After years of hard work, dedication, and late nights, is it time to sell your accounting practice? Whether you are nearing retirement age or are looking to slow down, selling your accounting practice might be the right move for your situation.
If after careful consideration, you decide to move forward with the sale of your accounting practice, there are a few things you want to consider before clicking the publish button on your listing.
#1: Consider Transferring the Client Base
The first consideration when it comes to selling your accounting firm is your client base. One of the most valuable components of your firm is your client base. Prospective buyers are paying for the list you’ve worked years or even decades to build. How will the transfer process work? Will you stay on for a few months to ensure a smooth transition? You must be prepared for what happens after you have a signed offer.
#2: Show Consistent Revenue
Your financial statements will be scrutinized throughout the selling process. Potential buyers want to see that your business is generating consistent revenue and showing signs of growth. Focus efforts in the months and years leading up to the sale on having consistent cash flow and revenue generation. Your annual financial statement shouldn’t show $50,000 in one year and $500,000 in the next.
Print the income statement or pull tax returns for the past few years to understand the fluctuations in revenue. This gives you an advantage to properly explain any drops in revenues to potential buyers. Recent economic events, such as the unemployment turnover, contributed to lost revenue for many accounting firms.
#3: Create a Good Mix of Year Round Business
In addition to annual income, you should generate a good mix of year round business. It’s no secret that accounting firms have a busy season from January through April. This means that the bulk of your revenue comes from those months. Prospective buyers want to see a steady stream of income throughout the year and not just during the busy months.
Consider expanding your firm’s abilities to include year round work, such as monthly bookkeeping or sales tax returns. Diversifying your services not only reduces your operating risk, but it also leads to steady cash flow throughout the year, a top priority for many buyers. Take a look at your income statement by month to see the months where revenue is lower.
#4: Find the Right Support Staff
The selling of your accounting firm is most likely new territory. This means you don’t know the ins and outs of what you should prepare or how to navigate the upcoming process. This is why it’s imperative that you find the right support staff to guide you throughout the process. This could be a broker that specializes in accounting firm sales, like Truforte Business Group. Experts who have extensive knowledge and experience surrounding the sales of accounting firms can provide firsthand insight into the next best steps for your situation.
#5: Time the Sale
Many accountants approach the sale of their firm by setting a deadline for when they want to sell. Have you found yourself saying “I’ll work until I’m 65, then sell my practice?” Finding a beneficial sales price with the right buyer takes careful planning of the timeframe. First, look at your personal goals, such as your health, financial security, and hobbies. Is now the right time to pursue the sale of your business?
There are also considerations for potential buyers. Many existing firms will be unlikely to purchase another practice in the middle of tax season. This might leave your firm sitting on the market until the tax deadline passes. Understanding the right timeframe to sell your business is crucial to maximize the profit from the sale. Additionally, consider selling your practice when you have a strong financial year. This gives buyer confidence and allows you to leave on a good note.
#6: List at the Right Price
Too many owners neglect to properly price their practice. Analyzing a few different factors can help you determine the right sale price including the focus of the practice, client size, length of the client relationship, client profitability, and staff experience. Each of these areas adds value to your practice and can serve as a selling point. For example, if you have dozens of long-term clients, you will be able to list your business for more money because these clients are unlikely to leave and have high loyalty.
Pricing your firm based on market standards can be a good starting point, but it’s not where you should stop with your research. Having an independent firm valuation is another helpful way to gauge your price point. Finding the right price is vital to attracting the right attention and receiving qualified offers.
#7: Be Ready to Sell
Passing the baton off to the next business owner can be difficult, especially when you’ve worked so hard to get to where you are today. Many business owners want to sell for a variety of reasons, but struggle when it finally comes time. Be sure you are ready to sell before you list your business. Taking the business on or off the market repeatedly can deter buyers.
Some business owners are able to avoid the fear of giving up their life’s work by staying on as an independent contractors or helping out when needed. This is at the discretion of the future buyer, but keep this in mind as an option if you still want to be involved in the business, but on a much smaller scale.
Summary Selling your accounting practice takes careful consideration of a variety of factors, which is why expert help is indispensable. The team at Truforte Business Group has decades of experience helping accountants navigate selling their practice. Our team is made up of several former CPAs that specialize in selling accounting practices, giving us inside knowledge on areas you need the most help with. Reach out today to learn more or check out what buyers are looking at when buying an accounting business.