If you have made the decision to sell your CPA or Accounting Practice, you may have thought about the kind of buyer that might best fit your firm, your clients, and your employees. This buyer may be a young professional working at an existing practice trying to buy his first practice, a seasoned consolidator, or an accountant/CPA coming out of the industry. Below are three key variables that must be considered when qualifying prospects: 
- Financial – Just like any business, CPA and Accounting Practices should understand the financial position of a buyer. A buyer should have enough liquidity to put a down payment on a practice, fortify the capital needs of the practice, and have a working capital of at least 90 days and more depending on the timing of the closing and the seasonality of the business. Professional practices come in all shapes and sizes and have different cash flow needs depending on the make-up and timing of the revenue in the practice. Seller due diligence in this area will reduce the number of buyers coming your way but will increase the efficiency as sellers narrow down the buyer pool to only those qualified. Consider asking for a bio or resume along with a personal financial statement up front.
- Technical – The practices that exist today are very different from one another in terms of the revenue stream and clients. A retail-1040 practice will require different qualifications than a high end, complex tax practice, or a practice that focuses on monthly accounting clients. Just because someone is a CPA doesn’t mean this person is qualified to run a tax practice. If the seller’s practice is heavy on tax and the nature of the client base is complex, you should be looking for a very specific buyer. While this may narrow the scope of buyers, it will save significant time by weeding out those unqualified from the start. Think about the minimum qualifications necessary and do not be afraid to put this out front as you search for the right buyer.
- Character & Reputation – Much more difficult to discern up front, the personality and character of the potential buyer is of paramount importance. It is important that you find a personality that meshes with the seller; a personality that is similar to that of the buyer will help with client retention. In addition, most acquisitions come with some type of earn-out in the contract and the transition plan will require that a seller work closely with the buyer over an extended period. Also included is the personal character of the buyer. Chances are if this person has been operating in the same vicinity as the sellers practice, they may know them or know of their reputation. We recommend doing a background check on the individuals that you are considering selling your business to. This can be done right before you accept an LOI or purchase agreement and can be a part of seller due diligence on the buyer. Some buyers will also provide a credit report prior or a seller can have a buyer sign an authorization to pull a background check.
If you are selling your practice, do not cut corners on buyer qualifications. While these may seem tedious up front, it can make all the difference in the world in a successful sale and transition.
