A quick look at the statistics shows just how many accounting practices are going to be for sale in the next few years. In the United States, 10,000 people will be turning 65 every day for approximately the next 20 years. Additionally, approximately 60% of all CPA firm owners are over the age of 50 and therefore are starting to think about retirement and perhaps selling their firms. This means the competition for CPA firms is going to be aggressive in the coming years. Anyone thinking about selling an accounting practice must avoid certain pitfalls to give them the edge and sell their practice faster.
As experts in private practice sales, we’re intimately familiar with the many accounting practice sale mistakes sellers tend to make. Keep reading to learn the private practice sale mistakes you must avoid for a satisfactory transaction.
Not Timing the Sale Right
When thinking about selling their practice, many accountants think that they are going to retire by a certain age, such as 65 or 67. However, although many people have a certain number in mind for their age of retirement, this is not the most pressing factor to consider when selling an accountancy practice. You also must consider your own health issues, the demand for accounting firms on the market, and your practice’s own finances. Taking these things into consideration will help you get a better deal when selling your firm than your age alone.
Being Unrealistic About a Firm’s Value
It is not uncommon for firm owners to place a higher value on their business than a potential buyer. Many business owners multiply the revenue of the firm by a certain number and while that is a general industry standard, there is much more that goes into valuing a firm than an arbitrary number. You must take a number of factors into consideration when valuing your firm, including:
- Services offered
- Location
- Size of client list
- The length of the relationship with each client
- Profitability of clients
- Talent of the staff
In most cases, hiring an independent firm to accurately evaluate your practice is the best way to find a realistic value for your firm.
Ignoring the Problems
Another accounting practice sale mistake owners tend to make is ignoring the problems of their practice. No business is perfect and if there are problems with your firm, potential buyers are going to notice them. Common problems with accounting firms include:
- Outdated technology
- Manual systems
- Aging staff members
- Lack of contracts with employees or clients
The best way to identify the factors that will decrease your firm’s value is to perform the same due diligence that buyers will. Think about the questions a potential buyer would ask and if you do not think the answer adds value to your firm, address the deficiency.
Being Integral to the Business
Your accounting firm is your company and so you are an important part of it. When it is time to sell though, you must be certain that the firm can run without you, otherwise, it will lower the value of your business.
If an accounting practice is incompetent and lost without its owner and founder, it won’t have much value on the market for buyers. While you need to be involved in your business right up until the sale closes, step back from client relationships, allow others to make decisions, and make sure you are not the only person with signing authority.
Interested in Selling an Accounting Practice?
The best way to sell your accounting firm and ensure you get full value for it is to work with a Washington business broker. At Private Practice Transitions, we have the experience necessary to sell your firm quickly and ensure the process is as smooth as possible. If you are ready to sell your firm, call us at (253) 509-9224 or contact us online to schedule a meeting with one of our skilled brokers.
