If you are pondering the idea of selling your CPA or tax practice, you may be wondering how you can maximize the selling price of your firm. After all, you’ve likely invested years into building your practice from the ground up, and thus, want to ensure you receive the highest dollar amount possible.
Here, we go over 6 ways you can increase the value of your CPA or Tax firm before you decide to place it on the market.
Fix Any Employee Issues
If your firm already employs staff, the buyer will likely want to keep things the way they are once they take over the firm. If there are any issues with an employee, it is highly encouraged to rectify the issue before you list your practice for sale.
Get a non-disclosure & non-compete agreement with all of your current employees. Ideally, you should contact a local attorney to draft the agreement. Is there an employee in the office that could leave and take a significant portion of your clients? Although you cannot prevent an employee from competing with your firm in California, you can prevent them from stealing your clients.
A certain disgruntled employee may decide to make your life miserable if the new buyer does not keep them or changes any processes you implemented in the past.
Offer a Client Retention Guarantee
One sure way to increase the sale price of your Accounting or Tax firm is to offer the buyer a client retention guarantee. Although a guarantee is not required, a buyer will want to know that the clients they are purchasing are committed and viable.
A buyer is typically willing to pay more for a guarantee if you decide to offer one. Of course, every practice that sells may lose a few clients. If you are unsure of a buyer’s ability to retain clients, you should consider another buyer.
Provide Seller Financing
One method for increasing the value of your accounting practice is by offering seller financing. With seller financing, you can ask for a down payment of up to 40% or more. When you provide seller financing, it shows a buyer you are confident in the financials of the practice, and that your clients will continue to use your firm.
Additionally, this can simplify the buyer’s life by helping them avoid the process of finding a lender and obtaining a loan.
Know Your Numbers
It is surprising to hear how so many accountants cannot tell you what their profit margins are, how much it costs them to produce a service and many other important data points. If you are offering a service, you need to know exactly how much the labor costs to produce each service. What is your average AGI? Do you know how many schedules C, E, and F you are preparing?
Sellers should also consider producing a cash-basis P&L on a monthly basis for the past 36 months.
Get Your Office Together
Do you store client documents in storage boxes throughout the office? A top-dollar buyer isn’t going to want to spend hours on end going through boxes to organize client information. Consider scanning your client documents and uploading them to a secure cloud storage file before you decide to sell your firm.
Additionally, take some time to make your office more presentable. If you can add good lighting, do a deep cleaning, and increase the overall positive ambiance of the office, you may be able to get a higher asking price.
Get Rid of Bad Clients
Bad clients not only spell trouble for you but can also cause great problems for your future buyer. Weeding out bad clients and collecting on clients that are behind can help increase the value of your Accounting or Tax practice. If you have clients that are behind, offer them a one-time discount to make payment in full.
If you decide to increase your fees, you can let all of the “late filers” know of the impending increase and encourage them to make their payment prior to the change in pricing.
There are multiple steps you can take to ensure you get the highest sale price possible when you finally decide to sell your Accounting or Tax practice. If you are looking to buy or sell an Accounting or Tax practice, the team at Accounting & Tax Brokerage can help. Our practice brokers have over 50 years of experience and only provide services to the accounting & tax industry. With hundreds of transactions successfully conducted, we can help provide the needed expertise to make your acquisition or sale successful.
To learn more, or to get a free consultation, contact Accounting & Tax Brokerage here or call us at (855) 428-2225.