How to Sell an Accounting Firm

Sell an Accounting Firm

A successful exit strategy may include the sale of your accounting firm. In many cases, this is the final stage of your exit strategy. Although selling an accounting firm can be stressful and complex, you can help ensure a successful and stress-free process by taking the time beforehand to learn, prepare, and assemble a team to help you reach your goals. This review provides a general overview of how you can sell your accounting firm. Specifically, it includes information about the accounting industry, valuation methods for your accounting firm, and a step-by-step guide for the sales process. 

About The Accounting Industry

The accounting industry is changing rapidly as technology continually plays a larger role. While many established firms may find the changes a major headache, many other accountants and entrepreneurs find the evolving industry has exciting opportunities and growth potential. This has created a market in which established firms can sell for fair market value. 

Additionally, clients expect general accounting firms to offer a holistic solution for their accounting needs. For firms that offer holistic services (rather than specialize in individual areas such as tax accounting), this makes them more valuable on the open market. A holistic approach to accounting may include (but is not limited to) these services:

  • Tax services
  • Audit services
  • Consulting services
  • Payroll services
  • Bookkeeping services

 

The fact is selling an accounting firm is a unique process. The buyer will likely need proper licensing (although some consultancies may not require an accounting license). Specialty firms, such as CPA firms, tax-based practices, etc. may have a different selling experience than accounting firms that provide general accounting and bookkeeping services.

How to Value an Accounting Firm

Rule of thumb data valuations offer a general idea of your accounting firm’s value. However, rule of thumb data  — and financial records overall — do not tell the whole story about your firm’s worth and profitability in the future. Nevertheless, you can use it as a starting point. The most up-to-date calculated averages for sales of accounting firms in the United States include:

  • Accounting firms sold between 2.22 to 3.38 times the Seller’s Discretionary Earnings (SDE)
  • Accounting firms sold between 0.85 and 1.33 times the annual net sales
  • Accounting firms sold between 4.17 and 4.29 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

 

Of course, your accounting firm most likely understands the business valuation process. However, determining your firm’s value has conflicts of interest that may influence the calculated (or perceived) value. Instead, we recommend working with a business broker to ensure you have the most accurate valuation for your business. Sigma Mergers and Acquisitions, in particular, ensures you receive an objective analysis of your firm’s value, so you can make the most informed decisions as to when and for how much you should sell your firm.

The Sales Process for Accounting Firms

Once you receive a business valuation and decide to move forward with the sale of your accounting firm, you can begin preparing for the sale. The next steps are to then bring your firm to the market (confidentially) and find the right buyer. Once a buyer is secured and there is an intent to purchase, the due diligence process begins, followed by the signing of the purchase agreement, payment, and the transfer of the business. Below is a more detailed review of each step. 

Preparing for The Sale

Preparation is vital for an effective and efficient sale of your accounting firm. Your business broker and advisor can help you prepare and answer any questions. In general, you should collect all of the paperwork that you will need. This includes your tax returns, financial statements, profit and loss statements, balance sheets, lease policies, insurance policies, professional certificates (i.e. CPA license), and client information. 

If you decide that now is not the right time to sell your business, you should focus on a long-term preparation strategy that maximizes your firm’s worth. This may include more investments into your business, a modernized marketing approach, rebranding, and improvements in your internal bookkeeping and accounting processes. This can help make your business easier to sell and allow you to maximize its profit when the time is right. 

Bring Your Firm to the Market (Confidentially)

Now it is time to bring your firm to the market and find interested prospective buyers; this is where your business broker shines. With a focus on confidentiality, your broker should list your business on your behalf without it ever being publicly known that there is the intent to sell. As offers come in for your firm, you, your partners, and your business broker can negotiate terms and secure the right buyer. 

The Due Diligence Process

Due diligence is the process in a business sale where the buyer evaluates all aspects of the business to understand and confirm its assets, liabilities, and commercial potential. The buyer asks the seller questions and requests documents to ensure no inaccuracies or misrepresented information. Due diligence should follow a strict step-by-step process and progress in an organized fashion to minimize the time between the letter of intent and the completion of the sale.

Complete The Transaction

Once all details are understood and confirmed during due diligence, you can schedule a time to sign the purchase agreement and complete all additional steps involved with the transaction process. Your attorney plays a vital role in this final step of the sale. This step also includes the transfer of the business to the buyer, which often involves an extensive process. 

Sigma Mergers and Acquisitions Has Helped Sell 600+ Businesses

Here at Sigma Mergers and Acquisitions, we help accounting firms such as yours sell their business. We have a proven track record of finding buyers that help our clients reach the goals they have for the sale. If you are interested in selling your accounting firm, you can get started with a consultation and a free business valuation. We are glad to address your questions and concerns during the initial call.

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Scot Cockroft Business Broker
Hi, I’m Scot Cockroft.

When I founded Sigma Mergers and Acquisitions back in 2003, I had sold my business the year prior.

Now, that can sound good, but let me tell you, back in 2003, it was not easy to sell a business. Not that I’m saying in modern day times it’s easy to sell a business, but back then I interviewed broker after broker after broker, and no one was interested in actually seeing the value that my business brought to the table.

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Sigma is a the leading business broker in with Corporate offices in Dallas/Fort Worth with roots from 1984. Over 600 businesses sold in Dallas, Fort Worth, Texas, Oklahoma and across the South. Sigma provides full business brokerage services with NO upfront fees. We provide Market approach business valuations for business sales. Sigma is passionate about helping business owners achieve their goal of financial security. Contact us today for a free no obligation business valuation. We are here to help you achieve your goals.

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