When Is The Best Time To Sell My CPA Practice?
Selling an accounting practice (or any other type of business) is a difficult decision. With so many years and so much time and money invested in it, the decision to leave often comes with a heavy heart. The problem is many stay in their practices too long and suddenly circumstances drive them to a quick sale at a less than satisfactory purchase price.
The “right” time to sell a CPA practice is different for everyone. It is always dependent on each person’s specific situation. Your health (and the health of your spouse if you are married) is always a major factor. Another important consideration is how you plan to spend your golden years. Are you a workaholic who plans to continue doing accounting at least part-time until you are no longer able? Or are you looking forward to making a clean break from the profession and enjoying a nice, quiet retirement?
In short, the best time to sell your CPA practice is when you are ready to leave and can gain optimal value from the sale to help fund your retirement. To ensure you can command optimal value, it is best to begin preparing for the sale one to two years in advance. During the preparation time, it is important to take a step back, put yourself in the shoes of a potential buyer and think about what attributes you would find attractive if you were shopping for an accounting firm to purchase.
Clearly, you want to have all your financials in order. Every buyer will expect an accounting practice to have comprehensive and coherent financial statements from the past few years. Buyers will also want to know about your employees, how many do you have and what are their roles in your business. They will also want to know how many clients you have and, perhaps just as importantly, the trajectory of your firm. Have you added or lost clients over the past couple years and if so, how many?
This is an area where the preparation period can pay off. If you can use this time to grow your practice by adding several new clients, you can show your buyers you are moving in the right direction. Additional marketing and/or revising your marketing strategies to target areas with a higher return on investment can often accomplish this. You may even want to consider hiring a marketing consultant to help put together a plan; the investment will likely pay for itself several times over when the firm is sold.
Finally, if you are considering exiting your firm in the near future, begin discussions now with a business broker. Specifically, you want to work with a business intermediary with particular experience in CPA practice sales. CPA business brokers have a strong read on the current market, what other firms are for sale, and what steps you should take to ensure you are positioned to sell your firm for top dollar.