It’s normal to see owners selling their CPA firms. Therefore, you shouldn’t worry too much if you arrive at this decision. What you must remember in such cases is to follow the right procedure. Otherwise, you’d be losing a ton of money, especially if you fail to value the business properly. In this article, you’ll learn a few must-follow practices that should guide you into selling your CPA business at the best possible price.
Seek professional valuation from third-party sources
How do you sell a CPA firm? You do so by hiring a professional third-party source to value your firm. Look for a reputable accounting firm to perform the valuation. A fair valuation is what your firm needs. The information you receive from third-party sources offers you the necessary confidence to ask for a solid asking rate. More importantly, the expert you hire must be skilled at performing one or all of the following types of valuations:
- Market valuation
- Asset-based valuation
- Discounted cash valuation
Know your needs and the reasons for selling
Before settling on the issue of price, you have to know your needs well. How much money do you need? What you need depends on several factors. For example, are you retiring? If so, you’d need to attract the kind of price that allows you to maintain your current lifestyle once you stop working. Therefore, look at your reasons for selling once more. Again, this works out well with a clear set of goals. That way, you can only focus on offers that align with your goals.
The most common reasons for selling are the following:
- The existing firm has been unable to grow fast enough.
- The buyers want to be their own bosses.
- Seller wants to retire.
- Seller wants to try something new.
- Seller needs money and a huge financial outlay fast.
- Seller has experienced
Check the size
Additionally, it’s worth remembering that it’s easier to sell smaller CPA businesses. You may be hard-pressed to make your firm smaller if it has operated as big business for eons. For this reason, work with what you have. Nevertheless, don’t wait any longer if you have a smaller operation to get rid of. Most prospective buyers prefer going to smaller firms, which are easier to run and require reduced financial outlay.
Using SDE multiplier
The SDE, or Seller’s Discretionary Earnings multiplier, provides you with the kind of specifics that help you to value your CPA firm accurately. Here, you first consider your income before taxes and any other factor that affects the firm’s profitability. Next, multiply them all. What you get is your firm’s exact value in monetary terms. Prospective buyers prioritize this kind of information, as it offers them an in-depth critical assessment of your firm and your offer.
Selling a CPA firm isn’t a walk in the park. You won’t, or rather shouldn’t, just wake up, offer it for sale, and take the first offer that comes along. Instead, you have to prepare the business for the impending sale. Make sure that all books and records remain presentable. Don’t be behind on your taxes, either. Improve the business substantially before selling it to attract the best buyers, too.
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