Food for Thought: Addressing the Basics for Sellers and Buyers

For both Buyers and Sellers, purchasing or selling a CPA firm can be a complex process. This article provides an overview of the steps required to make sure that both parties achieve the best possible outcome. We’re going to cover considerations for confidentiality, marketing, understanding firm value, negotiating price and terms, transitioning clients and employees, and financing options.

1. Confidentiality

We know confidentiality is important to you and it is important to us too! That’s why we require every Buyer to execute a non-disclosure agreement before reviewing any of our Seller’s information. We work hard to protect our Sellers’ confidentiality throughout the entire process. Of course, there will be a time to share the news about the sale with employees and clients, but doing so before the proper time could jeopardize the value of the firm. Deciding when and how to best make that announcement will be determined by the Seller at the appropriate time. Buyers have the same need for their confidentiality to be protected as well. If their current employer learns they are looking to purchase a firm and leave their employ, this could cause immediate termination, so Sellers need to be willing to offer the same level of protection as they expect from Buyers.

2. Marketing

We are serious about marketing! Making sure your business offering is in the right place at the right time is our job and we do it well. Our marketing efforts include the use of display and classified ads placed in state accounting and tax journals, targeted email campaigns, email blasts to our current buyer pool, cold calling as well as posting every listing on our website along with other paid websites. Whew! That’s a lot of marketing, but our Sellers trust us to get the word out to as many Buyers as possible and we work hard to achieve that goal.

3. Firm Value

Buyers are willing to pay a fair price for a quality firm and our Sellers have been seeing good offers with favorable terms. Those looking to purchase a CPA firm must consider the same benchmarks as any Buyer looking to purchase any type of business.

Every Buyer, whether they realize it or not, before making an offer to purchase a firm will perform what is referred to in the business brokerage world as a “Sanity Check”. What’s that? They will ask themselves the following questions to determine what the firm is worth to them.

Does the firm’s discretionary earnings or cash flow to the owner yield enough income to

  • Service the debt they will incur to make the purchase?
  •  Provide enough income for the buyer’s needs?
  • Provide a reasonable rate of return on the buyer’s cash injection into the business?

4. Negotiating

Negotiating is probably the most important part of our job. Most people focus on negotiating the price and terms of a deal, however, there are many other items that must be agreed upon between a Seller and a Buyer to make a deal gel.

Following are just a few other items that should be considered during this phase of the process.

  • How much will the Seller be needed after closing and how will they be compensated for their services?
  • What is the plan for transitioning the clients to the new owner?
  • What does the due diligence process look like? How will the sale be announced to the employees and clients? 

5. Transitioning 

There is wisdom in how to do most everything in life, including how to handle the transition of a firm’s clients and employees.

  • Employees want to be reassured they still have a job. They will have concerns about their compensation, benefits and the changes that will occur after the sale.
  • Clients, for the most part, just want to be reassured the new owner cares about providing the same high quality service they are accustomed to receiving from their current accountant/CPA.    

6. Financing

We work with industry specific lenders that offer SBA and conventional lending options. These lenders know this market well. Some lenders are willing to fund loans up to 90% of the sales price plus additional funds for working capital if needed. In many cases, the buyer only needs a small amount of cash to make the deal work!

Some Sellers are open to offering seller financing. If the Seller does offer financing, he is acting as the bank, so the Buyer should be prepared to share the same level of information with the Seller as what would be required to share with a bank.

The purchase or sale of a CPA firm is not something to be taken lightly. As we’ve discussed, there are many different considerations that must be taken into account in order to ensure the best outcome for both Sellers and Buyers. With proper due diligence and thorough knowledge of the process, selling or buying a CPA firm can be an advantageous move for both parties. Our 30 years of experience in the industry allow us to understand every aspect of the sales process and we seek to utilize that experience in each transaction.

About the Author

Picture of Christy Hudson
Christy Hudson
Growing up in central Oklahoma, Christy attended and graduated from the University of Oklahoma in 1992 with a Bachelors of Business Administration. She immediately went to work as an auditor for a regional accounting firm in Oklahoma City. Interested in small business, she and her husband, Paul, also opened and operated a local recreation business and grew it to the largest facility in the region at that time. After moving to Arkansas in 1996, Christy and Paul started their family. In 2000, she returned to the business world, working on the management team of a local event business. She quickly advanced as that business grew to a nationally franchised entity. As an Account Executive for 26 accounts nation-wide, Christy developed unique problem solving and assessing abilities as well as conflict resolution skills. In 2013, she entered the business brokerage industry. She is a member of the International Business Brokers Association (IBBA) and has earned the designation of Certified Business Intermediary (CBI).

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