Roles of the CPA/Valuation Expert in the Seven Step Exit Planning Process

Steps 1 and 2

• Evaluate appropriate type of valuation
• Participate in selection of valuation depending on owner's objective (sale to third party or transfer to insider)
• Develop cash flow projections
• Explain financial and accounting principles in light of Exit Objectives and valuation of the business
• Opportunity:
• Provide cash flow projections and valuation services on a fee basis (for a fee between $5,000 and $15,000)
• Solidify position as a critical Advisor Team member through financial, accounting and tax knowledge

Step 3

• Perform tax planning necessary to manage and/or minimize tax consequences to owner resulting from conversion to "S" status
• Analyze conversion to "S" status, if applicable
• Evaluate creation of multiple entities, if appropriate
• Analyze finances to measure success from recommended techniques
• Opportunity:
  • Provide ongoing tax advisory services in regards to possible recommendations for fix or hourly fee
  • Provide cash flow forecasting and financial impact analysis for various recommendations
  • Ongoing annual tax planning work

Step 4

• Provide financial and tax analysis/advice on consequences of alternative structures for transaction
• Prepare 3-year audit or reviewed financial statements or other financial information as needed by buyer
• Review/negotiate owner’s financial and tax representations and warranties
• Opportunity:
• Provide consultation and analysis (Fee generally between $5,000 and $100,000)
• Receive finder's fee from the transaction intermediary
• Negotiate financial transaction terms (when there is no transaction intermediary)
• Value the business or defend proposed valuation

Step 5

• Provide cash flow forecasting and modeling to illustrate and evaluate transaction structure
• Analyze tax ramifications of sale to insiders
• Propose tax savings or cash flow timing strategies
• Opportunity:
• Ongoing consulting fee income and continuation of business representation through ownership transition
• Continued representation of business after the successor owner takes control
• Collect fees for tax planning and structuring
• Charge flat or hourly fees for cash flow forecasting and modeling

Step 6

• Perform or review valuation
• Evaluate or interpret valuation provision in legal documents
• Analyze anticipated cash need of business should owner die
• Opportunity
• Provide fixed fee valuation services
• Evaluate financial advice in planning for various contingencies
• Maintain business as a client, following a business continuity event

Step 7

• Review proposed plans and estate tax consequences of each option
• Project income tax consequences of possible asset transfers to children and others
• Analyze both pre- and post-ownership transition
• Suggest and/or confirm recommendations made by the Certified Exit Planner (CExP)TM
• Opportunity:
• Provide consulting and advisory services
• Provide estate tax analysis and planning
• Represent family members with their personal accounting and tax needs