Trusted Advisers

The chances of a successful and fulfilling transition from your business are greatly improved with a team approach using trusted advisers. The right team can coordinate all aspects of the exit strategy. Members of the team generally include the following:

Attorney – Find an attorney with experience in estate planning and preparing the legal documents required for small business transitions. The attorney should be familiar with federal laws, and state laws in the state(s) in which your business operates. The attorney is responsible for drafting or, at a minimum, reviewing the sales agreement, estate planning documents, land contract or mortgage agreements, buy-sell agreements, and any other legal documents needed to implement a succession plan consistent with the business owner’s goals.

Financial Adviser – Your financial adviser should be one of the first trusted advisers you meet with when you consider exiting your business. Your small business may be the most valuable asset in your portfolio. Your financial planning adviser can help you make investment decisions that are consistent with your succession plan, and can provide the proper financial products to successfully implement your exit plan goals.

Accountant – When considering exiting a business, most small business owners talk to their accountants or CPAs first because of their often long- standing relationships, but most accountants and CPAs do not have the experience to properly advise small business owners in exit planning and valuation of the business. Most accountants simply refer their clients to someone who does have that experience. As key trusted advisers, your accountants are familiar with your unique business and tax situation and are typically the best source of financial information about your business. Although most accountants do not perform business valuations, they do know what creates the value in a client’s business, and should be involved early and throughout the entire business transition process.

Business Valuation Expert – Many different methods exist for valuing a small business, from informal rule of thumb methods to more formal IRS or SBA (Small Business Administration) sanctioned methods. Business brokers almost exclusively use multiples of Sellers Discretionary Earnings (SDE) – a rule of thumb method. Valuation of the business in some form or by some method is absolutely necessary as a major component of the exit planning process. Preferably, use a business valuation expert who is certified through a professional business valuation organization such as the American Institute of Certified Public Accountants (AICPA) or National Association of Certified Valuation Analysts (NACVA), and has experience preparing valuations for small businesses in your industry.

Exit Planning Adviser – Most business owners contemplating the sale or retirement from their business do not understand all the legal, financial and other aspects that generally need to be undertaken to successfully sell or transition a small business. A certified exit planning adviser (CEPA) acts as the “quarterback” for the Trusted Adviser team. His/her job is to coordinate the work of the various team members to ensure that the exit strategy is correct for the business seller, the proper valuation method(s) are used, and the succession plan is successfully implemented.

Insurance Consultant – Insurance consultants often work with the financial adviser, estate planner and the exit planner to provide insurance that may be necessary when implementing the exit plan. For example, in the case of a seller’s death before the seller has been paid in full for the sale of his/her business, life insurance proceeds can be used to pay the former owners estate to, satisfy a buy-sell arrangement, or to pay estate or income taxes. Under the Affordable Health Care Act, the health insurance of a seller should also be addressed. If your current insurance consultant does not have experience in areas related to business transition, you should find a trusted adviser who does.

Others – Other trusted team professionals include bankers or actuaries to assist with financing and implementation of your exit plan. Also, family psychologists are being used more now in family business transitions.