Curb Appeal is Important when Selling an Accounting Practice

Since we all know there is a range of multiples, which CPA’s and Accountants sell, what determines where in the range a practice will sell?  While the largest factor is the cash flow margin, it is not the only reason certain firms sell at a higher multiple than others.  Curb appeal matters!

When we refer to ‘Curb Appeal’, we are discussing all of the softer components that make up the business.  Curb Appeal has historically been used in reference to selling real estate property.  We use it to describe some of the key components of the business operation.  These items are usually addressed or questioned in due diligence of a firm and it is therefore critical that these value quadrants be addressed if you want to obtain top dollar.  Below is a list of items that will improve the saleability of the firm and are items that should be in order prior to sale:

  • Operating Systems 
    • What marketing systems are in place?  If the company can demonstrate through its web presence, social marketing, niche marketing, or sales force that future business can be generated from the duplication of these systems then curb appeal goes up.
    • Is the operational flow efficient and can it be scaled?  Well-informed buyers will review the operational systems.  Even the appearance of an organized and documented flow will increase the curb appeal.
    • How many IRS penalties has the firm had and how many audits in the last 5 years?  These items are usually asked and firms with clean records find themselves moving quickly to close.
    • What financial controls are in place and do they meet the standards now required for CPA’s or Accountants?
    • Human Resource Systems
      • How does a firm attract and retain good employees?  Systemic solutions to HR problems are an excellent way to improve curb appeal and increase the value of the firm.
      • How does the firm protect its assets and clients against employee theft, solicitation, or competition?  Does the firm maintain employment agreements that contain non-compete or non-solicit language.  Do they control client contact?
      • Are employee files maintained and readily accessible?  If someone can easily put their hands on the employee application, background check, I-9, W4, and non-solicit or non-compete agreements, the curb appeal goes up.

Curb appeal with businesses is not only how the business looks from the curb, but the general systems, operational flow, and human resources that it deploys.  These items will attract the kind of buyer that you want as well as improve the intrinsic value in your firm.

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>