Exit conversations with your clients: Next steps

As a tax accountant, you are perfectly placed to start one of the most important conversations in a business owner’s life. Simply asking the question “What’s your exit strategy?” opens an opportunity to really listen to the entrepreneur and discover how you can help them with the services you already offer. You can show how your advisory services can add value to them and their business. You can show that accounting is more than a cost in the form of compliance services.

What information do you need?

To be able to engage in an effective exit readiness conversation with your business clients so that they can prepare themselves for a successful transition, you are going to need a starting point. It’s all about the business owner, first, and the business second.

Start by understanding the client’s goals

Asking a client what they want out of their business will encourage a wide-ranging conversation, but most business owners aren’t used to being listened to. Listening is key here—do not be tempted to jump in with solutions at this point.

Often, business owners say, “My business is my pension,” but have no clear route to extract the value from the business into their own pockets. Get the thought process started by asking what their long-term plans for the business are and how that fulfills their personal aspirations for the future. This part is often missed by accountants in their client meetings because they focus on the business, and look for solutions before getting an understanding of the emotional needs of the business owner.

Taking a step back and asking the business owner about their plans, hopes, and dreams for the future means this is a very personal conversation about them. They will not be used to that from other accountants, so it will be a surprise. People love talking about themselves. Business owners generally get their personal identify tied so closely to the business that they often feel they can’t talk about leaving it.

Talk about the journey

The first thing you’ll find out from the opening conversation is how much the business owner knows about the choices they have. Most owners don’t understand exactly what they need to do because they aren’t aware of the choices they have. As a result, they end up with less money and worse terms than they should for all the work they’ve put into their business. This is where you can show visible value just in the conversation.

If business owners know that most business sales fail because of a lack of preparation, they’d be motivated to take more actions. At the risk of either closing their business or working long after their planned retirement, they are more likely to seek help. As the trusted advisor and accountant, you can help avoid huge amounts of value being lost in the wider economy and local communities.

Having opened the door on what the client wants out of the business, you can now look at what’s happening in the business that the client will need to work on to get exit ready—and this is not just the numbers; it includes operational efficiency and owner dependency. It’s having the right people doing the right things at the right time for the right reasons. It’s a full suite of compliance issues. And that’s just getting started. If they don’t know where their strengths and weaknesses are, then they can’t take the actions that increase the saleability of their business.

Roadmap the process for them

The exit process includes developing an exit strategy, conducting a business valuation, preparing financial statements, and identifying potential buyers or successors. Then the real work of negotiating the heads of terms, getting through the due diligence process, and finalizing the contracts begins. As the accountant, you don’t need to manage the whole process, but it benefits everyone if you are involved before and during the process, and work well with the various partners—lawyers, brokers, corporate financiers, buyers, and others—along the way.

Too often, I see the accountant oblivious to the sale process until the day they are fired, when the new owners’ accountants step in. Yes, this will happen in some cases, but it’s not an inevitability. Getting more involved includes the following:

1. Preparation: You need to prepare before the sale process starts to make the business more resilient and attractive to buyers. Step 1 is having the conversation about owner goals and the level of preparation already in play.
2. Provide resources: Offer to provide resources to help your client prepare for the sale or transfer of the business. If you’ve been working with the client on their financial reporting and planning, you’ll be ideally placed to further support this work.
3. Follow up: Conversations with your client on a regular basis to ensure that they are making progress toward their exit readiness goals demonstrates your commitment to their success and helps build a stronger, long-term relationship with them. Exit readiness is more than a year-end conversation.

Many accountants do not do this, so if you don’t, you are missing out … on fees, keeping your clients closer and more engaged, and mostly at risk of losing clients unnecessarily. Step up and engage with your clients. It’s a game changer for you, your practice, and your clients.

Editor’s note: Read part 1 of Christine Nicholson’s series on exit conversations.