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CPA Advisory Services

Property acquisitions: a true story of how to help

Will Hill, MBA  Product Manager — Tax Professionals Advisory, Thomson Reuters

Will Hill, MBA  Product Manager — Tax Professionals Advisory, Thomson Reuters

Some of the challenges with advisory services involve not always knowing what the end result will be. Let’s take a look at a real scenario of a client going through a property acquisition, and the keys to successfully offering advisory services with some of these unknown outcomes.

How do you provide advisory guidance, as the accountant, for clients’ property acquisitions? We’ll share a story of a prospect who had an acquisition in progress. We’ll review where to begin offering guidance, especially if your firm is brought in at the end of the process.

As shared in the “A Client Story Acquisition” episode of the Pulse of the Practice podcast, Paul Miller of Business by Design discussed some of the issues that come up around property acquisitions from the accountant’s perspective.

If prospects are in the process of buying a business, or considering it, how can you help them through the journey? There is a lot of heavy lifting that has to be done from the tax and consulting side of business transitions for property acquisitions. The process can become complicated further with the number of players involved, including a business broker and often a lawyer as well. When you’re handed this kind of acquisition process, one of the first things you have to do is figure out your role. From an advisory lens, you may not know the outcome of these deals, but as an accountant, you can offer help along the way and gain clients.

A client story: property acquisitions

Paul shares a recent experience with property acquisitions. “I’ve known someone for approximately a year, yet he hasn’t quite come around to becoming a client. Well now, he’s looking at buying a business. While I’m out of town, he sends me an email and says he’s getting close to closing on this business. Usually, clients don’t come to me in advance when making business or property acquisitions. They tend to come at the last hour, when the purchase agreement has already been signed. They’re already set for closing. At this point, your hands are tied a little bit. So, I responded and set up a meeting to understand the deal, which was about a $3 million purchase. He had already retained a business broker and attorney involved.”

Paul continues, “The client set up a new entity that’s going to acquire these assets. So, I started asking questions… ‘You’ve got this entity set up in multiple states. Do you have foreign registration?’ And I start going down this list of what happens when a business changes hands. 90% of the questions I’m asking no one has asked him yet. He has a business broker who’s going to get paid handsomely. There’s also an attorney involved who is not shy. The client comes to us and says they want us to do their accounting after they buy this business. How do we handle this?”

“All of this context puts your accounting firm in an interesting position. At that moment in time, you have the least amount of influence on the transaction and yet you’re going to be the one with the longest impact from a relational standpoint, because the broker’s going away, the lawyer’s probably going to go away, and the bank goes away after the acquisition is finalized.”

“Now you’re left with all of these other open questions. Let’s say there are six employees in the company being acquired by your client… what’s going to happen? How are they being terminated and rehired? What about benefits? As the accountant, I’m asking all these things and more, down to the details of their business processes. The business they are acquiring hosts events. They have 15 events in a year and there are some deposits that have been prepaid for venues for those events. What about deposits and registration fees they already received from customers? No one has addressed any of this business strategy yet, even though the closing is coming up soon. This is where you, as the accountant, can step in.”

Break the process down into bite sized pieces

Sometimes people get nervous about not knowing how it is all going to play out when it comes to acquisition-related or advisory work. One suggestion is to carve out what you know to be a fact and what you’re comfortable with packaging; identify the value of your services by starting with step one and then map out and price out steps two and three later. There’s nothing wrong with doing it that way. Sometimes, the work is unpredictable.

Paul explains it like this, “I usually like to do a three-step process. A lot of times, when I do property acquisitions or sales, I’m involving the law firm I work with here locally. It makes it a lot easier. We know each other, I know how they work, and I don’t have influence over this law firm. So I tell them, step one is we’re going to do some work leading up to closing. I have a checklist of pre-closing To Dos, including the consulting work that’s critical prior to closing. We have about a week and a half until closing. Someone has to start asking these questions and preparing this work, because in a week and a half, the client is going to own this business. Step two is the work done at the closing table, which is more legal-related, assuming the client makes it to closing. Step three is related to post-closing tasks. How I start framing this out is by asking internally where I would place value on my services.”

You have to think about your value as the accountant. You know how to run a business and how little nuances often happen in a business transition (and transaction). That’s a tremendous amount of value for your client. You can limit your scope to the pre-closing items first. Sometimes, the pushback you’ll hear from the client is about what happens if they don’t close for some reason. Well, then they just saved themselves a $3 million mistake. That’s basically it.

Don’t under value your advisory services

You have to prepare your client for this imminent transaction, because you know the bank’s trying to get them to close. All of these things lead to when you decide if you want to take this project on and where you go with it. When you deal with these types of transactions or property acquisitions, the other piece of advice is to make sure you set a minimum amount in your mind that you’re going to charge, regardless of the outcome.

While this is a story about a property acquisition, the method is applicable across the board when it comes to advisory services. You can’t worry about knowing the end result in advance. Your value as the accountant and advisor is helping clients walk down the road, predicting their needs and helping them achieve them. This relationship may end in the client buying the business or not, but you can be a part of that journey to make sure it’s the right choice for the client, regardless. And it’s just a fact: clients don’t get the best advice for free; you have to assign a value to it.

Don’t be afraid to stage things out and tell the client that you will tackle the next step when you get there. Cross that bridge when you get to it. It just makes it a lot easier to paint that picture of how this relationship is going to go from an advisory perspective. By putting a standard fee on these types of abstract advisory services, you might accidentally back yourself in a corner. Assign a value on your services, then just price out what you know and go from there.

Your clients’ journeys through property acquisitions can be much smoother with an your advisory expertise, giving you the opportunity to build upon client relationships as well as advisory services.

Listen to the “A Client Story Acquisition” episode of the Pulse of the Practice podcast on your preferred platform (Google Play, Apple, Spotify, Stitcher) or here.

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