Multiple factors determine the right time to sell an accounting practice, but the most important is that you’re personally ready to sell. If you are financially ready to retire or to move into a different line of work, emotionally ready to relinquish control of your firm, and have made clear plans for your future, then it’s time to consider selling your practice.
Determine the best time to sell
Time the sale carefully. If the market is down and you’re feeling frustrated and just want to get out, that’s definitely not the right time to sell. There will be few buyers at that time and they’ll be looking for a bargain. In order to increase your firm’s value, sell when the market is up, during a busy and profitable time of the year, and when your firm is doing very well.
Value your firm and address problems
Have an objective third party value your firm, then address the issues that may be depressing its value. Those issues can fall into a variety of categories:
- Staffing – Your value will be lower if everything depends on you than if you have competent staff supporting you and able to keep things running when you’re away. If staff is older, untrained in the latest technology, or doesn’t get along, these issues need to be addressed in order to raise your firm’s value.
- Technology – Update to the latest technology and make sure your staff is fully competent in its use. If you’re still doing things on paper, you’re a dinosaur.
- Client size, length of relationship, written agreements – A handful of large clients with whom you have clear, written agreements value your firm higher than many small clients or clients with no formal agreement. Long-term relationships increase value, but not if you’ve retained them by keeping your prices unusually low.
- Pricing – You should be raising your fees regularly, at the same rate as the market. Low pricing or clients who pay late are not attractive to buyers.
- Niche or market expertise – If you have time before you place your firm on the market, develop a niche that could be attractive to a larger firm looking to fill in a hole in its services.
Prepare for the sale
Build a team of advisors who can help you prepare your records, staff, and clientele for the close scrutiny of potential buyers. The right consultants, financial advisors, lawyers, and intermediaries will help you price and market your firm for optimal results. They’ll help you find the right buyers, qualify them, write contracts, negotiate, and develop a succession plan.
Qualifying your buyer means more than just determining if they can afford to buy your firm. It means making sure they are trustworthy, understand your market niche, and fit your clients. You’ve put your heart into your firm and you’ve developed relationships with your clients. Not only do you want to leave them in the best hands, but you also want them to stay with the firm because client retention is often a contingency in the sale. If retention decreases, your installment payments may also.
Take the time to thoroughly research your own firm and the market, and find the right experts to help you, so you can sell your practice for the best price.