Selling Tax Business

[Twin Turbo Z]

H&R Block have been trying to buy us out for eons. And I imagine a few here get the same letters and calls. My question is, has anyone here sold their business to them or know anyone who has. If so how do they base their offer ? I know it depends on client base, whether you plan on helping in the transition, etc. Guess we could always play along and see what is offered. But monetarily, what does one think a 1,000 per year client business is worth ?

[ATSMAN]

H&R Block have been trying to buy us out for eons. And I imagine a few here get the same letters and calls. My question is, has anyone here sold their business to them or know anyone who has. If so how do they base their offer ? I know it depends on client base, whether you plan on helping in the transition, etc. Guess we could always play along and see what is offered. But monetarily, what does one think a 1,000 per year client business is worth ?

Typically they will go for 1.5 times annual revenue. If you are willing to work for them, they may keep your staff and if you have paid for the software that becomes non refundable reimburse you.

It wont hurt you to get the conversation started and see where it goes. Insist on a non disclosure agreement before opening your books!

[Twin Turbo Z]

Typically they will go for 1.5 times annual revenue. If you are willing to work for them, they may keep your staff and if you have paid for the software that becomes non refundable reimburse you.

It wont hurt you to get the conversation started and see where it goes. Insist on a non disclosure agreement before opening your books!

1.5 times their revenue off of 1,000 clients or our revenue ? We do not charge anywhere near the price they charge.

[ATSMAN]

1.5 times their revenue off of 1,000 clients or our revenue ? We do not charge anywhere near the price they charge.

1.5 x your revenue.

If your average fee is say $150 per return. Your annual gross is 150,000.
150,000 x 1.5 = 225,000 would be a starting point.

[Lion]

Spend from now through next April raising your prices, and then initiate a discussion.

[Twin Turbo Z]

This is all hypothetical anyway. At 1.5 times its not worth it. It would have to be at least 4 times revenue. At 4 times they would make that back in 2 years, easy.

[spanel]

This is all hypothetical anyway. At 1.5 times its not worth it. It would have to be at least 4 times revenue. At 4 times they would make that back in 2 years, easy.

How do you figured that? They are not going to take your clients and jack up the fees overnight. They would lose everyone they bought.

Chris

[Twin Turbo Z]

How do you figured that? They are not going to take your clients and jack up the fees overnight. They would lose everyone they bought.

Chris

Oh I bet they would !!! Especially all the EIC qualifiers that they rake over the coals. Plus there is no other competition in our area, other than Block and Hewitt Jackson (seasonal at Walley World) . They could charge normal fees no problem.

[lenboush]

I sold my business to HRB in November, 1995

H&R Block have been trying to buy us out for eons. And I imagine a few here get the same letters and calls. My question is, has anyone here sold their business to them or know anyone who has. If so how do they base their offer ? I know it depends on client base, whether you plan on helping in the transition, etc. Guess we could always play along and see what is offered. But monetarily, what does one think a 1,000 per year client business is worth ?

I sold my business to HRB in November, 1995 so things may be a whole lot different then compared to what it is now.

They offered 100% of prior year's verified revenue plus the value of any physical assets they acquired. I was able to negotiate them up to only 110%. They paid half of the agreed fee up front and the other half the following May. The second half was contingent upon at least 85% of my clients coming on board with them with a prorata adjustment if it fell below 85%.

The first year they kept my old fees the same and the second year they charged halfway between my old fee and their fee. The third year it went to the full HRB fee. We lost a lot of my old clients the second year and even more the third year.

While nothing is perfect, everything went as planned and HRB was wonderful to deal with. I had to sign a 5 year non-compete agreement due to the sale and then I went work for them for five years. In addition to the 5 year agreement for the sale, every preparer was required to sign a new 2 year non-compete agreement every year.

I can say that I thoroughly enjoyed the 5 years I spent at HRB. Part of that was because I was in great office with a great office and a great district manager. Also, the office I was in is what they used to call HRB Professional or HRB Premium or something like that so we had a bit higher level clientele. While I was there, I also taught quite a few classes. I think it was a great experience.

Would I do it again. Maybe, but probably not. It worked in my best interest for where I was at the time and for what my needs were at the time.

[TaxGuyBill]

This is all hypothetical anyway. At 1.5 times its not worth it. It would have to be at least 4 times revenue. At 4 times they would make that back in 2 years, easy.

From what I've seen from other tax practices that are for sale, 1.5 times the revenue is on the high side of things. Most that I've seen are somewhere around 1.25 times the annual revenue, with some being lower than that.

[ATSMAN]

Based on conversations with fellow tax preparers it appears HRB is really not interested in buying any physical assets (Computers, office furniture etc.). They basically want your client list.

[Twin Turbo Z]

I sold my business to HRB in November, 1995 so things may be a whole lot different then compared to what it is now.

They offered 100% of prior year's verified revenue plus the value of any physical assets they acquired. I was able to negotiate them up to only 110%. They paid half of the agreed fee up front and the other half the following May. The second half was contingent upon at least 85% of my clients coming on board with them with a prorata adjustment if it fell below 85%.

The first year they kept my old fees the same and the second year they charged halfway between my old fee and their fee. The third year it went to the full HRB fee. We lost a lot of my old clients the second year and even more the third year.

While nothing is perfect, everything went as planned and HRB was wonderful to deal with. I had to sign a 5 year non-compete agreement due to the sale and then I went work for them for five years. In addition to the 5 year agreement for the sale, every preparer was required to sign a new 2 year non-compete agreement every year.

I can say that I thoroughly enjoyed the 5 years I spent at HRB. Part of that was because I was in great office with a great office and a great district manager. Also, the office I was in is what they used to call HRB Professional or HRB Premium or something like that so we had a bit higher level clientele. While I was there, I also taught quite a few classes. I think it was a great experience.

Would I do it again. Maybe, but probably not. It worked in my best interest for where I was at the time and for what my needs were at the time.

Thank you !!!