Tax Practice News
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Right after tax season every year (depending on how tax season went!) we talk to a lot of CPA owners, who are very motivated to sell their practices! Some will tell us they never want to go through another season. This may or may not be you – but one thing most CPAs want to ensure is, that they get the maximum value for their practice when they are ready to transition.
By the time you are ready to sell, it is often too late to make many of the changes, which would significantly increase the payday - especially if you want the sale to happen before the next tax season. However, if you are a few years or more out, then there is a lot that can be done – to not only increase the payday but increase profits for the years leading up to the sale.
We help our clients buy and/or sell practices every year. As a result, I wanted to share some of what I see makes a practice very attractive as well as some of the non-negotiables in terms of what a practice needs to have, before a purchaser will even consider it.
The most sought after CPA practices have the following:
- They have a strong support team that operates at peak efficiency, as opposed to a practice that relies solely or primarily on the owner, to survive;
- They’ve instituted effective client management processes that ensure a stellar client experience in all aspects of their engagement;
- They do tax planning with a good segment of their clientele, rather than being a solely after-the-fact tax preparation service;
- They have the right software applications to manage the practice, and staff leverages these tools to good effect;
- They manage staff time expertly by setting realistic budgets for jobs assigned to them;
- They have a steady influx of new clients, even if mainly referral based. Ideally, they also have some external marketing campaigns that are working well to grow the practice.
In addition, larger national practices are very interested in any niche, so if e.g. you have a few clients in a particular industry that they are interested in getting into, that will make your practice very attractive, and increase its value. Client age range is another factor they take into account. A very aging clientele is less attractive than a younger or at least, on average, more middle aged practice, would be.
There are many other factors that will affect the salability of your practice, as well as enhancements you can make – to both sweeten your bottom line as you continue to own and operate your practice - as well as increase its appeal to prospective buyers. For more information on these factors, please feel free to contact me (that information you can find below).
Lastly, if you are 3 to 5 years out from selling, a very smart move is – to take your practice to market "softly" before ready to sell, so you have time to fix anything that is detracting from the sum you want to get or from even attracting any buyer! E.g. in one case, doing this made one owner realize he needed to upgrade his tax and practice management software which opened him up to offers he was not getting previously. In another case, the owner decided to fully implement a paperless practice, which resulted in a quick sale.
Another reason to take your practice to market, a few years before ready to sell is – it gives the purchaser time to explore what synergies exist, that could enhance the value of the practice in the purchaser’s eyes — e.g. in one case, the purchaser realized they could afford to pay more than they thought for the practice, because they would have less administrative staff overhead than seller. In this case, the seller’s office manager was ready to retire, and the purchaser did not need to replace her because he already had an office manager.
Ciara MacMahon
Author Bio: Having worked with accounting practices since 1998, and prior to that working as an attorney in a set-up, very similar to a CPA practice, Ciara MacMahon, CEO of Phase Two Management Consulting, has successfully boosted revenues of accounting practices by 3 – 4X, while allowing the owner to take more time out of the practice. Accounting practice owners are faced with endless deadlines and the challenges of managing workflow, finding the right staff, staff training as well as securing the acquisition of quality new clients! They are also often tasked with the not too pleasant responsibility of imparting bad news regarding taxes due, that the unprepared client is unhappy enough about, to oftentimes ‘shoot the messenger’!
As no two practices are the same and each owner has his own vision for what he/she wants, the first step is a Planning Session to work out the owner’s goals and a strategy to obtain them, in the fastest time period, and for the highest return. To schedule your one on one complimentary practice analysis and consultation, email Ciara MacMahon at consultantciara@gmail.com today. www.PhaseTwoManagement.com