Common Myths When Selling an Accounting Practice
Selling a CPA practice is typically a once in a lifetime event. This is the culmination of several years (or even decades) of hard work; and after having poured your life into your practice, you want to receive the value you deserve at exit time. Because so few owners have any experience with accounting practice sales, it is easy to fall prey to some of the misconceptions about the process.
Here are four common myths that many owners have about the sale of CPA practices:
Myth #1: Any issues with the practice can be addressed during the sales process
Over time, CPA practices develop weaknesses and shortcomings that, for whatever reason, were never fully addressed. For example, maybe you have not had a technological upgrade for a decade or two, but since business was good, you never felt it was totally necessary. Or maybe you have not fully capitalized on the various marketing opportunities in the digital world (for the same reason). These and other areas should be looked at before putting the practice on the market. Just as you would want a home you are selling to be in top condition before listing it, the same holds true for your business.
Myth #2: I will have to stay on with the practice for an extended period of time after the sale
It is true that in some CPA sales arrangements, the seller continues with the practice. In general, however, this only occurs if the seller wants it that way. Most buyers will want you to stay on and advise/consult with them for at least a month or two, but if you do not wish to be involved any longer than that, this issue should not be a hindrance to a successful sale.
Myth #3: I can time the sale of the practice for optimal value
Some owners believe that they can wait until their practice is peaking, and sell it for top dollar. The challenge with this strategy is that future market conditions are difficult to predict. For example, you may believe your revenues will increase by 60% over the next two years, but unforeseen factors may turn things in the opposite direction. The best time to sell is when you are ready (e.g., you have addressed known issues and you have all your ducks in a row), and (hopefully) when the revenues and profits of the firm are growing.
Myth #4: All prospective buyers will recognize the value of my firm
An accounting practice is not a commodity, and not all buyers will see your practice the same way. Each CPA firm is unique and has a specific set of factors from which it derives value. Some buyers will see the value, some will not. This is why it is important to market your practice to the widest possible pool of buyers.
The best way to accomplish this is to work with a reputable business broker. A business intermediary, particularly one who specializes in the sale of CPA practices, can work hand-in-hand with you to prepare you adequately before putting the firm up for sale, and to discreetly market your firm to qualified prospects throughout the country.