Discussion:Sale of my practice

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Discussion Forum Index --> Business Growth Community --> Sale of my practice

Discussion Forum Index --> Hawaii User Group --> Sale of my practice


Actionbsns (talk|edits) said:

15 May 2006

I'm not sure if this an appropriate question for here and if not, perhaps someone can refer me to a better place. I'm planning on selling my practice in Hawaii - the mainland and family are calling me home. I sold a business in California prior to moving here and went through a local business realtor, but I wasn't doing tax work in that business. Any suggestions on the best way to proceed? There are a number of national websites for advertising the sale, I'm not sure if that's the best way or not. Or maybe it's best with a local broker again. What are the things that have to be considered from a confidentiality standpoint? I think this is a bigger issue with the tax practice than it was for simple bookkeeping. Any thoughts and suggestions will be appreciated.

Paula

Tilt53 (talk|edits) said:

15 May 2006
From Accountants World I found this link. http://www.mergerplace.com/

I've never used it but perhaps it might be helpful.

Nealab (talk|edits) said:

15 May 2006
The timing is a little off, as I'd like to move to Hawaii in 3-4 years. I have an existing practice in WA. Neal

Nealab (talk|edits) said:

15 May 2006
I'd like to set up a buy-sell agreement with a long term employee in the event of my early demise. Anyone have any docs they would be willing to share, or direct me in someway? I'd like to do this so that there is someone transition for my clients, and to ascertain a saleable interest for my beneficiaires. Thanks, Neal

ArchCPA (talk|edits) said:

15 May 2006
Nealab,

Will you consider selling your practice in WA? Where in WA is your business located?

Nealab (talk|edits) said:

15 May 2006
No, I do not wish to sell at this time. Just looking to have an agreement in place in case I die early.

Rruth (talk|edits) said:

16 May 2006
When selling a tax practice, I believe the concern from the buyer's standpoint is whether the clients will stay. Retension. Some purchase agreements will payout 20% of gross receipts for those clients retained over each of five years. There of course will be a contract signed that will both address the confidentiality issue, as well as the covenant not to compete.

Natalie (talk|edits) said:

May 16, 2006
I know a local firm on Oahu that was interested in purchasing small practices. They may still be interested. The prospective buyer will be interested in many of the following:


  • The type of clients you have, your current fee structure, how long you have had most of your clients, how you have operated your business (e.g., email vs. face-to-face meetings, e-filing vs. paper filing, etc.), percentage of bookkeeping vs tax vs other service fees, your future involvement, if any, etc.


It may be worth getting a broker to make sure you get a fair price for the practice, unless you feel you are a very good negotiator.

Warren (talk|edits) said:

16 May 2006
If I was going to go the broker route, I would contact one that specializes in accounting practices even if they are not local. As opposed to dealing with someone that was local that did not specialize in accounting practices. I live in a small city 300,000-400,000 and the local business brokers do not know much about marketing an accounting practice.

Actionbsns (talk|edits) said:

17 May 2006
Thanks for the input. I'm wondering about the companies who send out all those little blurbs throughout the year trying to list practices. Has anyone used one of those firms, or does anyone know of anyone who has used a firm like that? Then there are the internet business brokers. We are watching several of them for a specific type of business and I often see firms for sale, but I'm not sure how the firm was included. When I sold my business in California I used a local broker who specialized in businesses, his fee was either a percentage or a flat fee of something like $5000 for the sale, whichever netted him the greater commission. I'm more concerened this time with confidentiality issues especially with the tax prep part of my practice.

Centralcoastcpa (talk|edits) said:

20 May 2006
Actionbsns/Paula, Somehow my name got out that I was considering selling my practice and I have received a few solicitations from brokers that supposedly specialize in accounting practices. They are as follows: www.accountingpracticesales.com, Business brokers, Inc. ph. 1-800-727-4272 listing info at www.go2bbi.com, and www.prohorizons.com

What island is your practice on? I've been toying with the idea of moving back there (did some college there years ago).

Sue

Actionbsns (talk|edits) said:

21 May 2006
I'm on the Big Island. I have always received solicitations in the mail from business brokers who specialize in selling practices. I think some of them just do a google search for certain areas and then mass mail. That's one of the reasons I thought I would address this here, to see if anyone had experience using any of those brokers. Thanks for the additional information, though.

Dennis (talk|edits) said:

21 May 2006
Accounting Practice Sales

Lois (talk|edits) said:

24 May 2006
Several years ago I sold my practice (have since then ramped it up again). I used a broker that had advertised in a CPA magazine. They weren't specialized in accounting/tax but I don't think that is necessary. My business sold for 110% of gross revenue. There was an adjustment clause to the sales price after 1 year for the clients who left. I had a non-compete agreement for 4 years which was specific to that client base and a certain amount of mileage around that office. The terms of the 4 year note carried interest and had annual payments just after tax season (when the bank account should be able to accomodate the payment).

Natalie (talk|edits) said:

May 24, 2006
Paula, have you checked your talk page?

Actionbsns (talk|edits) said:

1 June 2006
Natalie, I just checked. Thanks for the information. I also contacted Accounting Practice Sales, left by Dennis. They are in Texas and routinely send out direct mailers regarding practice sales. They seem to have a good plan and I like the person I spoke with. When you do a Google search for this their's is the first name up. We are now waiting to clear up a nasty personal issue that developed with a family member this week. Then make some decisions on timing and listing and moving on.

Stodgytj (talk|edits) said:

5 June 2006
Actionbsns,

I'm on the Big Island (Kona) and keep getting soliciations from VR Business Brokers over in Hilo. They have represented some of my clients and the clients overall have been satisfied with their work. They do not specialize in accounting/tax practice. Its pretty much love the one you're with. Let me know how it goes. I'll be interested in selling in about five years.

Chriskrim (talk|edits) said:

28 June 2006
Hello all,

I am new to this forum, but I would like some thoughts on the following. A good friend of mine works for a CPA who is thinking about retiring, but he may not be there quite yet. From what she tells me, he has quite a few monthly accountings, but they are all done by hand. I was toying with the idea of sending him a letter introducing myself and letting him know that if he ever thought about selling that I would like to talk to him. What are your thoughts on doing something like that? What kind of things should I be thinking about? What things do I look at to see if this is a good buy? How do you price the business? Terms of sale? etc... I just started my own CPA last October and it may be a good way to get off the ground. I realize it would take some time and effort to get everything computerized. Should this play into the price? I thank everyone in advance for their input.

Chris

DZCPA (talk|edits) said:

28 June 2006
Email me at DZCPA@YAHOO.COM with your phone number to discuss. My firm has purchased 5 CPA firms in the past 17 years.

Chautauqua (talk|edits) said:

28 June 2006
Chriskrim....Invite him to lunch and tell him why if he asks. He will probably ignore the letter.

Warren (talk|edits) said:

28 June 2006
I've seen several different formulas for sales price and terms of sale. It seems that they all are about 100% of annual fees from retained clients payable over a 4 or 5 years period. Sometimes with interest and sometimes without. But I have seen prices as low as 75-80% in a case where the sole practitioner CPA had died and I have heard about prices slightly over 100%.

Taxea (talk|edits) said:

3 July 2006
I have purchased two small practices in the past 10years. Both on Oahu.

I suggest you call local preparers and interview them to see whether they would be acceptable to your clients. I paid 33% of prep fee I charged their clients, each year for three years. The seller wrote an intro letter to all clients recommending they come to me. Worked out great each time...the majority of the clients took the sellers advice and since have referred new clients to me. I now have just under 300 clients, work out of my home and go to my clients. Most clients who are used to "personal" service are not interested to switching to a large company where they will get lost in the process. Just a thought. taxea

Tkcpa (talk|edits) said:

18 August 2007
I am looking to purchase a practice in San Jose area. Anybody have a clue what the broker charges the seller if there is representation?

Kevinh5 (talk|edits) said:

18 August 2007
10% is the standard - it comes from the seller's money. My broker (Leon Faris of www.cpasales.com) held the deal together when it probably would have fallen apart.

Leon sent me a Happy Birthday e-card yesterday.

Natalie (talk|edits) said:

August 20, 2007
Happy Birthday, Kevin! Did the e-card have a positive effect on you as far as the reputation of the business?

Kevinh5 (talk|edits) said:

20 August 2007
no, I sold the practice 4 1/2 years ago, but I am still on his mailing list. I guess he thinks I might buy or sell again.

Bottom Line (talk|edits) said:

20 August 2007
Does Leon have a specific territory or is he nationwide?

Kevinh5 (talk|edits) said:

20 August 2007
He handles the Southeast (Carolinas, Georgia, Florida, maybe Alabama and Mississippi), but he has about 7 offices nationwide. I have tried to get him to exhibit at the NATP and NAEA events, but I believe the other offices are kind of franchises, because he implied that he personally didn't want to go out to California if most of the attendees were from the West Coast. You will see his ads in most of the industry publications, however (PAS - Professional Accounting Sales). Tell him that Kevin sent you, maybe I'll get two birthday cards next year!!

Bottom Line (talk|edits) said:

20 August 2007
Thanks Kevin. Always trying to keep names of people that are good to work with.

Gosix (talk|edits) said:

7 September 2007
So is it normal business to have a potential Buyer disclose personal financial information and such to the business broker (Hinderance) BEFORE even an initial meeting with the Seller? I won't, don't intend to, and feel disclosing this would greatly work against my bargaining power.

What if the practice has been for sale for 5 months already?

What if said business broker won't even notify the client and let them decide?

Actionbsns (talk|edits) said:

7 September 2007
Gosix, we were looking at businesses to buy about a year ago and most of the brokers we spoke to wanted personal information. They wanted to be sure we had the capital to buy and weren't just wasting their time. We usually didn't provide as much as they would have liked and if they didn't like it, sometimes they refused to provide us information. You have to use your own priorities in deciding how much your want the business and how much information you want to provide to obtain data.

Gosix (talk|edits) said:

7 September 2007
Personally, I would be highly ticked if I found out any broker of mine had been turning buyers away.

I should just do an end around. He's local, I'm local.

Natalie (talk|edits) said:

September 7, 2007
What's an "end around"?

Gosix (talk|edits) said:

7 September 2007
Approach him directly since I already know who it is (word around town). And casually mention that his broker is turning buyers away. End around.

Kevinh5 (talk|edits) said:

8 September 2007
I wouldn't talk to any buyer who didn't sign the confidentiality agreement AND when I sold my practice, there was no word around town BECAUSE the only ones who found out I was selling had signed a confidentiality agreement.

Go Six, Go Fish

DZCPA (talk|edits) said:

8 September 2007
Gosix, I would also be ticked off if I had to meet with a potential buyer who was not financial stable. Telling the truth might get the buyer a practice, unless they are a looser. Why waste the sellors time? There are plenty of buyers that will go along with the program and disclose financial info and get the deal. Those that try to invent thir own rules never get the "worm".

Gosix (talk|edits) said:

8 September 2007
All that may be. But one thing you have to remember. There won't be a sale until a buyer comes to the table. No buyer, no sale.

And any buyer would be an absolute fool to disclose his financial position to an Agent working for and paid by the seller.

Actionbsns (talk|edits) said:

9 September 2007
Gosix - answer to that problem is to get your own representation. Then you have the two representatives working together.

Kevinh5 (talk|edits) said:

9 September 2007
that way instead of paying a 10% commission to the broker, the seller can jack the price up another 11% so that each broker can get 10%. That way you certainly get what you pay for.

Johnhuddleston (talk|edits) said:

1 December 2007
I've heard a rule of thumb that accounting practices are worth up to 100% of one year's revenue. Of course there a many factors to consider.

John Huddleston

Cmts707 (talk|edits) said:

13 January 2008
Hey the laswt post was on my birthday!

Stodgytj (talk|edits) said:

25 April 2008
Have any of you worked with Accounting Practice Sales? Good? Bad? Recommend?

Gosix (talk|edits) said:

29 April 2008
Tried to work with them. But as a buyer I would not release all sorts of information about my own finances upfront. They refused to even notify their selling client of a local buyer interest without the financial info.

Practice is still listed for sale. 7 months later.

Actionbsns (talk|edits) said:

1 May 2008
When I was interested in selling my practice a couple of years ago, I went through Accounting Practice Sales. I really liked the young woman I was working with, but when a buyer came around, she wasn't qualified well enough, and when we started negotiating, I found most of the work that had to be done was between the two of us. All forms had to be prepared by the buyer and seller or their respective attorney. Everything just fell apart for a variety of reasons, and in the end, it worked out just fine because I had changed my mind. We were going to buy a different business and that didn't work out either, so all's well that ends well. I don't think I would use them if I were to attempt to sell my practice again because I just felt that there was a good sized commission to be paid, but I was going to do all the legal work or pay another person to do it.

{{ForumReplyPost|UserID=Rickymapco|Date=27 August 2008|Text=he sale of my practice was handled in a very efficient and professional manner. I even had comments from prospective buyers that Simmons & Associates were more professional than other brokers they had dealt with.


Ricky [link removed]

Actionbsns (talk|edits) said:

27 August 2008
Ricky, I'm glad the sale of your practice went smoothly for you. I'm not so sure what the link to alcoholaddiction is there for. According to that article, pretty much every community on my island is pretty pathetic. I've lived here for six years and recognize that, like other communities, there are problems with drugs and alcohol - but give me a break!! There are some pretty upstanding citizens who live here as well. BTW - a profile would be more than appropriate at this point.

Stodgytj (talk|edits) said:

27 August 2008
Agree with Action, why the alcohol addiction link? I had buyer for my practice after April 15th but Accounting Practice Sales requires the buyer and / or seller to prepare the agreements, non compete clauses, etc.... They still want 10% but only provide skeleton purchase agreements which the parties must modify, or pay an attorney to do it. Sale eventually fell through when buyer couldn't get financing. Not the fault of Accounting Practice Sales. Would be interested in more information on Simmons & Associates.

DZCPA (talk|edits) said:

28 August 2008
For California :

I have used Business Brokers for 3 tax firm purchases. They prepared the agreements, clauses, notes and other documents all for free. I worked with David Smith, CPA and have always been very happy with the results.

http://go2bbi.com/

Lisa Ye (talk|edits) said:

10 September 2008
I am new to the forum. My partner and I want to buy 1-2 accounting & tax practice in the Seattle/Eastside area. $100K - $800K. Where should we look? Is there a forum for "Buying Practice"? Do you know anyone who wants to sell?

"Shoebox" (talk|edits) said:

11 September 2008
try AccountingPracticeSales.com & ProHorizons.com.

Good luck...

Mdwtax (talk|edits) said:

11 September 2008
I bought my tax practice last year from a seller using Accounting Practice Sales and would echo the above comments - they provided generic, sketchy templates and we had to hammer out our own agreement, non-compete, etc.

I'm not sure I would want to pay the 10% for the service. Missouri Society of CPAs includes sale/merger practices listed in classified form on their website and that is where I check regularly now. Another comment on Accounting Practice Sales, they will not and encourage their clients to not make retention a part of the purchase deal. They encourage activities to make the transition from seller to buyer smooth for clients, hoping for the best retention possible. But, I'll tell you my retention rate was about 75%, where I had budgeted for 85-90%. From the comments we got from clients, it was location. I was farther away than the old preparer, so as long as change was inevitable, they went to the franchises or whoever.

IDrinkYourMilkshake (talk|edits) said:

26 January 2009
Isn't this site for accounting and tax professionals? If so, why would any moron be stupid enough to spam here?

Kevinh5 (talk|edits) said:

26 January 2009
thanks for the head's up, milkshake. spam deleted.


Benji55 (talk|edits) said:

19 May 2010
I miss I could move to Hawaii! Actually I am interested in purchasing a small to medium sized practice in the Phoenix/Scottsdale area.

AcctPracticeEx (talk|edits) said:

12 June 2012
Hi there

This is an interesting post, particularly fellow users comments about their experiences when using specialist business brokers when handling the sale of their accounting, CPA or tax practice.

I think the key here is that brokers must do more in the transaction to earn their commission than simply connect buyer to seller.

I've read a number of comments from individuals complaining about brokers being rigorous in their 'buyer screening' duties. The rule of thumb that they go by is that 9 out of every 10 enquiries that they initially received are from 'tire kickers', primarily curious competitors and individuals without the necessary financing in place to do a deal. With this in mind you can undertsand a little more why they are so demanding when it comes to releasing sensitive seller information.

Csg (talk|edits) said:

20 June 2012
When the practice buyout structure refers to "1.2 times gross revenue" (for example), the payout is from collections, not bilings, correct?

Kevinh5 (talk|edits) said:

20 June 2012
Depends on what the contract states.

Csg (talk|edits) said:

20 June 2012
Which is more common? Seems like for a cash basis business, "revenue" is the cash collected, so the payout would be from cash collected.

Fsteincpa (talk|edits) said:

20 June 2012
Cynthia, all depends on the contract as Kevin said.

I purchased my practice and it was based on revenues, others may buy and pay based on previous collections. Done all sorts of ways. If you pay all up front, some are as low as 75%. Terms determine all.

CrowJD (talk|edits) said:

25 June 2012
"I think the key here is that brokers must do more in the transaction to earn their commission than simply connect buyer to seller."

Don't you mean should do more?

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