How Can Your CPA Help You with Succession Planning?
Many business owners often begin to think about the succession planning process when they are ready to exit the company; however, that should not be the case. A key part of succession planning is the planning aspect. The discussion of an exit strategy should happen well in advance because often times, if the exit strategy involves selling a business, there are investments that need to be made into your business that take time and a proper thought process.
Now, how can your CPA help you facilitate your succession plan?
Business Valuation Services
There are many reasons to get a business valuation, but perhaps one of the most crucial is simply to know what your business is worth. While you may have an idea of what your business is worth, it may not be a completely accurate number. A business valuation will take into consideration, not just your historical numbers but also the economic outlook of the business and the industry. It will also cover looking at management and workforce skills, the company’s position in its market, and your competitors. All of these factors can contribute to a very different number.
Your CPA is well positioned to help you prepare your business valuation since the valuation does deal with the financial information of the business. However, it’s also a good idea to have a CPA with the right background to help you through the process. You will want to find someone with the proper training and credentials, such as:
- ABV (accredited in business valuations as certified by the American Institute of CPA’s)
- CVA (certified valuation analyst as certified by the National Association of Certified Valuators and Analysts)
- ASA (business valuation certification provided by the American Society of Appraisers)
- IBA (business valuation certification provided by the Institute of Business Appraisers)
Knowing what the business is worth ahead of time will prevent the unfortunate scenario of not being able to exit because it would be impossible to live the lifestyle you foresee. Or in another unfortunate scenario, selling your business for less than it’s worth.
Distinguish Your Strengths from Your Weaknesses
Your CPA is aware of what drives your business-and if they aren’t, they should be. During the succession planning process, there are sometimes hard decisions to make – such as breaking off parts of the business that have not been as successful. With knowledge of your financial situation, a CPA will be able to help you discover which parts of your business need to be let go.
Your CPA can help you differentiate your clients who contribute less than 1% of your revenue to the clients who contribute over 50%. If one of your clients falls into that high percentage, your CPA will be able to give you an analysis that includes adding more clients that contribute a mid-range percentage to your overall revenue.
Familiarity with Working with Different Professions
Depending on your CPA, chances are, they’ve worked with everyone from attorneys to bankers. These professionals are key players that you will have on your succession planning team. Finding a CPA with a business valuation background, who has also worked with professionals in similar roles, will give you less of a headache in the long-term. You want someone who can contribute to the team and, in some ways, lead your succession planning team.
There is never a cookie-cutter solution to an exit strategy. The ability to exit smoothly from your company will come down to many different factors, and you need someone on your team, who understands the differing aspects of your business.