Selling Tax Business -How?

[zeros]

I am considering selling my tax business (320 returns) and was wondering how that is done. How do you get contacts? How to figure a sale price? When am I paid? I have purchased the software for the 2013 return. Thought I would just quit preparing them for the 2014 tax year but the business must be worth something to somebody.

[Dusty2004]

Contact other preparers in your area

I would think one of them may be interested in expanding.

Sale of business is usually 75% of 1 year revenue to 150% of 1 year revenue. This is normally paid out over 5 years based off of retained clients.

I am in the process of purchasing a business from a local CPA and we have agreed on 50% of revenue but it is based on 2013 revenue so the loss will be mine if the clients do not come over to me or they bolt after the first year. I felt it was worth the risk based on 50%. It is a business about the same size as mine for personal returns but much larger for business returns. They are going to work with me on the business returns to get my firm up to speed.

Dusty

[MDEA]

Selling tax busines

Where are you located? Also Accounting Practice sales web site has practices for sale all over the country you can see asking prices.

[zeros]

Located in Minneapolis

Where are you located? Also Accounting Practice sales web site has practices for sale all over the country you can see asking prices.

Located in the northwest suburbs of Minneapolis.

[AZ-Tax]

Tied buying one in the last year

I tried buying a nearby one for the last year. The tax preparer was not being very straight with me on quite a few issues which made me wonder if this tax preparers returns have been red flagged. I personally would be very hesitate of ever considering to purchase another one. To many if's. This is a personal relationship business and unless I was GUARANTEED the tax preparer I was buying their books from would NEVER go back into the tax prep business, I would consider it but to iffy.

[Burke]

I have been approached by a colleague to purchase my business should I decide to retire. My question is this: just what do I give him? A client list? The actual returns? (He uses the same software as I do.) I would think I need authorization from the client to give him any kind of information concerning their tax return. How is this handled?

[taxxcpa]

If you buy or sell a practice, there is usually a non-compete clause in the contract. However, it should specify a geographical area for which the con-complete applies and a time period.

If you sell a practice in Bangor Maine you would be free to open a new practice in California.

[AZ-Tax]

Non-compete clause maybe as good as the paper its written on.

As mentioned in my earlier post, this is a very personal business. The Maine tax preparer can relocate to CA but we know how you can have clients in other states and if the taxpayer wants his former tax preparer to continue to prepare his tax return, he will eamil his docs to CA. Taxpayer has the last say.

[taxxcpa]

The Maine tax preparer can relocate to CA but we know how you can have clients in other states and if the taxpayer wants his former tax preparer to continue to prepare his tax return, he will eamil his docs to CA. Taxpayer has the last say.

I think it would be a violation of the non-compete clause if you moved to another state and notified your previous clients that you would still prepare their returns. In case a client wanted to send his documents to you at the new address, you would probably be obligated to refuse and explain that you could no longer do his return.

[David1980]

I tried buying a nearby one for the last year. The tax preparer was not being very straight with me on quite a few issues which made me wonder if this tax preparers returns have been red flagged. I personally would be very hesitate of ever considering to purchase another one. To many if's. This is a personal relationship business and unless I was GUARANTEED the tax preparer I was buying their books from would NEVER go back into the tax prep business, I would consider it but to iffy.

This is an interesting point. Say you buy a tax business and then find out all the clients are expecting you to turn their legitimate small refunds or balance due into $5-$10k refunds.

[MAMalody]

If you buy or sell a practice, there is usually a non-compete clause in the contract. However, it should specify a geographical area for which the con-complete applies and a time period.

If you sell a practice in Bangor Maine you would be free to open a new practice in California.

I don't know. My entire practice is internet based. I have only seen three clients this year, all the other clients from 28 states were via the internet. Another issue that must be considered in the "new" day.

[JohnH]

That's why much of the buyout must be based on contingency.

[ATSMAN]

Internet based practice

Very interesting practice. Only 3 face to face client returns?

How do you market yourself on the internet?

Do you have your online transactional website?

Are you familiar with 1040.com that allows private branding of a functional website?

[Black Bart]

Got a letter from Blcok this week about

Selling Tax Business -How?

I am considering selling my tax business (320 returns) and was wondering how that is done. How do you get contacts? How to figure a sale price? When am I paid? I have purchased the software for the 2013 return. Thought I would just quit preparing them for the 2014 tax year but the business must be worth something to somebody. .

buying my business. They sent one this past summer, so I think they're stepping up their push to get people like me who are old/tired/dreading Obamacare/etc. This offer is a little sweeter than the last -- includes software reimbursement if you've already bought although, to me, that would be a minor point given the overall importance of such a serious life-changing step (maybe not so minor to those buying 10K "Cadillac" packages).

The letter states: "It's not too late of sell before next tax season...we provide smooth transition and you can (a) sell your business and retire after transitiioning your clients to H&R Block or (b) sell your business but continue working in one of our tax offices full or part-time. Call 877-556-2209 for more information. The offer will include the amount of your cash payment."

I don't know if it would be better to go straight to your local Block competitor or try this "home office" deal (assuming you even wanted to deal with Block instead of an independent).

Here's a link to other business buyers that have been sending me a card every year. Although this one only handles Southern state businesses, I think they're part of a national chain and maybe could furnish a contact number for Minnesota. www.AccountingBizBrokers.com

I have been approached by a colleague to purchase my business should I decide to retire. My question is this: just what do I give him? A client list? The actual returns? (He uses the same software as I do.) I would think I need authorization from the client to give him any kind of information concerning their tax return. How is this handled?

Interesting question -- I've wondered the same thing. I suppose you'd have to get a disclosure notice from every single one of them, which would be a major pain/drawback (probably half wouldn't give you one or even reply to your request). Maybe should've gotten out pre-disclosure era when we could do what we wanted to with our hard-gained documents/info without the d*mn government sticking their collective noses in every thing we do.

[JohnH]

I don't think it would be too difficult to compile a profile of one's client list without names or exact numbers. I'd probably arrange it in groups, such as EIC, standard deduction, itemized deduction (basic), itemized deduction (complex, with 1099B, etc), itemized deduction (with xx rental properties), complex (with K-1,s etc), and so on. Maybe a listing of fees from highest to lowest with the number of returns falling into each category would be helpful. I'd see to it that the whole report would fit on a single page, one side only. Any potential buyer who can't form an opinion based on that data probably isn't qualified to buy the business anyhow.

If I were buying a tax business, that would be a good starting point for negotiation. The actual buyout would be contingent upon much more detail with appropriate disclosures and assurances of the accuracy of the initial info, but I think the above list would be sufficient. Details would come only after we had reached a pro-forma agreement on the broad issues of purchase price, terms of payment, non-compete, etc.