Accounting firm sale
From Wikicpa
Owners of most small accounting firms will decide to sell their practices. Several areas should be studied before making such a decision.
Valuation of a practice
Once a decision to sell is made, the first issue to study is the practice valuation. The price is normally based on a multiple of the firm's gross receipts for the prior 12 months. However there are several other factors that should enter into the mix when determining the price multiple.
- Where is the practice located? A Practice located in small cities or rural areas may sell for a multiple less than that of a practice in a large city.
- Does the total purchase price include the business assets? Normally the negotiated purchase price does not include the assets. Plus keep in mind that the market for used furniture and fixtures in generally weak.
- Will the current owner be associated with you and the business? If they are, how will they be paid when working with their former clients. Does the purchase price include a minimum amount of time from the former owner to convert the clients to the new ownership.
- Is an office building included with the practice purchase? If so, the building should be negotiated separately.
Timing of a sale
The time of year a practice offered for sale can make a difference in how long it can take to find a buyer. Selling a practice that specializes in taxation, may be better to sell just after your tax season ended. The off season may have negative cash flows and it would therefore be better to sell your practice just after your busy season when cash flow is greatest. Of course as a buy, you would want to wait until just before the busy season begins.
