5 Questions for Prospective Buyers in an Accounting Firm Sale

You’ve spent years building your CPA firm, developing client relationships and cultivating your niche in the marketplace. When the time comes to sell, selecting the right buyer can leave you in a cold sweat. How do you know this person or firm will maximize your firm’s profitability, satisfy your loyal clients and keep long-term employees happy? While life has no guarantees, there’s a lot you can do to vet prospective buyers when selling a CPA practice. Ask these five pre-qualification questions and significantly increase your chances for a smooth and profitable transition.

1. Is the buyer professionally qualified to take on the work?

CPA firms are all over the map in terms of the type of work they perform. Buyers should have adequate experience in the appropriate area, whether it’s write-up work, reviews and audits, forensic accounting, or international taxation. It’s almost impossible for somebody who’s only had tax experience in a small, local business to buy and successfully run a firm that specializes in international taxation or forensic accounting.

As the owner, you know what it takes to run your business. Potential buyers must have the appropriate competencies to keep your firm on track. How are their management skills? Can they adequately supervise your staff? Do they have experience working with the types of clients you serve? The more complex or specific your firm’s services, the more careful you need to be to find a buyer with the proper expertise.

If a larger partnership wants to buy your firm, check its track record. How has it handled acquisitions in the past? Just as a buyer needs to do due diligence on an investment, you need to perform your due diligence on prospective buyers.

2. Is the buyer financially qualified to get a bank loan?

Anybody with a tax-intensive practice for sale needs to evaluate the financial position of prospective buyers. How much cash will they have left after the down payment? Is this enough to grow the practice, even in the slow season? Can they access more funds? Your prospects must be credit-worthy, able to put down a substantial down payment and get a bank loan.

Research the current financing market in your area so you better understand what’s available to purchasers. Make sure your prospective buyer’s financing is solid. Accounting practice brokers take this investigation seriously, requesting financial disclosures and sometimes even personal financial statements.

3. Does the buyer have the inherent capacity to do the deal?

In an accounting practice sale, the buyer must have the capacity to take on the work of the seller. When the seller retires, will the void be too big for the buyer to fill? Somebody has to pick up that work, and the employees may or may not be up to the task. They might be too busy or lack the skills to fulfill higher-level duties. The buyer must prove to the seller that he or she has the inherent capacity to take on the necessary work or the practice will fail.

4. Does the buyer have the right people skills?

CPA firms are full of number crunchers. But in any accounting firm sale, it takes more than technical skills to retain the former owner’s clients. At its core, accounting is as much a people business as it is a numbers business. The new buyer must be able to communicate on a high level with very sophisticated clients. Also, the buyer must have the social skills to interact with clients. A typical “green-eyeshade” technical wizard with no personality will probably not succeed in the transition of a CPA practice sale.

Consider, too, the prospective buyer’s reputation. You’ve spent your career building your firm. You certainly don’t want to throw your clients to the wolves. That’s why it’s crucial to look at more than financial information about any prospective buyer. Investigate. Obtain a background check. Is the prospective buyer trustworthy? What is his or her reputation in the field?

Since the sales of CPA firms are often structured to include earn-out periods, your buyer’s character is even more important than if you were selling a different type of business. Your compensation depends on the buyer retaining your former clients. Make sure they’re worthy candidates.

5. Does the buyer have the predisposition for the best deal structure?

Don’t entertain a buyer who is interested in only doing an earn-out deal. The buyer for the sale of a CPA practice must willing to do a deal structure comparable to what the seller is trying to achieve. Accounting Broker Acquisition Group puts together deals that typically by-pass the traditional earn-out arrangement where the seller would receive nothing down and a percentage of collections for four or five years. Instead of the earn-out . . . most of the CPA practices that we have sold have been sold for significantly higher multiples of billings and extremely high cash at closing amounts unheard of elsewhere in the industry.

A note about confidentiality

The bigger the firm, the more confidentiality is a concern. You don’t want your competitors to prematurely learn about your potential CPA practice sale. At Accounting Broker Acquisition Group, we scour our database of tens of thousands of active CPA firm buyers. Then we target only the buyers who should be at the table based on predetermine selection criteria related to the accounting practice being sold. After the buyer signs a confidentiality agreement, we give them redacted information about tax returns, summaries, and other need-to-know data . . . where all contact names and other identifying information has been eliminated. Prospective buyers will only get a general description, such as “a mid-sized accounting firm for sale in Boston.” We distill the best prospects down to a half dozen or so that meet with the seller based on the five criteria indicated above (among other criteria). Our buyer qualification process is so successful that we usually get a few instantaneous offers after our best buyers meet with the seller of the CPA firm. This puts the seller in the driver’s seat.

The secret to our success? Accounting Broker Acquisition Group is the only national business brokerage of its type comprised 100-percent of brokers who are CPAs with significant “Big Four” merger and acquisition experience. Contact us now so you can benefit from our exceptional skills related to marketing, qualifying buyers, and negotiating an exceptional sales price and terms for the sale of your CPA firm. What is end result of this process? A better buyer and more money in retirement!


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