How to start exit conversations with your clients

When you start any conversation with clients about their exit plans, the first question that comes to mind is why is an exit conversation valuable for your practice and your clients? Is it still relevant if they aren’t thinking about an exit? And what happens next if they are interested in exiting now?

The truth for about every business owner is that 100% will leave their business. No one can cheat death. Yet most business owners do not have plans for events such as death or disability, let alone the sale of the business. If they aren’t thinking about this now, then it might be too late when they do start thinking about it.

Learning how to have these conversions is one way that you, as their trusted advisor and tax accountant, can help them and help your practice earn more fees by adding measurable value to your clients.

The benefit in this approach is you might also start thinking and acting on your own exit and succession plans—which means big wins all round. Your retirement is in your hands when you have an exit strategy in place.

Starting the conversation: Key initiators

Most business put off exit planning because they don’t know where to start. Most business owners only sell one business—their own. Never having done it before, they don’t have a full picture of the process that is ahead of them or how to properly prepare for it. Many don’t have the business basics in place and lack an understanding of how this diminishes the value of their business. By extension, this leads to a poorer retirement.

How do you prepare someone for a process that is emotional, stressful, and demanding, especially if you haven’t been through it yourself? As an accountant, you might know the theory and mechanics involved to successfully sell a business. Helping your clients get prepared means they can sell their business for more money and on better terms when they are ready to. And you could emulate this in your practice, too.

If you have never been involved in M&A, do not be afraid to open the conversation with clients around the services you already have experience in, and work with experienced partners on those parts you don’t have the resources or capacity to deliver. Using exit readiness as a door opener makes showing how you can add value a lot easier.

As an accountant, you have key insights into your clients’ lives. Year-end accounts, business and personal tax returns, payroll, and management accounts are all rich sources of data and intelligence if they are used correctly. Here are some openers:

Tax returns (business):  Any opportunity to discuss tax can easily fold in a conversation about exit tax planning. 

Tax returns (personal):  Long-term personal tax planning should include discussions about the valuable business asset. This may also add in personal wealth planning advice from a partner in your practice or a trusted colleague outside your practice.

End of the year:  Year-end accounts are an ideal time to talk about an overall business moment of truth, which includes exit and succession planning. You can see whether the business is in a growth or stagnation/shrinking phase. Having a chat about market conditions and what that means for the going concern, as well as the long-term value of the business, will engage you with the business owner to a greater depth than most accountants.

Management accounts: If you are putting management accounts together and providing other accounting services, this gives you direct insight into the operational activities of the business. Taking more interest in the business’ numbers, instead of just the financials, is beyond the norm for most accountants. It makes you more valued by the business owner. If you aren’t offering management accounting services, ask to see what the business produces. This alone will lead to finding out the quality, if any, of what is produced. If there are none, offer the service. If they are produced, you will get to see a much better picture of what’s happening in the business for very little time investment.

Payroll: Payroll is one of the richest sources of real time data on a business, especially if things are changing rapidly. Growing or shrinking numbers on the payroll are an excellent way to start a conversation about where the business is going, and what the exit and succession plans are headed.

Help clients on their journey

Conversations with your client on a regular basis to ensure that they are making progress toward their exit readiness goals demonstrate your commitment to their success and helps build a stronger, long-term relationship with them. Exit readiness is more than a year-end conversation; it’s a journey.