Selling your Accounting or Tax firm can be an exciting and rewarding time. However, there are a number of things sellers should know from the start- a list of do’s and don’ts to ensure a smooth transaction occurs for both you and your practice’s buyer.

Selling Your Practice Do’s

Settle Any Employee Issues

If you have an issue with an employee, it is best to rectify the situation before you decide to place your Accounting or Tax practice on the market. Employees should be knowledgeable and be able to assist the buyer once the practice changes hands. If you know you are selling your firm, avoid hiring any additional employees, as the buyer may have their own staff they intend on bringing in.

Do you have any employees that can put your sale at risk? Are there any confidentiality agreements in place? Can an employee hold you hostage, or take a significant portion of your clients if they leave? This type of vulnerability can create huge contract issues or even potential litigation after the close of escrow. If you have employees, get a non-disclosure, non-compete agreement with all of them.

Get Your Practice Organized

If you have boxes of client files laying around your office, it’s time to scan them and get them uploaded into a secure storage cloud. Additionally, consider taking some time to clean up your office and making it look presentable to any future buyer.

Understand Your Numbers

It is vital to know your average fee per return, both for entities and for individuals. It is always surprising to hear how many accountants are unaware of what their profit margins are. It is important to note that most buyers are looking for a minimum baseline EBITDA of 50%.

You should also be aware of how long it takes to process each client’s tax return. Some buyers will want you to break down the fees in terms of time, rather than schedule. What is the average AGI? How many schedules C, E, and F are you preparing?

Selling Your Practice Don’ts

Don’t Invest in Any Equipment or Software

When you decide to sell your Accounting or Tax practice, it is advised you avoid signing any new leases for copiers, servers, or T-1 lines. The new buyer should be able to make those decisions themselves. In some cases, being bound by certain arrangements such as a printer lease can cause issues for the buyer, as they may have other resources they plan on using.

Don’t Notify Your Clients Until You Have Closed Escrow

Practice sellers should wait until they have found a qualified buyer and have closed escrow to notify their clients of their retirement. Once you have closed escrow, notify your clients that you have found a person who is qualified and will treat them as you did.

You can give your clients even more peace of mind by letting them know you would never leave them without finding a qualified replacement.

Don’t Sign a Long-Term Lease

If you are pondering the idea of selling your practice, avoid getting into any long-term leases. What if the buyer already has a lease? What if the lease is too long-term for the buyer? If possible, consider having a month-to-month lease agreement instead of getting into a long-term lease.

You could also consider renting your own building to the buyer at a favorable rate for a few years, which can really help a seller get the price they want for their CPA or Tax practice.

Final Note

If you are considering selling your Accounting or Tax practice, there are multiple things you will need to consider. Accounting & Tax Brokerage can help you navigate the challenges of selling your tax practice to ensure a smooth transition seller to buyer.

Our practice brokers have over 50 years of experience working with both buyers and sellers. To learn more, contact Accounting & Tax Brokerage here, or give us a call at (855)-428-2225 to learn more and to get a no-hassle consultation.