From financial-planning
Contains verified QoE adjustment categories and working capital normalization procedures, IRS 9-factor reasonable compensation test with independent investor test (Exacto Spring), and coverage gap analysis methodology with key person insurance valuation formulas. M&A due diligence, succession planning, buy-sell agreements, compensation benchmarking, insurance adequacy, debt covenant compliance, capital allocation, advisory pricing. Consult when analyzing an acquisition or quality of earnings, planning ownership transitions or ESOP/MBO structures, defending officer compensation or building a benchmarking study, reviewing business insurance coverage gaps, monitoring debt covenants or DSCR/leverage ratios, evaluating capital allocation or dividend vs reinvestment decisions, or pricing advisory and outsourced CFO engagements.
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/financial-planning:strategic-advisoryThe summary Claude sees in its skill listing — used to decide when to auto-load this skill
Operational procedures for strategic finance advisory services to closely-held
Operational procedures for strategic finance advisory services to closely-held C-corporations. Covers the full advisory spectrum from transaction diligence through succession planning, with pricing guidance for scoping engagements.
Three sequential phases govern every transaction:
QoE bridges reported earnings to sustainable recurring EBITDA. Three adjustment categories:
Define working capital as current assets (excluding cash) minus current liabilities (excluding current portion LTD and income tax payable). Compute the peg using trailing 12-month average of monthly normalized working capital (24-month for seasonal businesses). Purchase agreement sets the target at signing; true-up occurs 60-90 days post-close.
Allocate total consideration to identifiable assets/liabilities at fair value. Tangible assets at FMV, intangible assets (customer relationships, trade names, technology, non-competes) each require separate valuation. Residual to goodwill — not amortizable for book (ASC 350 impairment), amortizable over 15 years for tax (Section 197). Engage a qualified valuation firm for transactions exceeding $5M enterprise value.
Declining gross margins without explanation, customer concentration >25% from one customer, heavy related-party transactions, off-balance-sheet obligations, deferred revenue inconsistencies, sudden revenue acceleration near transaction date.
Deep dive: Read
references/ma-due-diligence.mdfor the complete financial diligence checklist (3-5 years of records), tax-specific items (ASC 740, NOL schedules, R&D credits), Section 368 reorganization types, earnout structures and tax treatment, integration planning (Day-One readiness, COA harmonization, cutoff procedures), and recording of acquisition entries in the accounting system.
IRS Revenue Ruling 59-60 requires consideration of all relevant factors. Three primary approaches:
Most engagements use two or more approaches and reconcile.
Funding mechanisms: life insurance (most common for death trigger), installment notes (5-10 years, must meet AFR minimum under Section 7872), sinking fund (no underwriting required but exposed to creditors).
Lifetime exemption: $13.99M per individual (2025). TCJA sunset risk: reverts to ~$7M if provisions expire. Anti-clawback rule (Treas. Reg. 20.2010-1(c)) protects gifts made under higher exemption. Section 2701 special valuation rules apply to junior equity transfers when senior interests retained.
Planning horizon: 3-7 years for optimal tax and operational outcomes.
Deep dive: Read
references/succession-planning.mdfor full treatment of Section 1202 QSBS exclusion, accumulated earnings tax implications for transition cash reserves (Section 531), Section 302 redemption qualification tests, equity tracking for shareholder positions in the accounting system, and key person risk quantification methodology.
The IRS 9-factor test (from the Reasonable Compensation Job Aid): training/education, duties/responsibilities, time/effort, comparable compensation, revenue/complexity, nature/scope of work, compensation history, ratio to non-shareholder employees, and compensation agreements.
Independent investor test (Exacto Spring Corp, 7th Cir. 1999): Would a hypothetical outside shareholder be satisfied with the return on equity after officer compensation? Calculate implied ROE: (net income after compensation) / shareholder equity and compare to risk-adjusted market returns.
Board resolution referencing benchmarking analysis, written employment agreement (signed before tax year begins), compensation study, job description, time records, and dividend history (for C-corps, demonstrates compensation is not disguised dividends).
C-corp optimization crossover: Higher compensation reduces corporate income (21% flat rate) but increases payroll tax (15.3% to SS wage base, 2.9% above). Model both sides.
Deep dive: Read
references/compensation-benchmarking.mdfor Form 1120 Schedule E reporting requirements and IRS automated screening triggers, Section 162(m) $1M deduction cap applicability to private C-corps, zero-compensation year handling, and officer compensation account setup in the accounting system.
D&O (critical with outside directors/investors), E&O/professional liability (service businesses; some contracts mandate minimums), cyber liability (confirm ransomware, social engineering, regulatory fines, BI coverage), EPLI (risk scales with headcount), key person life insurance, business interruption.
Monthly revenue baseline (trailing 12-month average) plus continuing fixed expenses plus extra expense coverage. Watch for coinsurance penalty (coverage below 80% of actual business income reduces payout proportionally). Match indemnity period to realistic recovery time — 12 months standard but may be insufficient for manufacturing or specialized operations.
All standard commercial premiums deductible under IRC 162. Key person life insurance premiums NOT deductible (IRC 264) when company is owner/beneficiary, but death proceeds generally tax-free (IRC 101). Prepaid premiums: accrual- basis C-corps must allocate over the policy period.
Deep dive: Read
references/insurance-adequacy.mdfor debt covenant insurance requirements (cross-reference with debt covenant monitoring), annual review trigger events, common underinsurance patterns, insurance expense sub-account structure, and prepaid insurance amortization entries.
Always use the credit agreement's definitions — not textbook formulas. EBITDA add-backs, debt inclusions, and measurement periods are agreement-specific.
Quarterly cycle: extract financials as of measurement date, map accounts to agreement definitions, calculate ratios, compare to thresholds with cushion analysis, prepare compliance certificate, officer sign-off, submit within reporting window (typically 30-45 days after quarter-end).
Early warning thresholds:
Technical default may trigger loan acceleration, cross-default on other facilities, default interest (+2-5%), restricted line access, enhanced reporting. Cure options: equity cure (typically limited to 2-3 times over loan term), 15-30 day cure period for financial covenants, waiver (one-time forgiveness), amendment (permanent change, 0.10-0.50% fee), forbearance (temporary standstill).
Deep dive: Invoke
financial-planning:financial-modelingfor the full debt covenant analysis reference, including financial report extraction workflow, EBITDA build-up from the P&L, ASC 842 lease impact on ratios, frozen GAAP provisions, and multi-facility tracking procedures.
Track time even on fixed-fee work — not for billing, but for profitability measurement. Rank clients quarterly; bottom 10-20% typically destroy firm profitability.
Present in order: what the client gets, what it costs, how payment works. Never lead with price. Never discount without removing scope.
Deep dive: Read
references/advisory-pricing.mdfor engagement letter pricing terms (payment schedule, expenses, annual adjustment, termination), client profitability analysis framework (profitable/high-utilization vs. unprofitable/unfixable matrix), bundling discount strategy, fee raise timing, disengagement criteria, and time tracking / invoicing setup.
Capital allocation decisions draw from multiple advisory domains. Use this decision sequence:
financial-planning:financial-modeling for scenario analysis.Read these for detailed procedures, formulas, and compliance checklists:
references/ma-due-diligence.md — Complete financial diligence checklist (core financial records, working capital, tax-specific items, legal/operational). Section 368 reorganization types (A/B/C/D) with continuity requirements. Earnout structures (tax treatment under Section 453, open vs. closed transaction doctrine, ASC 805 accounting). Integration planning (Day-One bank/payroll/insurance readiness, COA harmonization, cutoff procedures, opening balance sheet). Acquisition entry recording.references/succession-planning.md — IRS Revenue Ruling 59-60 valuation framework. Asset/income/market valuation approaches with selection criteria. Discount analysis (DLOM, minority, key person) with empirical support sources. Buy-sell agreement types, funding mechanisms, trigger events. Ownership transition paths (internal sale, MBO, ESOP with Section 1042, third-party, liquidation). Estate/gift tax implications (Sections 2701-2704, annual exclusion amounts, TCJA sunset). Section 1202 QSBS, Section 531 AET, Section 302 redemption. Shareholder equity tracking.references/compensation-benchmarking.md — IRS 9-factor reasonable compensation test with case law citations. Independent investor test (Exacto Spring). BLS/ERI/RCReports data source hierarchy. Five-step benchmarking methodology with multi-role premium calculation. Documentation package requirements (board resolution, employment agreement, time records). Form 1120 Schedule E reporting and IRS screening triggers. Section 162(m) applicability. C-corp payroll tax optimization crossover.references/insurance-adequacy.md — Core and specialized coverage types with typical limits. Coverage gap analysis methodology (5-step). Business interruption calculation (revenue projection, continuing expenses, coinsurance penalty, indemnity period). Key person insurance valuation methods (compensation multiple, revenue contribution, replacement cost, lender-driven). Debt covenant insurance requirements. Annual review triggers and common underinsurance patterns. Tax treatment of premiums (IRC 162 vs. 264). Insurance expense sub-accounts and prepaid amortization.references/advisory-pricing.md — Four pricing models (hourly, fixed-fee, value-based, subscription) with advantages/disadvantages and best-suited scenarios. Service-specific benchmarks (tax compliance, bookkeeping, FP&A, project-based). Engagement letter pricing terms. Client profitability analysis (realization rate, effective hourly rate, write-down rate). Profitability action matrix. Value-first pricing communication. Fee adjustment and disengagement decision points.Invoke these skills for capabilities outside this skill's scope:
financial-planning:financial-modeling for three-statement models, scenario/sensitivity analysis, and the full debt covenant analysis reference (ratio calculations, report extraction workflow, compliance monitoring, breach remediation)financial-planning:variance-analysis for budget-vs-actual context, KPI tracking, and historical trend data that informs strategic recommendationstax-prep:tax-planning for tax implications of strategic decisions — entity selection, officer compensation optimization, accumulated earnings tax planning, Section 338(h)(10) election analysisqbo-integration:qbo-reporting for QBO financial report extraction supporting covenant calculations, valuation data, and management reportingaccounting-foundation:entity-profile for entity type, ownership structure, officer details, controlled group status, and foreign ownership that affect M&A, succession, and compensation planningnpx claudepluginhub aeyeops/aeo-basis-plugin-marketplace --plugin financial-planningDesigns or audits equity compensation plans (stock options, RSUs) for startups and growth-stage companies, covering tax, accounting, and governance requirements.
Routes corporate finance questions to the narrowest matching specialist agent. Use when you don't know which specialist to call.
Conducts commercial, operational, financial, strategic, and technology due diligence for M&A, investments, partnerships, or vendor decisions. Useful for assessing targets, quality of earnings, working capital, tech/IP review, and risk identification.