When is seller financing a good option?

  • Financing

At Accounting Broker Acquisition Group, we encourage deals that result in high multiples of billings and significant cash at closing for the seller. For most firms, we can achieve a very high sales price with significant cash at closing, which is obviously much better for the seller than having to carry a very large portion of the deal. But this depends, of course, on a number of factors that affect the attractiveness of your CPA firm.

Fix Problems First

Sometimes, a seller is forced to carry a significant amount of financing because of internal problems with their CPA firm that makes his/her firm undesirable in the marketplace. Low profitability is a common problem. If your million dollar firm only nets $80K, it is unattractive to most buyers. A buyer would have to be crazy to take over your business when low profitability would make it impossible to service acquisition debt. Other common internal problems include a dwindling client base, understaffing and billing rates that are set too low.
Best case scenario: Fix your internal problems first. Sell later. If you are able to plan a few years out, do whatever you legally and ethically can to turn your firm around before looking for a buyer. Increase profitability. Stabilize staff. Raise your billing rates. You’ll be in a much stronger position to maximize your value on the sale, and to not take on significant seller financing.


If You Must Sell Now

Maybe a combination of factors is forcing you to sell now, before internal problems can be corrected. If that’s the case, you need help. Call Accounting Broker Acquisition Group to help you negotiate the best possible price and terms. With our experienced team of former Big 4 CPAs, we can help you obtain a much higher price and better terms than you would be able to achieve on your own.

Selling a Segment of Your Business

Sometimes a seller needs to carve out and sell a segment of a practice. For example, a CPA firm has $500K of annual revenue, of which $100K is audit business. If you were to sell only the audit segment, this would often require seller financing. The reason for this is that lenders will generally not finance anything less than the whole practice, due to the difficulty in obtaining stand-alone cost allocated financial data for the partial segment being sold. However, even with seller financing, we can help you take steps minimize contingencies related to the financing, and thus reduce your risk.

Avoid Traditional Earn Out Deals

In traditional earn-out structures, the seller may receive a very small percentage of the purchase price at closing, with the remaining payments based on a percentage of collections from the seller’s client list for a period of time. Under this structure, the buyer has little “skin in the game”, compared to when the buyer has a debt obligation. This is not an ideal situation for the seller.

At Accounting Broker Acquisition Group, we generally advise sellers to steer clear of low-cash-down earn-outs. If a seller feels that there is no choice but to structure a sale as an earn-out, call Accounting Broker. Your situation may not be as desperate as you believe it to be. We often do what sellers could not do for themselves.

Call Us First

Our typical deal includes high multiples of billings and high cash at closing amounts. We are masters of the negotiation process. We are able to find alternative deal structures for many sellers. Why are we so successful? Because we employ the best talent in our field. 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 today to find out how we can help you structure the absolute best deal when you sell your CPA practice.

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