Common Misconceptions When Selling a CPA Practice

When selling a CPA practice, many CPAs view the transaction similarly to selling a house or other piece of real estate. However, since the average American sells their home every seven years and the average accountant sells their practice just once in a lifetime, the sale of the practice is obviously far more important. As such, owners need to put more time and effort into the process to make sure they find the right buyer. Business Intermediary

There are several other misconceptions about CPA practice sales that should be cleared up to ensure a successful transaction. Here are some of the most common:

The Average Sale Price of Other Area Practices Determines the Value: One of the first things owners want to look at when setting the price for their firm is what other practices in the area are selling for. Again, since this is the general formula used for home sales (what are other 4 bedroom, 3 bath, 2000 square foot homes selling for in my area?), it is assumed that this applies to selling an accounting firm. The challenge is that each firm is unique, and there are numerous variables that must be considered when arriving at the sale price. These include location, annual sales, operating costs, staffing, overall profitability, financing options, and many others. It is the specific qualities of your practice rather than the price of other firms that must be the primary factor in determining the sale price.

The Ideal Buyer is Another Accounting Practice: While on the surface it may seem as if the perfect buyer for your practice is a competing firm, this may not always be the case. First of all, a firm that is in the position to buy you out may not be particularly motivated to do so. Mergers and acquisitions are time-consuming, and there are always concerns about how to go about downsizing staff, compatibility of systems, consolidating locations, etc. While another firm might be mildly interested in buying your practice, an individual CPA who is looking for a profitable business to take over may be a far better candidate.

The Seller Needs to Continue to Be Involved in the Practice Long-Term: While it is good to offer consulting and perhaps even work in the practice for a while after the sale, in many cases long-term involvement is not necessary. Often, the sale price is contingent on client retention over a certain period of time, so there could be a vested interest on your part in maintaining as much of the existing clientele as possible. However, as long as you provide proper training and some ongoing consulting for the buyer, you can usually leave them in a position to succeed without maintaining an active role.

Non-Compete Clauses are Generally Unenforceable: If you are thinking of continuing as a CPA (somewhere else at some point in the future) and are asked to sign a non-compete agreement, do not automatically assume it cannot be enforced. In recent years, courts in most states have upheld non-compete agreements as long as they are “reasonable”. One notable exception is California; in the Golden State, non-compete agreements are statutorily unenforceable, though judges there have sometimes chosen to ignore the statues and enforce them anyway.

A Seller Can Keep more Profit from a CPA Sale by Not Using a Business Intermediary: While you can save on the commission you would pay to a broker by selling on your own, you will end up doing far more leg work and, at the end of the day, you may still end up with less profit from the sale. A business intermediary, particularly those that specialize in accounting practice sales, have extensive experience with such transactions and an in-depth understanding of how to avoid the common pitfalls that could cost you time and money. They are also marketing professionals that utilize a wide network of online and offline publications in which they can advertise your practice while ensuring confidentiality.

TAGS

Comments

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>