This quarter, TPG Wealth Management Consultant Bob Noack interviews co-workers John Woolley, CEPA, managing director of wealth management and chief investment officer, and Geneva Stegemoller, wealth management consultant.

This quarter’s commentary turns to a planning topic vital to business owners: business succession planning. Also referred to as exit planning or transition planning, this work encompasses a broad range of topics and skills that help a business owner understand, prepare for, and execute a successful transition of ownership of the business. When we are working with business owners on their personal financial plans, we commonly see a projection of future cash flows that includes a large and important payment reflecting the sale of the business. It’s at that moment that we ask: “What are you doing today to ensure a successful sale or transition of the business within the next X years?”

The simple truth is that all businesses transition eventually; but very few of them transition in a way that is intentional and well planned. In fact, only 20–30% of businesses that go to market actually sell, leaving up to 80% of those business owners without good options to harvest their wealth and ensure the next generation’s economic continuity.1  Why would an owner with a successful business run into such difficulty when it comes to the most important phase of that business’s life?

This is where our work specifically tailored to business owners can make a big difference. With Certified Exit Planning Advisors (CEPAs) on our team, we have the tools and experience to help our clients that own businesses start to plan for their transitions today, ideally years before an exit or sale is anticipated.  As early as possible, we’ll use assessment tools to evaluate and align business, personal, and financial goals. Many business owners who state they have a plan to sell in five years are amazed (and unpleasantly surprised) when an offer to buy their business comes to them within the next 12–18 months (often at a disappointing price).

Succession planning done today allows evaluation and enhancement of the four types of capital that make up a business: human, customer, structural, and social. Human capital looks at the strength, depth, and mix of your talented employees. Customer capital is the measure of the strength of relationships with your key customers, including tenure, depth of integration, and diversification. We also dive into structural capital: the infrastructure of your business processes, including intellectual property, financial reporting strength, and documented know-how of key skill sets. Finally, we look at the social capital, or company culture; this is the capital that can elevate a company to best-in-class.

This can be an intimidating list, but one that can lead to maximizing exit value. Engaging with a qualified partner who speaks the transition language can bring needed accountability and resources. The payoff can be a business that is transformed from one built around the owners’ current income to one that has significant enterprise value – value that is ultimately the source of a successful exit.

As the investment and planning arm of The Partners Group, wealth management is an integral part of a much bigger group of services called One Partner Advantage®. Many services focus on business needs like employee benefits or commercial insurance or corporate retirement plans. But for many business owners, the line between personal and business is blurry, at best. Business succession planning melds the two and requires a unique skill set.

We would welcome an opportunity to discuss this broad and important topic. Whether you own your own business or are involved in the long-range plans of the company for which you work, good exit planning is good business planning. The time to start is now! Let’s see how we can help.

The TPG Wealth Planning Team

1. 2016 State of Owner Readiness survey, Exit Planning Institute


"*" indicates required fields

How would you like to be contacted?
Would you like to receive email communications from TPG?*
Would you like to schedule a meeting to discuss your financial goals?