Navigating Exit Planning Fees: Strategies & Tips for Advisors
For over 25 years, BEI has been dedicated to assisting advisors in strengthening their connections with business-owning clients and providing the necessary tools to help reach their goals.
The BEI team frequently engages in conversations with professional advisors, exploring how incorporating Exit Planning can enhance their core offerings, differentiate them from competitors, and provide a new way to approach clients. However, despite the benefits of Exit Planning, many advisors struggle with the question of how to properly charge for these services and come to us for guidance.
Navigating the complexities of fee structures can be challenging, particularly in the Exit Planning space where different pricing strategies are prevalent. Many advisors may find it difficult to decide on the most appropriate method and how it will be received by clients and prospects.
Pricing Strategies
Over the years, we have observed a diverse range of fee structures used by advisors within the BEI Network. Some advisors choose to align their Exit Planning strategy with their existing fee schedule for other services offered in their practice, while others opt for a unique approach. To assist advisors in this process, we have compiled a list of some of the most commonly used fee methods:
- The All-In Strategy
Completing one specific aspect of an Exit Plan, such as creating Business Continuity Instructions or a Value Driver Report would qualify for this method. This approach is often used for charging on a project basis or for business owners who are still far from their exit date.
- The 50-50 Strategy
This fee method involves collecting 50% of the fee upfront and the rest upon completion of the project. Alternatively, this method could be implemented by billing 33% of the fee every month for a three-month period or 25% of the fee for four months.
- Retainer Strategy
The advisor and the business owner come to a mutual agreement on a fixed monthly fee for a specific duration, typically on an annual basis.
- The Phase-Creation Strategy
This method involves breaking the Exit Plan creation and the implementation process into multiple “phases,” and the business owner would pay as you enter and complete each phase.
- The Hybrid-Pricing Strategy
This approach asks for a sum up front (e.g., 25% of the proposed total fee), and then the balance is on a retainer agreement.
- Hourly Pricing Strategy
While project billing has a higher perceived value in the mind of the business owner, many advisors are more comfortable charging an hourly fee as they do with their existing practice work.
- Bonus Ideas on Pricing Strategy
An Exit Planning Advisor could offer the business owner a “credit” of the Exit Planning fees towards any fees they would get as a result of their effort. You also have the option to add a “success fee” as a percentage of the selling price onto your Exit Planning fee.
Selecting the Right Strategy
While the above list provides common strategies from the BEI Network of advisors, it is by no means a comprehensive list. At the 2022 BEI National Conference in a session titled, “Recipes for Success: Pricing Strategies,” attendees heard four different takes on pricing based on each presenter’s practice specialty and preference.
Terry Staley, CPA with MarksNelson, offered his informal method to charging fees: The estimated total cost of the comprehensive Exit Plan is given using the BEI fee estimator tool, which typically falls within the $30,000 range based on his location and clientele.
His team then charges consultative fees by the hour as they complete different phases of the plan. In Terry’s opinion, “If you bring excellent service and provide a tangible value, you can charge what you feel is fair, whatever that might be.”
At the end of this session and along those same lines, BEI Founder John Brown posed the quote: “Value-based pricing is customer-focused, meaning that it is done based on how much the customer believes the planning is worth.”
Whichever strategy you decide best suits your practice, it is key to find a satisfactory pricing strategy that ultimately provides value to your clients.
Business Owner Feedback to Fees
Regardless of your chosen pricing method, how do you manage fee aversion from your clients?
- Be transparent. Being honest about what exactly an owner is getting and what deliverables are included in the engagement letter or other signed agreements helps to manage client expectations.
- Research your audience. As with any aspects of consulting or advisory services, knowing your target audience is key to proposing an appropriate fee. Considering geographic location, business size, and annual revenue, among many things, can help determine an applicable, yet competitive strategy.
- Understand their resistance. While you have justifications for your method of charging fees, it’s helpful to keep in mind why each client might prefer one strategy vs. another. It may be that having a monthly retainer helps keep the owner accountable for Exit Planning tasks, or they might appreciate paying per project if their timeline spans several years.
Pose Your Price as an Investment
Understand & Articulate Your Value
What is more important than the actual fees you charge is the relationship that you are building and forming with your clients. Your unique value proposition as an Exit Planning Advisor is to help your owner clients get out of their business when they want, with the money they need, transitioning to whom they want.
Therefore, it isn’t about justifying a price for the amount of work you will do, it is about allowing the business owner to place a value on the benefits they receive. You are selling a solution.
Put the Price in Perspective for Your Client
Simply put, if you are saving or making your client money, there will be no need to justify your fees. But, providing excellent service, tax savings, improved cash flow, higher price of sale, etc. sometimes still does not add up for them.
It may be helpful to relate your cost to a common expense in order to give perspective. “The cost I am proposing for your comprehensive Exit Plan is less than the salary of your personal assistant or office cleaning staff.”
Or, you could also relate your fees to your client’s revenues: “The investment of $15,000 for your Exit Plan is only one half of 1% of your gross revenues.”
Every business owner has a different mindset, but posing your price as an investment helps to promote peace of mind as they prepare for the transition of their business.
BEI Tools
Due to the complex nature of charging fees, BEI offers several tools to Members to assist with this undertaking.
BEI Fee Estimator Tool
This tool is a 10-question assessment that generates a proposed fee based on the answers. Once you input information (i.e, company’s gross revenue, number of employees, etc.), the tool suggests a fee based on the complexity of the recommended Exit Plan. This tool provides the total proposed for the complete, comprehensive Exit Plan. It is then up to you as the advisor to come up with a strategy that works for both you and your client, as well as determine additional fees for implementation based on your client’s needs.
Engagement Proposal Letter
Sending a formal, detailed proposal letter is an important factor in engaging and retaining clients. Using this tool to map out all that you will be providing is crucial in your client understanding what they are paying for. BEI has several templates created that you can customize for each client based on what deliverables you plan to offer.
PlanIt Recommendations:
Lastly, BEI Members with a Planning or Full License are familiar with the outputs received using the PlanIt software. Each recommendation is based on a values-based goal of the business owner and can be used as line-item deliverables within your engagement proposal letter.
