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The Truth About Hiring a Certified Exit Planning Advisor

If you are reading this article you are most likely thinking about selling your business or you are someone who is investigating certifications related to advising business owners and CEOs on exit strategy and exit planning. My reason for compiling the information below is not to discourage you from working with a well-trained professional. The purpose of this article is to encourage you to vet the specific person and not look at a certification as the ONLY criteria for determining if the Certified Exit Planning Advisor is qualified.

What is a Certified Exit Planning Advisor?

A Certified Exit Planning Advisor (CEPA) is a professional who specializes in assisting business owners with the process of planning and executing the successful exit or transition of their businesses. The Certified Exit Planning Advisor designation is typically obtained through specialized training and certification programs. The goal of a CEPA is to help business owners maximize the value of their businesses and ensure a smooth transition when they decide to exit, whether through a sale, succession, or other exit strategies.

Key Responsibilities and Services Provided by a Certified Exit Planning Advisor

Assessment and Planning

CEPA professionals work with business owners to assess the current state of their businesses, financial situation, and personal goals. They help identify potential obstacles and opportunities for improvement.

If you rely on a Certified Exit Planning Advisor to assess and plan your exit, you may get a professional with zero business strategy experience. People from all professions sign up for the different exit planning certifications. These folks include financial advisors, realtors, and people who were previously unemployed and have decided to purchase a business coaching franchise.

Most of the groups that “certify” these exit planning advisors have done little vetting other than making sure the licensing fee is deposited in the account of the certifying organization. This is particularly dangerous during the assessment and planning phase, as the professional will steer you toward any motive that suits their needs.

When working with a Certified Exit Planning Advisor (CEPA) during the assessment and planning stage of the business exit process, it’s essential to ask questions that help you understand the advisor’s approach, gather relevant information about your business, and ensure a tailored exit plan. Here are some questions to consider:

1. Experience and Qualifications:

– Can you provide details about your experience helping businesses with exit planning?
– What qualifications or certifications do you hold as a Certified Exit Planning Advisor?

2. Understanding Your Business:

– How do you typically assess the current state of a business during the exit planning process?
– What information do you need about my business, operations, and financials?

3. Exit Planning Process:

– Can you outline the typical steps involved in the exit planning process?
– How do you customize your approach based on the unique characteristics of each business?

4. Client Success Stories:

– Can you share examples of businesses you’ve helped in similar situations and what outcomes were achieved?
– How do you measure success in the exit planning process?

5. Collaboration and Communication:

– How do you collaborate with other professionals, such as financial planners, legal advisors, or business brokers, during the exit planning process?
– What can I expect regarding communication and updates throughout the planning stages?

6. Exit Strategy Options:

– How do you assist in developing a range of exit strategy options for consideration?
– Can you provide insights into the pros and cons of different exit strategies?

7. Timeline and Milestones:

– What is the typical timeline for the exit planning process?
– Are there specific milestones or deadlines we should be aware of?

8. Cost and Fees:

– How do you structure your fees for exit planning services?
– Are there additional costs beyond your advisory fees that we should anticipate?

9. Risk Assessment:

– How do you identify and address potential obstacles or risks in the exit planning process?
– Can you provide examples of challenges other businesses have faced and how they were addressed?

10. Client Involvement:

– What level of involvement do you expect from me and my team throughout the process?
– How can I contribute to the success of the exit planning initiative?

11. Confidentiality and Privacy:

– How do you ensure the confidentiality of sensitive business information during the exit planning process?
– What measures do you have in place to protect privacy?

These questions can serve as a starting point for your discussions with a Certified Exit Planning Advisor and help you better understand their approach, expertise, and the potential value they can bring to your business exit planning process.

Valuation

CEPA professionals often have expertise in business valuation, helping owners understand the fair market value of their businesses. This information is crucial for determining an appropriate asking price during a sale or transfer.

During the valuation stage of the business exit planning process, it’s crucial to ask the Certified Exit Planning Advisor (CEPA) specific questions to gain insights into how they determine the fair market value of your business. Here are some questions to consider:

1. Valuation Methodology:

– Can you explain the specific valuation methodologies you use for businesses?
– How do you take into account the unique aspects of my industry and business when determining value?

2. Comparable Sales and Market Analysis:

– Do you consider comparable sales and market analysis in the valuation process?
– How do you identify and analyze relevant data from comparable businesses?

3. Financial Statement Analysis:

– What financial statements and documents do you analyze in the valuation process?
– How do you adjust financial statements for non-recurring or extraordinary items?

4. Normalization Adjustments:

– How do you handle normalization adjustments to reflect the true earning power of the business?
– Can you provide examples of normalization adjustments made in previous valuations?

5. Working Capital Considerations:

– How is working capital factored into the valuation, and what considerations are taken into account?
– Do you use industry benchmarks for working capital?

6. Discounts and Premiums:

– How do you determine discounts or premiums, such as a lack of marketability or control?
– Can you explain the rationale behind the application of these adjustments?

7. Future Cash Flow Projections:

– Do you consider future cash flow projections in the valuation process?
– How do you assess the reliability of business forecasts provided by the owner?

8. Scenario Analysis:

– Do you conduct scenario analysis to assess the impact of different business and market conditions on the valuation?
– How do you account for uncertainties in the valuation?

9. Industry Trends and Market Conditions:

– How do current industry trends and market conditions influence the valuation of my business?
– What sources of industry information do you rely on?

10. Valuation Report Format:

– What information will be included in the final valuation report?
– How do you present and communicate the results of the valuation to the business owner?

11. Client Involvement in Valuation Process:

– How can I and my team actively participate in the valuation process?
– What data or information do you need from us to ensure an accurate valuation?

12. Timing and Milestones:

– How long does the valuation process typically take?
– Are there specific milestones or checkpoints during the valuation stage?

13. Cost of Valuation Services:

– What is the cost structure for your valuation services?
– Are there additional fees or expenses that I should be aware of?

These questions will help you understand the approach and methodology the used in valuing your business, ensuring transparency and a clear understanding of the factors influencing the valuation.

Always Select a CPA for Business Valuations

When it comes to the valuation stage of the business exit planning process, working with a licensed Certified Public Accountant (CPA) can offer distinct advantages over relying solely on a Certified Exit Planning Advisor (CEPA). While CEPA professionals bring expertise in crafting comprehensive exit strategies, a licensed CPA’s financial acumen and understanding of accounting principles can be paramount in accurately determining the fair market value of a business.

A licensed CPA possesses the skills and knowledge necessary to delve into the intricate financial details of a business, ensuring a thorough and precise valuation. Unlike business exit planning advisors who focuses on strategic planning and broader exit considerations, a CPA specializes in financial analysis, making them well-equipped for the complexities involved in determining a business’s worth.

Do Not Use a Certified Exit Planning Advisor for ValuationsOne key advantage of working with a licensed CPA during the valuation stage is their proficiency in financial statement analysis. CPAs are adept at scrutinizing income statements, balance sheets, and cash flow statements, extracting essential information crucial for a comprehensive valuation. This meticulous examination allows them to identify and adjust for anomalies or irregularities, providing a more accurate representation of the business’s financial health.

A licensed CPA’s experience in normalization adjustments sets them apart during the valuation process. Normalization adjustments involve accounting for one-time or non-recurring items that may distort the financial picture. CPAs possess the expertise to make these adjustments, ensuring that the valuation reflects the true earning power of the business, a nuanced aspect that may not be the primary focus of a Certified Exit Planning Advisor.

In addition to financial expertise, a licensed CPA brings a rigorous understanding of accounting principles and standards. This proficiency is crucial for ensuring that the valuation adheres to industry-accepted accounting practices, enhancing the credibility and reliability of the results. CPAs are well-versed in the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), providing a solid foundation for a comprehensive and standardized valuation.

The meticulous nature of a CPA’s work aligns seamlessly with the diligence required during the valuation stage. The ability to analyze historical financial data, assess future cash flow projections, and navigate the intricacies of discounts or premiums adds a layer of precision to the valuation process. This meticulous approach is essential for business owners seeking an accurate representation of their company’s value, a critical aspect when making strategic decisions about the future.

While a Certified Exit Planning Advisor plays a vital role in crafting a holistic exit strategy, partnering with a licensed CPA during the valuation stage ensures a nuanced, financially grounded assessment. The synergy of strategic planning expertise from a CEPA and the financial acumen of a licensed CPA provides a well-rounded approach to the complex task of business valuation. This collaborative effort not only enhances the accuracy of the valuation but also instills confidence in the business owner that the process adheres to rigorous financial standards.

Exit Strategy Development

Business exit planning advisors should assist in developing a comprehensive exit strategy tailored to the owner’s objectives. This may involve exploring options such as selling to a third party, passing the business to family members, merging with another company, or implementing a management buyout. It is important to note that you should be working on your business strategy for years before thinking about your exit. This is the only way to be certain you will have the most options when preparing the business for sale.

During the exit strategy development stage of the business exit planning process, it’s crucial to ask Certified Exit Planning Advisors specific questions to ensure a tailored and effective strategy for your business. Here are some questions to consider:

1. Customization and Personalization:

– How do you tailor exit strategies to the specific needs and goals of individual business owners?
– Can you provide examples of how you’ve customized exit plans for businesses similar to mine?

2. Range of Exit Options:

– What types of exit strategies do you typically explore with business owners?
– How do you determine which options are most suitable for a particular business?

3. Timing and Market Conditions:

– How do you consider the timing of the exit concerning market conditions and economic factors?
– Are there optimal times to execute certain exit strategies based on market trends?

4. Risk Assessment:

– How do you assess the risks associated with different exit strategies?
– Can you provide examples of challenges other businesses have faced during the execution of their exit plans?

5. Financial Implications:

– How do you evaluate the financial implications of various exit strategies for both the business and the owner?
– What factors do you consider when assessing the financial feasibility of different options?

6. Alignment with Personal Goals:

– How do you ensure that the chosen exit strategy aligns with the personal goals and aspirations of the business owner?
– What mechanisms do you use to reconcile potential conflicts between business and personal objectives?

7. Communication with Stakeholders:

– How do you facilitate communication with key stakeholders, including employees, clients, and suppliers, during the exit process?
– What strategies do you employ to manage the expectations of various parties involved?

8. Contingency Planning:

– How do you incorporate contingency planning into the exit strategy to address unexpected events or challenges?
– Can you share examples of how contingency plans have been beneficial in previous exit strategies?

9. Succession Planning for Key Roles:

– In the case of a management buyout or internal succession, how do you address the development of key employees to assume leadership roles?
– What strategies do you recommend for ensuring a smooth transition in key management positions?

10. Tax Considerations:

– How do you integrate tax planning into the chosen exit strategy?
– Can you provide insights into tax implications for both the business and the owner based on different exit options?

11. Legal Requirements and Compliance:

– What legal considerations and compliance issues should be taken into account when developing an exit strategy?
– How do you work with legal professionals to ensure all legal aspects are addressed?

12. Post-Exit Involvement:

– For business owners who wish to remain involved post-exit, how do you incorporate ongoing roles or advisory positions into the strategy?
– What arrangements do you recommend for a phased or partial exit while maintaining some level of involvement?

13. Measuring Success:

– How do you define and measure the success of an exit strategy?
– What benchmarks or criteria do you use to assess whether the objectives of the exit plan have been met?

14. Education and Empowerment:

– How do you educate and empower business owners to make informed decisions about their exit strategy?
– What resources or tools do you provide to enhance the owner’s understanding of the process?

These questions aim to ensure that the business exit planning advisors take a comprehensive and individualized approach to developing an exit strategy that aligns with your business’s unique characteristics and your personal aspirations.

Transaction Execution and the Role of a Certified Exit Planning Advisor

A Certified Exit Planning Advisor should guide owners through the actual process of executing the chosen exit strategy. This may involve preparing the business for sale, negotiating with potential buyers, or facilitating the transfer of ownership to successors.

During the transaction execution stage of the business exit planning process, it’s crucial to ask business exit planning advisors specific questions to ensure a smooth and successful transition. Here are some questions to consider:

1. Deal Structuring:

– How do you approach the structuring of the deal during the transaction phase?
– What factors do you consider when determining the most favorable deal structure for the business owner?

2. Negotiation Strategy:

– What is your strategy for negotiating with potential buyers or other parties involved in the transaction?
– How do you ensure that the business owner’s interests are well-represented during negotiations?

3. Due Diligence Process:

– How do you assist in the due diligence process, and what role do you play in facilitating communication between the parties?
– What steps are taken to ensure a thorough and efficient due diligence review?

4. Transaction Timeline:

– Can you provide an estimated timeline for the entire transaction process, from initial negotiations to closing?
– How do you manage potential delays and keep the process on track?

5. Legal Support:

– How do you work with legal professionals to address legal aspects of the transaction?
– What legal considerations should the business owner be aware of during this stage?

6. Financial Guidance:

– What financial guidance do you provide to the business owner throughout the transaction execution stage?
– How do you ensure that the financial aspects of the deal align with the owner’s objectives?

7. Communication with Stakeholders:

– How do you manage communication with key stakeholders, including employees, clients, and suppliers, during the transaction process?
– What strategies do you use to maintain confidentiality and mitigate potential disruptions?

8. Contingency Planning:

– How do you address and plan for unexpected events or challenges that may arise during the transaction?
– Can you share examples of how contingency plans have been beneficial in previous transactions?

9. Transition Assistance:

– How do you assist in the transition process after the deal is finalized?
– What support is provided to ensure a smooth handover of responsibilities to the new owner or management?

10. Regulatory Compliance:

– What regulatory compliance issues should be considered during the transaction execution?
– How do you ensure that the transaction adheres to all applicable laws and regulations?

11. Crisis Management:

– How do you handle potential crises or unforeseen issues that may arise during the transaction?
– Can you share examples of how you’ve navigated challenges in previous transactions?

12. Financial Settlements:

– How are financial settlements structured, and how do you ensure that the business owner receives the agreed-upon value?
– What mechanisms are in place to address any discrepancies in financial settlements?

13. Post-Closing Involvement:

– What involvement, if any, do you have in post-closing activities or follow-ups?
– How do you ensure that the business owner’s interests are protected even after the deal is completed?

14. Exit Team Collaboration:

– How do you coordinate with other professionals, such as legal advisors, financial planners, and business brokers, during the transaction execution stage?
– What role do these professionals play in ensuring a successful transaction?

15. Client Testimonials or References:

– Can you provide testimonials or references from business owners you’ve worked with during the transaction execution phase?
– How satisfied were your previous clients with the outcome of their transactions?

These questions are designed to help business owners understand the CEPA’s approach to transaction execution, the support provided throughout the process, and the measures taken to address potential challenges and ensure a successful outcome.

Legal and Tax Considerations: Always Engage a Lawyer Not a Certified Exit Planning Advisor

Certified Exit Planning Advisors often think they have knowledge of legal and tax implications related to business exits. However, you should always work with an attorney to assess the legal and tax considerations associated with the sale of your business. 

When navigating the legal and tax intricacies of the business exit planning process, partnering with an experienced, licensed attorney holds significant advantages over relying solely on a Certified Exit Planning Advisor. While a CEPA brings valuable strategic insights to the table, an attorney’s specialized legal expertise is paramount in ensuring compliance, mitigating risks, and optimizing the financial outcomes for the business owner.

HIre a Lawyer Not a Certified Exit Planning AdvisorOne of the primary advantages of working with an experienced attorney during the legal and tax stage is their in-depth knowledge of the complex legal landscape. Attorneys are well-versed in the intricate details of business law, contracts, and regulations, providing a comprehensive understanding of the legal implications associated with various exit strategies. This expertise is particularly crucial when addressing legal considerations specific to the business, such as contractual obligations, intellectual property rights, and employment agreements.

An attorney is adept at crafting legally sound agreements that protect the interests of the business owner during the exit process. This includes negotiating terms with potential buyers, drafting sale agreements, and ensuring compliance with local and federal regulations. An attorney’s role is pivotal in translating exit strategies into legally binding documents that stand up to scrutiny.

In the realm of taxation, an experienced attorney is well-versed in the tax implications of different exit strategies. Tax planning is a critical component of the exit planning process, influencing the financial outcomes for both the business and the owner. Attorneys collaborate with accountants and tax professionals to optimize tax structures, minimize liabilities, and ensure that the chosen exit strategy aligns with the owner’s financial objectives.

During the legal and tax stage, an attorney’s ability to navigate the complexities of tax law ensures that the business owner maximizes available tax benefits and avoids potential pitfalls. Whether it’s addressing capital gains taxes, structuring transactions to benefit from favorable tax treatment, or ensuring compliance with evolving tax regulations, an attorney’s role is indispensable in safeguarding the financial interests of the business owner.

The legal and tax intricacies of a business exit plan demand the specialized knowledge and skills that an experienced attorney brings to the table. Attorneys serve as advocates for business owners, safeguarding their legal rights, and providing counsel that extends beyond strategic planning into the realm of legal compliance and tax optimization.

Partnering with an experienced, licensed attorney during the legal and tax stage of the business exit planning process complements the strategic insights offered by a CEPA. The attorney’s legal expertise ensures that the chosen exit strategy is legally sound, mitigates risks, and aligns with the intricate requirements of business law. Simultaneously, their proficiency in tax matters optimizes financial outcomes, providing business owners with a comprehensive and well-rounded approach to the complexities of the exit process. While a CEPA sets the strategic direction, an attorney’s legal acumen is instrumental in translating those strategies into concrete, legally enforceable actions that secure the best possible outcome for the business owner.

Final Thoughts on Working with a Certified Exit Planning Advisor

The Certified Exit Planning Advisor designation is often awarded by organizations that provide specific training and certification programs in exit planning. It is important for the entrepreneur or business owner to thoroughly investigate the criteria used to develop the certification process. A certification is only as good as the organization that issues it. The decision to exit from your business is one of the most consequential you’ll make in your lifetime. Do your homework before hiring a Certified Exit Planning Advisor.

We at the Exit Success Lab are here to help you with this process. Click here to review our business strategy program for entrepreneurs. It is designed to demystify the process of increasing enterprise value and help you have the most options when you exit.

Dave Lorenzo

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