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CPAs Can Create Better Outcomes


Business owners desperately need more leadership from their CPAs. What? CPAs provide guidance and leadership day in and day out. How to get PPP loans, whether to buy equipment, tax planning, how to incorporate, and even what school a client’s kids should go to. The CPA profession is held in high esteem so clients rely heavily on their most trusted professional in decision making. In what way do clients need leadership that they are not getting?


Business owners are not getting prepared to harvest the wealth of their most valuable asset. 80% of an owner’s net worth could be the business value itself. That would not be an outlier percentage in the business owner community. The owner’s CPA is in the prime position to help them take action to protect the value, grow, and make the business truly transferable to an external buyer, family member, or management buyout. A recent Exit Planning Institute study found that 99% of owners agreed that “Having a transition strategy is important both for my future and for the future of my business.” Yet 79% had no written transition plan and 48% had done no planning at all. Given the amount of wealth at stake, the age of the owners, and the almost universal agreement of the importance, why are CPAs not taking the lead? Part of the problem is the business model of most CPA firms.


The profession has been warning for years of the commoditization of compliance-based accounting work. Technological innovation and industry changes have reduced the value of tax preparation in general. It used to be enough to focus on business owner clients because of the complexity of business circumstances necessitates thought and problem solving. It still does. Even more than ever. But how proactive can a CPA be if they’re responsible for over 300, 400, or even 500 tax returns per year? The reality is that one can’t be truly forward-looking with that volume of work. With many practitioners putting in 80 hours a week of work during tax season, people are justifiably overwhelmed.


The other big hurdle to delivering impactful strategic business advice is how to charge for it. Author Ronald Baker and others have advocated value-based billing and client retainer fees for years. Transitioning to this type of revenue model can enable the practitioner to do more impactful work for the firm’s best clients. It is a noble and worthwhile goal. The problem is that many CPAs struggle with how to communicate these fees to clients. There is a sense that clients perceive and expect that their CPA is already helping them with strategy. It feels unnatural to charge extra for business consulting when the work itself sounds somewhat vague. The engagement needs to be clearly defined and the practitioner needs help communicating the fee.


Put simply : Owners desperately need help with business transition strategy. They trust their CPA more than any other professional. The CPA’s business model is an obstacle to delivering this service. There is no time to do the work. There are challenges to getting compensated for the work. What is the answer?


Collaboration is the only way to tackle this challenge. Not referring the client to other professionals but true collaboration. The difference between making referrals to professionals and building a true collaborative team is significant. It’s significant to the business owner client who is confused by the conflicting advice given by the owner’s advisors. This type of advice is not only confusing but it appears self-serving to the advisor giving it. In a collaborative team approach, all of the advisors are rowing in the same direction based on the owner’s goals and objectives. There is communication between team members and recommendations are always linked to the owner’s goals and objectives. The team members still stay in their respective lanes of expertise but understand the bigger picture and hold each other accountable. No team member is expected to have all of the answers including the CPA.


The difference between referrals and collaboration is also significant to the CPA. Since the CPA is the most trusted advisor, there’s a reasonable fear about what happens to the practitioner’s reputation each time a referral is made. If the client is unhappy for any reason, it reflects poorly on the CPA. If the referred professional does a great job, it is credited to the person to whom the referral was made and the CPA often gets left out of the loop. In collaboration, professionals are not referred but added, as necessary, as members of the team. The CPA maintains the position as the leader of the team who allocates the resources an owner needs. The work is not vague. Based on the owner’s specific objectives and future plans, the goals are to grow the value of the business and help the business become truly transferable.


The right team can help the CPA with positioning the fees or even revenue sharing depending on what is appropriate to the practitioner’s practice. Business clients are results-oriented and if the value can be clearly articulated, they will pay their accountant handsomely for this work. The team can help with clarity and communication with the owner. There would be some extra work involved for the CPA. But because of the fact that the team collaborates across areas of expertise, all of the extra work for the CPA would be accounting-related and well within the practitioner’s skill set.


This is high-value work for the firm’s best clients. Client outcomes can be the most impactful in business transition planning than in any other area of the practice. Imagine doubling a client’s business value. Or evolving a non-transferable business into an attractive, highly marketable business that provides for all of the client’s personal and financial goals beyond the client’s lifetime. These results are possible when the right team collaborates to work on behalf of the client in a disciplined way. How does an accountant build this kind of team?


The disciplines required can vary based on the client’s needs and circumstances. At a minimum, there should be a wealth manager, estate planning attorney, valuation specialist and CPA. Other team members could include insurance experts, business attorneys, investment bankers, commercial bankers, and other disciplines. All of these professionals must be willing to work collaboratively. The core professionals should understand some key principles about working with business owners.


A fundamental principle is that the personal and financial objectives of the business owner must be in alignment with the business objectives. In a closely held small business, everything is personal. The wealth manager, estate planning attorney, and CPA must understand that for the business owner, the business asset is the primary store of wealth. Products and services must take a back seat to helping the business owner manage their most important asset. There needs to be an understanding of the business value and the drivers of value in the business. The wealth manager needs to help the business owner get clear about what they want in their next act of life, how much money they’ll need, and what gaps might exist. The best option for the owner to fill the gap may be embarking upon a valuation growth plan for the business.


Business strategic value is simple math. All of the team members must understand the principle that it is the intangibles that will drive value in the business. The human, structural, customer, and social capital of the business. Any growth plan will target improvement in specific areas within these categories. By making improvements over time, incredible value can be delivered to the business owner. All of this activity comes with extra compliance-based accounting work but more importantly, clearly defined, valuable, billable forward-looking work for the CPA. By transforming the lives of the firm’s best clients, small business owners, a CPA practice can be radically transformed as well.


For firms wondering where to get started or how to build these teams, start by finding a professional in one of the core areas that has expertise specifically in exit planning and business value creation. There need not be heavy lifting to get started. The firm has accounting expertise, the small business owner clients, and the clients need help. Plug into the appropriate experts and make the greatest impact imaginable in client’s lives.


https://medium.com/increasing-life/cpa-leadership-can-create-better-outcomes-6260d8e31144





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©2020 by Brent Rupnow, CEPA, CFP, CLU, ChFC