Wednesday, October 02, 2013

Why You Should Discuss Exit Planning With Your Accountant

According to a Canadian Federation of Independent Business (CFIB) study, nearly two thirds of companies consider their accountant (and lawyer) the most valuable source of information. [1]
In 2009, the CEO of the Canadian Association of Family Enterprise (CAFE), Lawrence Barns, was quoted as saying "When family businesses are asked who their most trusted adviser is, 73% say it is their accountant." [1]  
Does this include you?  Is your accountant your most trusted advisor?  Is he/she aware of when and how you plan to exit your business?  When you meet with your accountant to review the annual financial statements and corporate income tax returns, does the topic of exit, succession or business transition come up?  It should!  Your accountant should be an integral member of your exit planning team and must be involved throughout the process from beginning to end.
I recently sat down with Jeff Ambrose, CPA, CA, Partner with HSM LLP ( and Principal with Valuation Support Partners Ltd. ( in Markham, Ontario.  Jeff has over 25 years experience in consulting with companies on accounting, financing, sales and acquisitions, profit growth, marketing, business management, corporate structuring, business valuations, business modeling and income taxes.  Jeff is actively involved in developing estate and succession planning solutions for owner managed businesses.  I have had the opportunity to work closely with Jeff and see how much his clients trust him and value his advice.  He truly is the most trusted advisor to many of his clients. 
According to Jeff, from an exit planning perspective, the top 4 things business owners should regularly discuss with their accountant are as follows:
  1. Tax Planning Advice – tax planning is something that should be done early in the exit planning process.  If one of your goals is to minimize income taxes on the eventual sale of your business your accountant can help you determine and implement the appropriate strategies (i.e. estate planning, family trusts, capital gains exemption qualification, corporate-owned life insurance, etc.).    
  2. Business and Succession Plan Preparation – in order to be attractive to potential purchasers you must have a concise business plan with financial projections that clearly show how the company will address its weaknesses/threats and exploit its strengths/opportunities to deliver future growth.  As part of the plan, or as a separate plan, the owner must identify the most likely exit strategy and what is required to get there.  With financial acumen and intimate knowledge of your business, your accountant is uniquely qualified to assist with this.
  3. Financial Statement Preparation – if you plan to sell your business within the next 5 years, potential buyers will want to see that you have reviewed or audited financial statements (as opposed to a notice to reader).  This will help streamline the due diligence process and increase your odds of getting a deal done.  You should find out if your accountant is willing and able to provide reviewed or audited financial statements.
  4. Pre-Sale Diligence Binder – if you are serious about selling your business on the open market and attracting a premium price, a pre-sale due diligence binder will be invaluable.  Your accountant can help you build this binder and keep it current to help streamline the due diligence process and increase your odds of getting a deal done. For more on building the pre-sale diligence binder,

These items should be discussed regularly because exit planning is a dynamic process and not a one-time quick fix solution.  As an accountant and business valuator, Jeff routinely has exit planning conversations with his clients.  He works closely with his clients and other professionals (including lawyers, insurance professionals, bankers, family business advisors, etc.), on issues surrounding exit planning to ensure his client’s goals and objectives will be met.  According to Jeff, what is most important in the process, however, is documentation. Without proper documentation some of the best plans fail.

My time with Jeff was very informative.  It seems to me that your accountant should be a critical member of your exit planning advisor team from beginning to end.  If you want to minimize taxes, maximize net proceeds and protect your family’s wealth you need an accountant with exit planning experience that you trust.  Whether you are planning an internal transfer or an external sale, you will need to consult your accountant on issues surrounding your financial statements, tax and estate planning, business plan preparation, business acquisitions and sales and pre-sale due diligence preparation.
For more information on how an accountant and business valuator can help with your exit planning efforts, contact Jeff at or  If you have questions regarding the exit planning process in general or want to learn more about our VSP Exit Starter Program, contact us at
[1]  Source: Ten Ways To Add Value, CA Magazine, August 2009.

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