There are a number of contractual points that one should expect to encounter when negotiating a purchase agreement of an accounting practice or CPA practice. These may or may not be difficult to negotiate, but one should understand some of the key issues before starting the process. There are 5 topics that will come up regularly in addition to the standard deal terms. While there are others, these 5 will always need to be addressed. 
1) Retention: Retention is a variable that enters into the agreement when the buyer wants to make sure that the customer base of the seller returns for a period after the sale. Buyers want to pay fairly for the practice but only want to pay for the clients that return. Often a down payment is not subject to retention however; a seller carry back note is subject to retention. The typical retention clause is 12 months but some buyers ask for a 2-year retention period.
2) Non-Compete: Buyers usually want some type of Non-Compete or Non-Solicit agreement in the contract. The fear that buyers have is that the seller will sell and then open back up for business and begin to steal back the clients that were just sold. The problem arises when a principal sells and is not ready to completely retire. The seller may wish to do contract work for the buyer or some other entity after the sale. The reality is that these agreements can be customized to meet both the sellers concerns and the buyers concerns. One also needs to be concerned with the non-compete or non-solicit agreement that the seller has with his staff (especially if in regular customer contact).
3) Familiarization: This is a period, usually 30 days or so that the seller agrees to “familiarize” the new buyer with the clients, employees, and the operation. It is customary to provide this time free of charge but it is usually a negotiated item.
4) Transition Plan: This is one of the most important components of the contract and is often overlooked by attorneys and buyers. It is critical, if you want the transition to go well, that both buyer and seller agree to certain action steps and timelines. Transition plans are much easier to write and execute if there is retention in the deal already but should always be written and part of the purchase contract when possible.
5) Timing: Timing of the close becomes increasingly important as the percentage of tax return related revenue rises inside a firm. If primarily a tax firm, the seller will want to sell as close to May as possible and the buyer will not want to close until November or December. Many tax practices have a negative cash flow in quarters 2-4, so a buyer will have to negotiate the close with that in mind. The larger the practice, the larger the negative cash flow that needs to be considered.
Simply understanding these issues can help you negotiate a better and more complete purchase contract.
