Exit Planning Consulting for CPAs. Where to Start?

Key Takeaways:

  • Many business owners are ill-prepared to exit their business when the time comes.
  • CPAs are uniquely positioned to help clients plan for their future transition early and often by providing exit planning services.
  • Exit planning may be a logical extension to your CPA practice if you have deep, healthy relationships with entrepreneurial owners and founders.

CPAs can play an integral role in ensuring that business owners have a fair chance to maximize the returns when they choose to walk away from their companies. Given their unique visibility into the owner’s business and their situation, they are well-positioned to assist owners in formulating a long-range plan to maximize the value of the company and their estate simultaneously. Moreover, proactive accountants who have played a vital role in their client’s retirement and succession planning often give themselves a higher chance to retain their business with the company in the future, mainly if the company is sold or transferred to a family member or management team.

Exit planning is more than just helping an owner exit their business. The exit planning advisor helps the owner plan to ensure that the transition enables both the company to succeed going forward and the owner to have a successful transition to what’s next. This is where a CPA can step in – to be a planning partner to make sure that the business is ready for the next phase (be it a leadership transition, an internal sale, or an external sale).

There is a lot of opportunity in the business marketplace for CPAs to develop their profitable practice in exit planning. The aging business owners and the wealth trapped in their businesses are just a few favorable conditions for advisors. But only a knowledgeable exit planning advisor can guide a business owner when the wealth changes hands upon retirement.

What is Exit Planning?

Exit Planning is the process of preparing business owners to get out of their business at the best/ highest possible value. It is a long-term planning process that consists of developing strategies and procedures designed to grow business value and maximize it at the point of retirement to ensure that a business owner can get what they need to retire.

It consists of:

  • Identifying the gap between the business’s current value and the future needs of the owner to retire.
  • Developing a long-term plan to grow business value and close that gap so that the owner can exit the business with what they need or at its highest potential value.
  • Ensuring that the business value at the time of exit is enough to fund all the post-exit goals of the business owner or for the rest of their retirement after exit.
  • Ensuring that the business owner’s post-exit life is well funded for the rest of their lives.
  • Ensuring that the business has a clear path to future success and that the owner has a clear vision for what’s next.

How Exit Planning Can Help Your CPA Firm

When businesses transition, new owners frequently bring in their own or new advisory relationships. Assisting your clients through a transition can be an effective way to partner through that transition and build a relationship with the new ownership team (especially if it’s internal).

An exit planning practice creates another way to create value for your clients and earn your trusted advisor status. Let’s face it, financial audits and tax preparation are becoming increasingly commoditized. Clients increasingly see these services as transactional and continue to put more price pressure on the firms they work with. An exit planning practice can help sustain trusted advisor status and provide value to your clients beyond tax and compliance.

As a CPA — What’s Your Advantage?

CPAs have several unique advantages over investment bankers, wealth managers, attorneys, and insurance advisors working within the exit planning space. Often CPAs are clients’ longest and most recurring advisor relationships. After all, the owner turns to their CPA as many as 3-4x per year for tax-related matters. Frequently, this makes the CPAs the owner’s most trusted advisors. If you’ve earned that type of trust, it allows space for open and honest discussions.

CPAs also have complete and immediate access to the business information needed for exit planning in the first place. They can use their privy information to have impactful and powerful dialogues with clients about their exit and post-exit plans. For this reason, it’s sometimes easier for them to identify opportunities that will lead to long-term value creation in the business because they are given broad access to detailed financials regularly. Because of the nature of the relationship, CPAs have a tremendous opportunity to educate clients on how to increase the value of their business and proactively motivate them to take actions early to increase the likelihood of future success.

Of course, a CPA is in a unique position to help an owner optimize the day-to-day financial procedures of their business. They can help owners navigate and understand financial statements, which allows the business owner to make informed business decisions that contribute to future value.

Comprehensive exit planning comprises of complete financial analysis of the business, modeling, valuation, tax analysis of the owner’s estate, tax planning for exit.

How to Build a Successful Exit Planning Practice as a CPA

Building a new practice takes time and dedication; if you are transitioning from a full-time tax practice to a full-time exit planning practice, you would need the following:

  • An Education Plan – Your high-level, tax-related advice is valuable to the client, so participate in formal training to get hands-on expertise on even the most minor tasks and processes. Of course, as a CPA, you must stay current on federal tax laws and the state laws where you are licensed. Still, you also have to stay current on what drives business value, leading value creation strategies, and how to facilitate adequate exits. Of course, Value Scout and its Guidon community can be an excellent resource for you in this regard.
  • A Framework – A structure for how you’ll sell and deliver exit planning work and the value you expect to provide to your clients. Every exit planner has their methodology for how they approach a relationship, and you’ll need to develop yours. To get you started, Value Scout has developed the Exit Planning 2.0 Framework. Access this webinar recording for details.
  • Client Transition Plan- Go through your client lists to identify strong candidates for exit planning services. Your target segment is generally clients that are 5-7 years away from their expected retirement age. Develop a plan for having proactive conversations about value, transition, and exit.
  • Identify Prospects – Look at all your new clients through the eyes of an exit planning professional. However, do not push all new clients into exit planning just to acquire new business. And when you come across a unique opportunity (client), carefully analyze the company and their needs from an exit planning professional’s point of view. Have early conversations about value and transition to explore opportunities to be a resource in this area.
  • Marketing Plan – Develop a summary plan for how you’ll grow your exit planning practice. Start with identifying your ideal client, then think about how you’ll position your practice and develop a lead generation strategy. Then, determine what will differentiate your practice from other exit planning professionals.

Develop Your Domain Expertise

Even though it’s challenging to move from one area of expertise to another, if you are not afraid of getting out of your comfort zone, then adding another value-added service, like exit planning, into your accounting firm may be a great idea to extend the value you provide your existing clients and establish new ways of helping future clients.

Guidon, the Value Scout community, can help you on that journey. You can join or develop a particular interest group, purchase high-quality, on-demand learning on value and value creation topics, and access a range of free and paid content to help grow your practice. With Guidon, you can build your reputation and relationships on a local level through our local groups AND develop your skills and expertise in exit planning through our courses and special interest groups.

Exit Planning May Be a Great Business Opportunity for Many CPA Firms

Even though every business owner has to exit their business someday, most of them are ill-prepared to do so. For CPAs with strong, trusted relationships with owners and ownership teams, building an exit planning practice may be a logical extension to your core business. Once the valuation process begins, it can be overwhelming and exhausting for an unprepared business seller. Business owners need sound exit planning advice. As a CPA, you have a unique ability to serve business owners’ needs, enable educated-informed decisions, and create positive change and successful exits.

How the Value Scout Platform Can Help

You can leverage Value Scout to drive your exit planning practice. When you bring a client onto Value Scout, we provide a baseline value for their business. Using our built-in questionnaires, you can establish the value they need to retire and their target exit date. From there, Value Scout helps you pinpoint the Value Gap and helps your client identify and implement value creation programs to get there. As a trusted advisor, you get the ability to see inside their journey – enabling better quarterly client calls and meaningful conversations about your client’s business and life goals. Schedule a demo today.

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Author Summary

Dan Doran

Dan Doran

Is the Founder of Value Scout, Quantive and the 2019 Exit Planner of the Year. He is a recognized expert and speaks frequently about M&A, valuations, and developing more deliberate value creation strategies.

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