Selling Your Accounting Business in New Jersey?
Are You Ready to Sell?
Accounting firms in New Jersey are overwhelmingly owned by baby boomers. Many are just about ready to retire. This means that soon there could be tons of accounting firms on the market - and a limited number of buyers.
Are you looking to sell your accounting firm? Maybe you feel unsure about the future, or maybe you are tired of working 80 hours a week. You may want to merge your firm with a more structured firm, allowing you to scale back the amount of work you do while still earn money from your firm. If so, there are a few things you should consider before putting your New Jersey accounting firm on the market.
What is the Best Time of the Year to Sell Your Firm?
Most would answer that the best time to sell is during tax season because this is when revenue is its highest and cash flow is positive. This might be true if your practice is compliance-focused, but there is no such thing as a one-size-fits-all model for accounting practices.
If you have a seasonal business, then your busiest time may fluctuate throughout the year. The goal is to sell your practice when your cash flow and revenue are healthy as this might attract serious buyers quicker.
Smaller Practices Sell Easier
This does not mean that medium or large size practices will not sell, but it may require a little more work. Buyers are drawn to smaller practices, especially those owned by sole proprietors who have complete control over the business. Smaller practices have three benefits that they bring to the table.
1. They offer the buyer a list of clients who are ready to go, as opposed to the buyer needing to add clients one at a time.
2. Small practices usually have a small staff. This makes the transition process simpler.
3. They are less expensive to acquire.
There is a Market for Larger Practices
For our discussion, a larger practice is one that does between $800,000 and $3 million in annual sales. There is a market for firms in this range. Larger firms will need to know who is interested in buying and then approach them directly. Existing firms are usually interested in purchasing larger practices that have the needed capital and the experience to make the purchase with little risk.
Client Retention is of Paramount Importance
Client retention is key in deciding the value of your accounting practice. Many buyers are reluctant to agree to an upfront sale because they worry that the clients will leave as soon as the handover is complete. It’s more common for buyers to pay yearly installments based on the adjusted number of clients who are retained.
If a firm loses clients after the purchase, then the annual installments go down. If it gains clients, then the annual installments increase. This means that before selling your firm, you need to build strong customer loyalty and ensure that they stay loyal after you left. The quality of your clients is usually just as important as the quantity.
Whether your goal is to sell your accounting practice tomorrow or you want to sell it in 10 years, now is the time to plan. Fusion CPA is looking for accounting practices for sale in New Jersey. If you are interested in selling your practice outright or are interested in discussing a merger, we would like to talk with you. Click the link below to schedule a no-obligation discussion with our team today.