When considering selling your accounting practice try to think of a realistic time frame. Developing a reasonable time frame can assist when it comes to deciding on what avenues to take when contemplating offers. If you are literally running out of time, you may want to try to work with proposals that you weren’t that interested in prior.
Consider the marketing time span that will be needed. Consulting professionals that have done this sort of activity before, should shed some light on the situation concerning the average amount of marketing and marketing time. How to Sell an Accounting Practice.
Preparing the Firm for a Sell
So often we see online notifications that say, accounting practices for sale. It sounds simple enough, however it takes quite a bit of preparation to reach that moment. The agency has to do a number of things including making sure that all of their company paperwork is in order.
Missing or incorrect paperwork can present a problem and ruin an otherwise good transaction. Also, letting your clients know that the company is being sold, is a courteous and professional move. Whether they decide to leave or not, it is your responsibility to inform them, in case they would like to readjust their future plans.
Valuing the Accounting Firm
There’s no need to exaggerate about the value of the company. The truth will eventually come out, so be honest. A few things that will determine the value of the company are:
- Recurring revenue
- Company size
- Profitability and Terms
If revenues are constantly flowing into the company that is a sign of a healthy organization. This is not just a good sign with accounting companies, but any successful company. Valuing Your Accounting Practice.
Clients that return year after year, means they are satisfied and happy. This is excellent news for anyone that is considering purchasing the company. This is less footwork that has to be done. Clients are happy, revenues are rolling in, what more can a buyer ask for?
The worry of many buyers is the opportunity of growth. Depending on the buyer, a good challenge is the perfect way to show off their hidden business talents. However, for others it’s just more work and worry. And always keep in mind, a small practice could end up losing even more value, whatever the reason.
Accounting practices in metropolitan areas have a strong tendency to have a higher value than those in less populated areas. Similar to purchasing a home or an apartment, it also matters where in the city. The difference could be as high as ten to twenty percent more.
Profitability is always a concern for buyers who are looking to purchase an accounting firm. If the firm charges high rates, that means more cash net worth.
The same idea goes for terms. One firm may demand that the buyer pay the entire payment upfront, while another will take $100, 000 down and the rest in installments, whichever term that sounds attractive to the buyer, that will most likely be the firm that he/she chooses.
Tips on Selling
A myth that many buyers have concerning firm retention, is that it’s not an issue. Every business has the potential of turnover, to purchase a firm without preparing for this is unrealistic.
Keep in mind that some business owners may have very loyal workers who would prefer to only work with them, so be alert and aware of a possible turnover. Tip and Misinformation When Selling an Accounting Practice.
Also, sellers should be prepared to receive offers that are well below the market price. That doesn’t mean that they have to take it, but don’t be so surprised when it is offered. There is no one asking price for a particular firm that has a high value, it just doesn’t work that way.
A firm can make an exceptionally high value price and a buyer will still make a low priced proposal. Unless, the seller is desperate they should simply deny the offer and move on.