Wish to Purchase Small Tax Practice

Software. Marketing. Training. Running your business.
#1
Posts:
52
Joined:
29-Sep-2014 10:35am
Location:
Rockville Centre, NY 11570
I am a CPA in Nassau County, Long Island, NY and would like to purchase a small to medium, up to $100,000, tax practice in the local area.

I have been in practice for over 30 years, and share a working relationship with another practitioner. Our combined practices consist of 130 personal tax returns and 20 business returns, writeups, compilations & reviews, bookkeeping, payroll tax services, etc.

Anyone interested in selling, merging, etc, this type of practice should feel free to contact me directly at mdubincpa@aol.com.

Thanks
 

#2
Posts:
314
Joined:
2-Jun-2014 11:11am
Location:
Long Island, NY
I am still looking too Mike, but more for a $500,000 practice. I was referred to one that would be good for you but the guy wanted 100 of selling price up front with no guarantee of retention. I laughed at the broker, i give $100,000 and the next day -0- clients come to me?

Its touch market out there.
 

#3
ATSMAN  
Posts:
2094
Joined:
31-May-2014 8:34pm
Location:
MA
Must be an inexperienced broker because they all know that the buyer is going to need some retention protection. Usually the seller's broker tries to get 80% upfront and then have the 20% on a schedule for a year or two. I doubt this seller is going to find anyone taking that kind of a risk on a $100K business!
 

#4
Posts:
267
Joined:
20-Sep-2016 8:18pm
Location:
The ATL
michaelmars wrote:I am still looking too Mike, but more for a $500,000 practice. I was referred to one that would be good for you but the guy wanted 100 of selling price up front with no guarantee of retention. I laughed at the broker, i give $100,000 and the next day -0- clients come to me?

Its touch market out there.

ATSMAN wrote:Must be an inexperienced broker because they all know that the buyer is going to need some retention protection. Usually the seller's broker tries to get 80% upfront and then have the 20% on a schedule for a year or two. I doubt this seller is going to find anyone taking that kind of a risk on a $100K business!


On the other side of the coin, I sold my practice last year and was fully prepared to make concessions for client retention. However, the buyer proposed a full selling price and I accepted of course, though I did have a twinge of guilt doing so. Fast forward to today and I have a different twinge of guilt. I'm satisfied with the purchase price agreement, however I am finding over and over again through the grapevine that my former clients are unhappy, very unhappy. Calls and emails are not promptly returned, if they are at all. The new CPA is gruff and curt. And yes, everyone has different personalities. However, as a professional, I feel that behavior towards a client (for the MOST part) is not acceptable. I could hone in on more details but don't want to put more out there if you KWIM.
 

#5
ATSMAN  
Posts:
2094
Joined:
31-May-2014 8:34pm
Location:
MA
Change is never easy and I am assuming you "sort of knew" this when you got 100% of your asking price without any retention clause. It is possible the buyer is trying to weed out certain clients and only keep what fits his business model?

My long time family physician retired last year and the business was sold to a regional practice and I can already see the difference in "customer service". Before my doctor would call and discuss lab results and now I only get a call from the nurse if there is an issue!
 

#6
Posts:
2468
Joined:
24-Apr-2014 7:54am
Location:
Wisconsin
michaelmars wrote:Its touch market out there.


I'm kind of surprised to hear this, because as a part of the baby boomer accountapocalpyse I hear that there are not enough buyers and therefore sellers are having to make concessions (i.e. not every firm is worth 1x revenues, sellers have to guarantee retention somehow). Or -- and this is something a friend of mine ran into when looking for a firm to buy -- are you dealing with a seller whose firm is nominally for sale but is really not emotionally ready to sell?

MichelleSCPA wrote:I am finding over and over again through the grapevine that my former clients are unhappy, very unhappy. Calls and emails are not promptly returned, if they are at all. The new CPA is gruff and curt. And yes, everyone has different personalities. However, as a professional, I feel that behavior towards a client (for the MOST part) is not acceptable. I could hone in on more details but don't want to put more out there if you KWIM.


I think this is a good point that the seller has due diligence to do sometimes, too. Or, maybe the seller's non-solicitation clause needs to be short :lol:

ATSMAN wrote:My long time family physician retired last year and the business was sold to a regional practice and I can already see the difference in "customer service". Before my doctor would call and discuss lab results and now I only get a call from the nurse if there is an issue!


Sounds a lot like an accounting firm, doesn't it? In a small firm, the principal often is a hand-holder, but larger firms have scaled their businesses such that profit is more important than customer service.
 

#7
Posts:
314
Joined:
2-Jun-2014 11:11am
Location:
Long Island, NY
Got to remember where each of us is located. A 100k practice here on Long Island isn't a firm, its a sole practitioner barely making it. Any clients he has is mostly due to her personality and that is what makes retention so hard. If he had staff that handled the clients they would be more likely to stay if you retain the staff. Clients like continuity of service.
 

#8
Posts:
2468
Joined:
24-Apr-2014 7:54am
Location:
Wisconsin
michaelmars wrote:Got to remember where each of us is located. A 100k practice here on Long Island isn't a firm, its a sole practitioner barely making it. Any clients he has is mostly due to her personality and that is what makes retention so hard. If he had staff that handled the clients they would be more likely to stay if you retain the staff. Clients like continuity of service.


Right, but that really makes my point. That firm appears not to be worth 1x revenues paid up front with no retention clause, and that the seller will need to make concessions to sell the firm.

I don't see it as a tough market. Maybe a stubborn market!
 

#9
Posts:
6043
Joined:
22-Apr-2014 3:06pm
Location:
WA State
MichelleSCPA wrote:Fast forward to today and I have a different twinge of guilt. I'm satisfied with the purchase price agreement, however I am finding over and over again through the grapevine that my former clients are unhappy, very unhappy. Calls and emails are not promptly returned, if they are at all. The new CPA is gruff and curt. And yes, everyone has different personalities. However, as a professional, I feel that behavior towards a client (for the MOST part) is not acceptable. I could hone in on more details but don't want to put more out there if you KWIM.


As much as each of us gets invested in the personal relationships we develop with our clients, when you sell...you sell. You really have to separate yourself from those dynamics. Those clients were going to need to find a professional. By selling your practice, you received funds for your retirement (your need), another professional received a book of business (buyer's need), and the clients didn't have to search for another professional (their need). If the buyer wants to operate in such a way that results in unsatisfied clients, the clients have no contract that they need to stay.

I would have no guilt around this.
~Captcook
 

#10
Posts:
11
Joined:
24-May-2017 3:34pm
Location:
NY
Still looking on Long Island as well. For some reason the sole practioncers have really decided to work until they die.
 

#11
Benztax  
Posts:
17
Joined:
21-Jun-2019 10:25am
Location:
NY
I don't like the idea of purchase a small tax practice. I think a small tax practice is based on the owner's personality.

I started my practice two years ago because I needed a flexible schedule to take care of my three kids. My gross receipts has reached 100,000 this tax season. But I think once someone take it over, all the clients will move on, too.

Building a revenue of $100,000 is quite easy, once you find a niche market to get into. I don't think it is worth it to may for a practice that is unstable.
 

#12
philly  
Posts:
1722
Joined:
14-Sep-2014 4:48am
Location:
New York
I purchased several small accounting practices over the last 25 years. Each time the CPA had a transition period with my firm.
The client retention rate was very high. Most times once the clients got to know me they stayed.
 

#13
Posts:
314
Joined:
2-Jun-2014 11:11am
Location:
Long Island, NY
I agree with philly and that's why I am looking to purchase something on Long Island.
 

#14
RJH  
Posts:
28
Joined:
30-Jan-2019 4:44pm
Location:
San Jose, CA
I have bought two tax practices over the year and curretly purchasing another tax practice. I find that if you personally contact each client in the office season and invite them in to talk and make them understand how your tax practice works. I find that the retention is very good. I usually can hold on to 80 to 85% after the first year. Here is how my deals goes. Now, I am in San Jose, Ca. There is a lot of tax practices for sale right now.

1. I get the review the clients list and their current fees with their actual tax files. I want to make sure I can hadle the tax return.
2. I pay 25% at signing the contract
3. I only pay for the clients that come to me the first year. We lock the client list Oct. 30th.
4. I pay based on a 2 or 3 year contract.

When I look at purchasing a practice. I look for a practice using the same software I am using. That way the boarding time is much easier. If I have to input the tax return for each client, I would have to take that in consideration of the purchase price. In San Jose, The purcahse price is usually 85% to 100% of prior year billing. Maybe sometime it can be as high as 125%. I find it is easier to go direct and not use a broker.
 

#15
jon  
Posts:
1535
Joined:
3-May-2014 11:11am
Location:
minnesota
Is it not true the SELLER - has to contact his clients if he is going to make customer list and files available to anyone and get permission from his clients??

Whatever happened to the sale price being a % of collections for over a three to five year period. Heavy tax practice used to be around 33% for three and combination practice 20% to 28% for five. Downpayment would be equipment etc. not huge.
 

#16
Posts:
314
Joined:
2-Jun-2014 11:11am
Location:
Long Island, NY
Last time I purchased, it was 20% of collections for 5 years for tax work and 25% for monthly/quarterly businesses. A 20@ down payment was applied against the the above.
 

#17
FLAcct  
Posts:
446
Joined:
21-Apr-2014 2:47pm
Location:
Florida
When you sell a practice with payments over a period of years based on retention, how do you know which clients have stayed with the new accountant and which have left? Is it based solely on the word of the new accountant? Do you call all of your old clients every year (ridiculous)? Do you mandate that the new accountant must provide you with a printout of accepted returns from his tax prep software each year? How can you trust someone that you may not know very well?
 

#18
Posts:
2887
Joined:
21-May-2018 7:50am
Location:
Northern MI and Coastal SC
FLAcct wrote:When you sell a practice with payments over a period of years based on retention, how do you know which clients have stayed with the new accountant and which have left? Is it based solely on the word of the new accountant? Do you call all of your old clients every year (ridiculous)? Do you mandate that the new accountant must provide you with a printout of accepted returns from his tax prep software each year? How can you trust someone that you may not know very well?


This is why any buyer is a fool to do a purchase agreement where the buyout is not tied to client retention, and paid based on collections. While there are many reasons an acquired client may leave, the seller has to have some skin in the game, including staying onboard for 6-12 months to help clients feel comfortable with the transition.

I am looking to buy a small practice. Came across one last year that was far larger than I wanted, but the seller wanted $650k upfront with no retention guarantee, and would only stay on for about six months of transition. No deal. I think his firm is now listed with a broker for basically the same terms...I would be truly shocked if he gets his terms.

Once brokers get involved, everything goes to hell as far as what is reasonable for each side. I know locally and for our field, most of the sales occur directly between the parties without using a broker. Once I hear broker, I am immediately turned off from a prospective purchase.
 

#19
EZTAX  
Posts:
1608
Joined:
24-Apr-2014 6:48pm
Location:
California
I am thinking of trying to downsize in the next 3-5 years. Anyone ever find a way to bring a new person on to work with you and transition the business over a period of time? I am in the Santa Cruz, CA area.
 

#20
ATSMAN  
Posts:
2094
Joined:
31-May-2014 8:34pm
Location:
MA
EZTAX wrote:I am thinking of trying to downsize in the next 3-5 years. Anyone ever find a way to bring a new person on to work with you and transition the business over a period of time? I am in the Santa Cruz, CA area.


Every situation is unique, but in general (from my experience), bringing in a junior associate that wants to grow and own the business someday works the best. That is how I got started. When my mentor decided to cut hours and work part time only, I was right there to takeover and finally when he retired, it was a very smooth transition. I still have most of the original clients with me.
 

Next

Return to Business Operations and Development



Who is online

Users browsing this forum: lckent, wombataholic and 47 guests