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How to build a successful exit planning practice

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There is an opportunity in the marketplace to develop a profitable practice in exit planning. Countless books and articles on exit planning highlight today’s ideal conditions for advisors: the aging population of business owners, and the tremendous wealth that is trapped within these businesses. How that wealth will change hands when those business owners retire, ideally, will be under the guidance of a knowledgeable exit planning advisor.

CPAs have a unique view into their clients who will exit their businesses in the not-too-distant future. However, many CPAs will miss the opportunity to engage in exit planning and provide greater value to their clients because they lack the skills to assist them.

What is exit planning?

Exit planning is the process of preparing business owners to exit their business at the maximum value. It primarily consists of:

  • Developing a long-term plan for maximizing business value, so the owner can exit the business at its highest potential value;
  • Ensuring the business value at the time of exit is sufficient to fund all of the business owner’s post-exit goals, for the duration of their life after exit; and
  • Confirming the business owner has a post-exit life plan that will provide long-term fulfillment for the duration of their life.

Exit planning begins long before a business owner wants to exit their business. The ultimate goal is to have the business owner prepared for an exit from the business at all times. An early start facilitates far more comprehensive and powerful planning than attempting to enhance value when an exit transaction is on the horizon.

The CPA’s advantage

Due to the variety of disciplines encompassed in exit planning, many professionals attempt to provide this service to clients, including investment bankers, wealth managers, attorneys, insurance advisors, but CPAs have unique advantages over other professionals when it comes to exit planning.

As CPAs, we are often our clients’ single most trusted advisor. That trust allows us to have open, honest discussions with clients; they will be more inclined to ask questions and express their concerns about exiting their business, with their CPA more so than with any other advisor. They will listen to us and trust our advice.

CPAs also have early and immediate access to pertinent information about our clients that any exit planner would require to properly advise them on exit planning strategy. Regardless of the services we currently provide, we can leverage that information to have a powerful dialogue with our clients about their exit and post-exit plans. And because we are so closely connected to a client’s financials, we can identify opportunities early that will create long-term value in the business over time.

Because of our long-standing and trusted relationship with our clients, they give us their utmost attention and take our advice to heart. This allows us to educate our clients on how to maximize the value of their business and proactively engage in conversations with our clients that motivate them to take action early for maximum results.

CPAs as exit planners — why we fail

Given all the advantages CPAs have to be the most effective exit planning advisors to our clients, why do so few CPAs seize the opportunity to be the Exit Planning Advisor that clients need?

Exit planning is distinct from transaction planning, and yet these two terms are often misused interchangeably. CPAs are most often focused on current transaction advice, and are not often engaged in long-term, comprehensive exit planning; they fail to consider the value that comprehensive exit planning they can bring to their client’s business. CPAs need to understand the distinct difference between exit planning and transaction planning before they can build a successful exit planning practice.

CPAs who do not currently engage in exit planning may consider using it as a fall back practice to fill their time in between the “busy seasons” of their primary practice. But exit planning requires a continuous commitment to a long-term client engagement, and if it is avoided during busy seasons, exit planning clients will become frustrated and the practice will never flourish.

On top of those two big factors, there is currently an emphasis for CPAs to become specialists in a specific area of tax or accounting. Once a CPAs has developed a reputation as an expert in their current field, it can be a difficult decision to change to a new specialty area, and devote the time required to develop a new area of expertise.

Partners can also be an issue within certain firms. Partners are often hesitant to introduce their clients to other experts for fear of losing that client relationship. To develop a successful exit planning practice, the partners must be committed to growing the new service line, whether through participation or by providing referrals and introductions.

Any finally, CPA firms may hesitate to create new service lines due to the concern of removing resources from their already successful services. They are concerned with a loss of billable hours by investing some of those hours in developing a new service line, which will take time to grow and flourish. This is a very shortsighted view when it comes to developing ‘value add’ services such as exit planning.

How to build a successful exit planning practice in a CPA firm

Forward-thinking CPA firms have long recognized traditional services are under attack from many directions. In addition to competing CPA firms, we also contend with non-CPA competitors, outsourcing to lower cost countries and other low-cost service providers penetrating our service areas at an accelerating pace. The CPA firms that thrive are those that succeed in developing value-add services to help their clients succeed in achieving their business, personal and financial goals. Exit planning services can be a strong value-add service line. Here are some guidelines for breaking through the barriers that CPAs may encounter in building an exit planning practice in their firm.

1. Make a professional commitment and develop your plan

Building a new service line takes time and commitment. You cannot turn off your fulltime tax practice, for example, and turn on a fulltime exit planning practice overnight. You need a transition plan that includes:

  • An education plan: You can accelerate your advancement in this new practice area with participation in formal training. There are many organizations and universities that offer exit planning programs. We chose the Exit Planning Institute because of their one-week certification program, their training materials and their commitment to continuing professional development for exit planning professionals.
  • A change in market identity: Once you make a commitment to building an exit planning practice, it must become your new identity. You can no longer market yourself as an assurance or tax professional, if you want to attract new exit planning clients. You firm bio, website, LinkedIn profile, business card and elevator pitch should all identify you as an exit planner.
  • A client transition plan: Examine your client list carefully, and begin transitioning client relationships. The business clients who are strong candidates for exit planning services are the clients you should retain. Other clients should be transferred to others within your firm. The clients you transfer to others will make room for you to invest time in building the exit planning practice.
  • An ability to see through a new lens: When new client opportunities come to your attention, see them through the eyes of an exit planning professional. If it is a prospective exit planning opportunity, move forward and pursue the opportunity as you always have. If there are no potential exit planning services, resist the temptation to pursue it yourself, and introduce the accounting opportunity to others in your firm.

2. Develop domain expertise in exit planning

While the market place is demanding domain experts, it is very challenging to change your area of expertise to something new. However, if you are not afraid to come out of your comfort zone, this is a terrific opportunity to reinvent yourself, rejuvenate your energy and passion, all while providing value added services. How many domain experts in exit planning are there in your CPA firm?

In smaller firms and solo practices, changing your domain expertise may not be practical. In that case, you can educate yourself on the process and then align yourself with an exit planning advisor in your community. Where do you find a professional exit planner who is not a member of a competing firm? The Exit Planning Institute has a Find a CEPA webpage that lists certified exit planning advisors (CEPAs) by location. This will help you find an exit planner that will compliment your practice and assist your clients in exit planning, while you continue to serve your clients in your current practice area.

3. Invest in growth opportunities

It is guaranteed that every business-owner client will exit their business someday. Most business owners exit a business only once in their lifetime, and they do a terrible job. They are often unprepared, ill-informed and exhausted by the buyer’s due diligence process, as it is overwhelming and emotionally draining for an unprepared seller. Business owners need comprehensive exit planning advice. Once your firm develops the reputation for excellence in exit planning, not only will your exit planning practice will grow, your traditional services will also grow. In fact, for every dollar of exit planning revenue that we generate for exit planning services, we generate twenty dollars in new revenue for other services in our firm. It is a win-win for everyone in a firm who invests in exit planning services.

Business owners in your community will benefit from exit planning that is done well and preformed timely. Some of these business owners are already your clients. As their most trusted advisor, you can become the exit planning advisor who will educate them on the value enhancement opportunities, and guide them through what to do, how to do it and when to get started. Every one of your business owner clients will exit their business, and now you have the opportunity to guide them through a successful exit.

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