Exiting right requires early planning and help from a team of advisors that is often formed by a company’s CPA.
In our work as M&A brokers, business owners often come to us emotionally ready to sell but unrealistic about the value and condition of their business. And frequently they are out of time or unwilling to re-position the business for a more lucrative sale. Misconceptions, clouded judgement and lack of planning are all too common. Fortunately, a growing number of business owners are turning to their CPA’s for early exit planning assistance.
Potential CPA Exit Planning Services
- 3-5 years before exit. A top business CPA can help assemble a team of advisors that typically includes an M&A advisor, a personal financial planner, a business attorney, and perhaps an estate planning attorney. The CPA can recommend a business valuation or a sale readiness assessment by the M&A advisor and run tax calculations under likely deal terms. They can help the client select their best exit option, and if gaps exist, the team can assist with developing a comprehensive exit plan, which typically includes a business growth plan.
- 2-3 years before exit. Top business CPA’s provide finance and accounting advice and services. They can Review or Audit financial statements. They can recommend that a client stop co-mingling personal expenses and adjust related-party transactions to market, help clean up the balance sheet, shore up accounting systems, staff, policies and practices, help organize all financial records, and create important management reports — all things that buyers and their CPA’s and lenders expect to be in place.
- 1-2 years before exit. The CPA can perform a sell-side Quality of Earnings (Q of E) analysis of historical reporting. Q of E often covers revenue recognition procedures including rebates, discounts, allowances, credits and collections, analysis of accruals and contingent liabilities, identification of non-recurring revenue and expenses, working capital level analysis, adequacy of capital expenditures to sustain performance and operational plans, changes in personnel and compensation, and stratification of revenue and gross margin by customer and product. Basically, whatever it take to understand and verify the underlying economics of a particular business.
- During the sale process. The CPA can provide tax / deal structuring advice, financial and tax due diligence support, and financing support for lender(s). They can also provide or recommend post-closing investment support.
What Business Owners Should Do
Early involvement in exit planning by a seasoned business CPA can help company leaders increase shareholder value, improve marketability, and ensure that owners are able to exit on their own terms and time frame. When selecting a CPA for your business, ask about their experience and track record in helping other clients achieve more successful exits. Then choose accordingly.
Loui Cionci, ABV, CPA, is a senior M&A advisor and business appraiser with Exit Strategies Group. For more information on exit planning services, help finding an experienced business CPA, or selling a California business, contact Louis at LCionci@exitstrategiesgroup.com or call 707-781-8582.