There are many nuances to selling your accounting or CPA practice that you should consider prior to the sale. One of the items that should be considered is coming up with expectations on “how and when” you will receive the proceeds of the sale. There are cash buyers in the marketplace but those are few and far between so chances are you will be asked to carry at least a portion of your practice in the deal.
In many small practice sales, the buyer and the seller agree that the buyer will bring in a down payment and the seller will finance the balance. The term of this payback will definitely come up in the negotiation. The buyer typically wants a longer amortization and the seller wants it to be as short as possible. Below, you will find the expectations of the respondents to the recent AICPA Succession Survey completed in 2012:
Number of years over which I expect to be paid for my practice
The above statistics point out that approximately 50% expect to be paid out fully in four to five years and about 25% expect to be paid in three years. The cash flow of the firm should be able to pay a new principal a salary (market rate), service the needs of the business, service the debt, and have enough left over for working capital purposes. Breaking down these various cash uses will help you set a reasonable payback. If you are interested in making sure that you get paid back in a reasonable amount of time and carry maximum protection during the term of the payback, please consider talking to a business intermediary. Berkshire Business Sales & Acquisitions specializes in the preparation and sale of accounting firms and CPA firms.
