The acquisition and sale of an accountancy practice is a challenging and complex process. The steps involved in this process of handing off from one entity to another requires much planning and preparation. The approach of the “Great Retirement,” a wave of “Baby Boomers” departing the workforce with the decision to sell their practices, will cause there to be many mid-size and small CPA firms ripe for the plucking by bigger firms. This oncoming phenomenon is going to tremendously saturate the market with many small to mid-size firms which will lead to these firms and owners being taken advantage of as a result of the stiff competition for potential buyers.
For any retiring CPA or accountant considering selling their practice in the cutthroat market aforementioned, it is important to know how to secure the best deal. Below are seven expert pieces of advice to consider before putting your firm or accounting practice up for sale.
These seven points can assist in developing a sound plan and ensuring the success of negotiations and transitions.
1. Prepare and Plan
Prepare for the sale as early as possible, preferably a year or two. The planning will help you improve your financial records, business structure, and client base to increase the value of your firm. These improvements will help foster the buyer’s transfer and keep the firm working efficiently.
Put yourself in a potential buyer’s perspective and think about what makes the practice appealing to you. Consider what distinguishes your accounting firm from the competition. It is best to plan and prepare for the sale in advance so that you may analyze your practice’s performance and identify areas where you excel. These results should then be highly promoted. Also, recognize where you’re falling short and strive to make the required changes or improvements to make it more appealing to a buyer and impede a good deal. The better you prepare, the better the outcome.
2. The timing of the sale
Another step to selling your accounting firm at a good value is knowing when to sell. Many business owners make the typical mistake of anticipating a great sale whenever they wish to sell their company. That, however, is not how it works. The optimum time to sell is when the firm is doing well since this will allow you to extract the most value from the transaction. Buyers will be hesitant to invest in your practice during a period of low earnings. When your sales and cash flow are good, selling your accounting firm is the best moment since it will immediately attract the right buyer with great value.
3. Selling to the Right Owner
Is your practice of interest to a partner, a family member, or a friend? Consideration of the appropriate exit strategy for your accounting practice should also focus on your planning. However, determining where to sell your practice should be unbiased, free of emotions, and consider business point-of-view.
Imagine how much time and effort it takes to begin and grow your accounting practice. It only makes sense for you to be rewarded for all of your efforts by knowing that your company is in capable hands. This means that your firm’s successor should have the necessary knowledge, experience, and leadership skills to become a business owner.
4. Taking Care of Your Clients
Client retention is an important factor in evaluating the worth of an accounting practice. There’s always a fear that clients will leave when news gets out that the firm is up for sale.
Buyers also don’t often agree to an upfront sale because of the risk that clients will leave after the handover.
Therefore, taking care of your client should be a part of planning when you decide to sell. Maintaining a solid client database will help sell your accounting practice. Keeping an existing client satisfied is also less expensive than to acquire a new client. The present owner’s desire to remain on for 6-12 months is critical when selling. This will give you time to introduce the new owner to the clientele and gradually acquaint them with the concept of transition. It will contribute to a smooth and seamless sale and transfer.
5.Size of the accounting practice
If your accounting practice is small, you will most likely have an easier time finding a buyer. This is especially true if you are the sole proprietor and have complete control of the firm. Small accounting firms might be appealing to more prominent corporations because:
● Obtaining a customer list from a smaller firm is significantly faster than adding clients one at a time.
● Smaller firms often have fewer employees to facilitate changes.
A smaller practice is also less expensive to establish, which means you have a larger market–from large corporations to small firms and individuals. If you own a larger business or are a partner selling your shares, be prepared for a more complex sale, especially given the current level of competition.
6. Technology Advancement
Accounting technology has always played a part in making the accountant’s job easier and more efficient. Therefore, buyers will want to know what technologies your firm uses to acquire a competitive edge in productivity and efficiency.
Does your practice still use outdated software or spreadsheets? If this is the case, buyers will presume you perform a lot of low-yielding, tedious work. They’ll believe they need to labor harder for every money that comes in. If you’ve adopted cloud accounting or tax and practice management technology, promote it. Buyers today will favor firms that use cutting-edge technologies As a result, if you are already preparing to sell your practice, select the technology that will help you optimize your business’s worth and attract a large number of possible buyers.
7. Maximizing the Value of your Practice
What are your revenues?
What is your staffing situation like?
What industries are your clients in?
What services do you perform?
The answers to these questions will impact the worth of your practice. Being prepared is one strategy to maximize your value and boost the probability of a successful transition. This means that you will need to figure out how to increase the value before selling. Owners must be diligent in keeping their firm competitive and growing to maximize value and maintain their most valuable assets. A prospective buyer will recognize that a practice has increasing income and profitability, a strong management team, high-quality goods and services, and practical procedures when the time comes. The goal of the owner is to keep the firm clean, friendly, organized, and growing to attract the greatest possible buyer.
Don’t just make a sale; make the right sale.
You’re a small business expert, but you’ve probably never priced, marketed, or sold an accounting practice. If you’re interested in maximizing your sale price while also safeguarding your firm’s legacy, team’s future, and client outcomes, then it’s vital to consider using a specialist.
We at HWA Alliance of CPA Firms work with clients from various industries to determine the actual worth of their firm’s tangible and intangible assets. We believe that small and medium-sized entrepreneurs, enterprises, and corporations have many opportunities and great potential. That is why we provide our extensive knowledge in business valuation to give them the confidence they need to prepare for their future.
Contact us to gain the knowledge you need to maximize your business value and secure your financial future and strong legacy