Five fundamentals to building a successful business valuation practice within a CPA firm


Robert Kleeman Jr., CPA/ABV, ASA, managing director at OnPointe Valuation, has been providing business valuation services for 40 years. In that time, he has not only started several practices from scratch but also assisted several CPA firms in building successful business valuation practices.

Kleeman recently wrote an article for the Business Valuation Update outlining five fundamentals that can spell the difference between the success and failure of a valuation practice within a CPA firm. In this post, we briefly cover these five fundamentals. Be sure to download the article for a complete look at each one.

1. Understand the fundamental differences between a traditional accounting practice and a business valuation practice

A business valuation practice is not the same as a traditional accounting practice, and, until there is an understanding of those differences, successfully building the business valuation practice using traditional CPA firm methods will be difficult, if not impossible.

The traditional attest or tax client is what has always been referred to as a “legacy client.” If a CPA firm does a tax return for John Doe, the firm can expect to see him every year. If the firm provides an audit for Widget Manufacturing, the work can be scheduled knowing an audit must be done every year. Once the firm acquires the client, there’s an expectation to keep that client indefinitely, assuming the service is meeting the client’s needs at a reasonable fee. Unfortunately, there is no such thing as a “legacy client” in the business valuation practice area.

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There are also significant differences in marketing business valuation services versus traditional accounting services. Clients don’t always understand why they need a business valuation. They also don’t necessarily perceive value in business valuation services. Why do they need anything but the low-cost provider? What benefit do they get from a well-prepared valuation report? When marketing a business valuation practice, we really don’t market to our underlying client; we need to market to the client's attorneys and other advisors who will be telling the underlying client that it needs the valuation.

2. Commitment to the practice

Success requires that the CPA firm make several long-term commitments. Without these commitments, there is little or no probability of building a business valuation practice line. First is making a commitment that the practice will be a full-time activity for the firm. The business valuation world has evolved significantly, and it’s difficult to stay current when you do two or three engagements a year. You can’t just shut down the practice during the busy tax season—successful business valuation practices must operate year-round.

There must also be a commitment to fund the operations over a long period. Think of the long-term financial commitment you or your firm has made in your general accounting practice: people, space, equipment, accounts receivable, and work-in-process. You don’t really notice these expenditures because they are part of what you consider “normal” for the growth of the legacy practice.

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Finally, your commitment to the overall practice must include a well-thought-out and definable strategic plan that covers at least the next five years. It is very easy to set up a strategic plan if you don’t have to be the one to make it successful. If the business valuation partners and staff don’t believe the plan is doable, then the plan is worthless. This plan should be driven by the business valuation personnel and confirmed by the firm partners, not the other way around.  

3. Commitment to the practitioner

For CPA firms, the first step in building the business valuation practice line is determining who will be the leader for the practice area. The practice leader must be somebody who will embrace the long-term objectives for the practice and has the “fire in the belly” to tackle the myriad of challenges that will be faced in order to build the successful practice.

Commitment to the Practitioner

The business valuation and litigation service practice leader will require a very different skill set. Strong writing and speaking skills are an absolute necessity. So is a temperament that is willing to accept the fact that there will be significant challenges to your conclusions. If you have never been cross-examined in a courtroom, you don’t really understand the stress levels associated with that task.

4. Commitment to provide the tools

A successful BV practice requires the appropriate tools. The most skilled tradesperson cannot perform his or her services without the right tools. Many times, the firm that wants to grow the business valuation/litigation services practice does not want to invest in the proper tools. No tools, no success.

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Let’s be honest: Library and research materials can be expensive, but, at the same time, they can be very inexpensive. As the practice grows, these costs get spread over more engagements, which lowers the per-unit costs. In addition, having the proper research tools can assist you in creating more detailed and convincing reports. If your referral sources see the quality in your work product, you are more likely to get additional engagements from them. You don’t need to have “every” research tool available at the beginning, but, if you know what the best tools are for the startup, you can purchase those and then add to the library as you grow.

Continuing education, staff training, and other costs (related to certifications) are also necessary. Consider the fact that business valuation is an opinion or judgment of the appraiser. The more the provider can learn, the better that judgment gets. It is important that business valuation/litigation service staff attend CPE events where other practitioners are present to discuss the how-tos and the whys of the practice area.

5. Commitment to success

This might seem like a strange item to list as a fundamental for building a successful business valuation/litigation service practice, but it is the area where most firms fail in that goal. Have you ever seen a company put together a pro forma that shows over the long term that it will go bankrupt? Of course not. We all believe that, when we start an endeavor, it will be successful. But are you really committed to that success? Let’s look at some key points that are necessary to provide every opportunity to succeed.

  • Set goals. Set short-term and long-term goals and provide timely measurement toward the attainment of those goals. These goals need to be put in writing, agreed to by all the key players, and monitored regularly.

  • Don’t expect miracles. Building a business valuation/litigation service practice takes a lot of time and patience. It takes time to acquire the client, it takes time for the work to begin, it takes time to produce the work, and finally it takes time to complete the engagement. Firms that are trying to start a practice should set a realistic goal that it will not be profitable for the first 18 to 24 months.

  • Focus on staff. Always keep in mind that, as you grow, you need to be proactive in adding and developing staff. Finding experienced business valuation practitioners at any level is a very difficult task. Add to that the fact that it takes time to find and ultimately hire experienced staff, and you are faced with the fact that you need to be looking for your next staff member before the practice really needs that person.

  • Seek help. Lastly, don’t be afraid to seek help. Starting and growing a business valuation/litigation service practice is not a normal occurrence in the life of the average practitioner. Talk to experienced professionals and get their take on the local market and opportunities. This means the legacy firms also. Perhaps they don’t want to have a business valuation/litigation service practice but would be happy to refer that work to a firm they know won’t try to interfere with the existing client relationship.

While there is no “magic bullet,” no “set formula,” or any other assurance of success, if the firm has the desire to excel in this new practice area and is willing to make the commitments necessary for success, there is no reason not to add a business valuation/litigation service practice to the existing legacy practice.

To read more about these five fundamentals, download the complete article by Robert Kleeman in the Business Valuation Update newsletter, considered the voice of the valuation profession since 1995.


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