because they are coming into money, maybe they want to upgrade their advisor, too.