Hi there,
I am a tax CPA located in California. I started my own practice about two years ago, and I currently have around 75 clients. I found it challenging to grow organically, despite having a quick website with a blog and Google reviews. I also experimented with Google ads and remain active within my community. I tried BNI but disliked the whole up-selling aspect.
What I've learned is that the best source of new clients is referrals. However, I feel like my growth has been too slow, and I've finally made the decision to buy a client list, preferably a small and local one. My hope is that acquiring new clients will generate more referrals in the future, eliminating the need to purchase another practice. I've been exploring broker websites and noticed that they typically ask for 1.3 or 1.4 times the gross receipts. Additionally, I would need to finance most of the acquisition. It seems like a big chunk of money will be spent on interest and broker fees and I may not even retain all clients.
Currently, I am searching for a client list in the range of $100,000 in gross receipts, and I have around $35,000 available for a down payment. I am looking for any tips you can provide, especially regarding what to pay attention to when making a purchase and how to negotiate the price. I won't have a broker or a lawyer to help me out. I have been advised to offer 1.2 times the gross receipts, put down 25% as a down payment, and arrange a seller note for the remaining amount, which could be paid off within 3-4 years. I am also wondering what I can ask for a potential client retention rate adjustment. I've heard that the standard adjustment is 15%.
Any insight you can provide would be greatly appreciated!