Selling a Practice??

[MelanieCPA]

I have a very small home-based practice in OH. About 80+ clients and 15K gross income. I may not prepare tax returns next year. Is there a market to sell such a small practice? I've looked at other posts on this subject, just looking for more input. Can anyone suggest the "going" rates/terms?

[Snaggletooth]

Rule of Thumb

Melanie, we would hate to lose you, but there are perhaps more reasons now than ever to leave the profession. If you are interested in a sorta historical rule of thumb, I believe that number would be one years' revenue -- in your case about $15,000.

[erchess]

Melanie

See if you can get an HRB office in your area to put you in touch with Kansas City. Block buys practices of all sizes and they at least used to pay three years' revenue structured over the five years that the seller covenanted not to compete.

[JoshinNC]

3 years revenues??!!

See if you can get an HRB office in your area to put you in touch with Kansas City. Block buys practices of all sizes and they at least used to pay three years' revenue structured over the five years that the seller covenanted not to compete.

Hell, I could retire today, invest at 8% and never work again. You sure about that?

Wait, HRB doesn't do payroll, bookkeeping, consulting, etc. Oh well, guess I'll have to trudge it on in today.

[BOB W]

The downfall of most contracts is that it only pays for clients that stay with the buyer during the payoff period. Consequently, you may only collect on 50% or less on the contract price if your client does not like who you sold the practice to.

[joe28g]

What part of Ohio are you from?

[MelanieCPA]

Central OH

On the northeast side of Columbus - Licking County

[Zee]

Selling prices for CPA practices are not very good. Typically, they are 1 to 1-1/2 Gross. But, buyer's expect you to work for them at $25 hour during the transition period. My former partner just sold our MN firm with those conditions. In essence, he worked for them and helped them pay for the practice through the tax season. My understanding is that isn't unusual at all. A small, 80-client practice producing only $15,000 of revenue will be difficult to market and would most likely have to be discounted even further. HRB, AMX, and others aren't interested in anything that small. I sold a similar practice in PA to a local EA. He paid me the first years actual revenues only since I didn't help with the transition. I saw it more as an opportunity to help my clients find another tax preparer than a sale. I doubt a third party broker will bother to represent a sale that small. It's not worth the effort to them. But, I get daily emails from a broker in FL on practices for sale. The going rate is 1 to 1-1/2 times gross, but I've never seen anything that small for sale. Your best best is to meet with a practioner close to you, and offer him/her a deal like I've suggested.

[dmj4]

We bought clients

If you are in a small town, you may want to contact other preparers you know and trust.

We bought clients a few years ago. The seller chose us because she knew us and could refer her clients to us in good conscience. She wrote all of them a nice letter and told them that we were experienced, honest, etc. She also had us agree that we would not increase the prep fee the first year and that if there was a client that we knew we could not continue to do with small increases, we would tell them the first year that there would be an increase the next year. In the letter she wrote to her clients, she told them they would not pay more for a similar return than they had paid her.

We paid her based on the clients that did come to us. We gave her 30% the first year, 20% the second year and 10% the third year.

We were able to add a third preparer that year to take the overflow. The two most expensive preparers took the more difficult returns and the new preparer took the easier returns. I am the only preparer, of the three, that remains and every time I pull one of those files, I know I have managed to keep them for 12 years.

[Lion]

HRB does do bookkeeping, etc.

HRB does do bookkeeping, payroll, etc., now. So, they might like to pick up a practice that has been doing more than just tax returns. Doesn't hurt to ask. If you're not trying to sell until after next tax season, I'd suggest you raise your prices. Your clients are more likely to go to the buyer if he doesn't have to raise prices on them the first year. That will benefit your sales price if based on retention, not to mention that it will help you this coming tax season.