5 Things To Do Now (even during Tax Season) to Get Your Firm Ready for Sale

Introduction: Are you an accountant, wealth advisor, financial planner, or registered investment advisor running a practice? Tax season might feel like the worst time to think about anything else, but if you dream of making this tax season your last (or next-to-last), now is the perfect moment to prepare. Don't brush this off as another task to tackle later – discover these easy tips that won't overwhelm you but will set you up for a successful practice sale when the time is right.

1. Raise Your Rates for a Bigger Payday: You might hesitate to increase your rates, but it could be the key to boosting your practice's value. Most acquisitions are based on a multiple of your gross revenue. For instance, if your annual gross revenue is $1,500,000 and you sell now, the buyer will calculate the purchase price based on this figure. By raising your rates by just 10% this year, you could potentially increase the purchase price dollar-for-dollar or even more. Remember, if you don't do it, your buyer will. And that could lead to client attrition, impacting your financial recovery for any earn out on the back end.

2. Document the Unwritten: As you work through client files, you may stumble upon unique client needs or billing practices that exist only in your head. Document them in writing, whether it's in the client file or as part of a standard operating procedure. This practice ensures that your clients receive top-notch service even if something happens to you. Plus, it sets you up for efficient delegation or scaling down the line. Remember to note clients with special rates or preferences, unique tax-filing situations, and any other valuable information that isn't immediately apparent.

3. Plan for Staff Changes: While you don't need to replace staff members during tax season, it's crucial to plan for their replacement well in advance if you anticipate making changes. Preemptively addressing staffing concerns will prevent disruptions closer to the acquisition, ultimately benefiting your transition process.

4. Optimize Your Profit Margin: When selling your practice, arguably the most critical aspect is your profit margin, often measured by Seller's Discretionary Earnings (SDE). To maximize SDE, be attentive to expenses and income that might need to be adjusted. Are you paying a family member above-market rates for menial tasks? Expenses like vehicle costs, club memberships, insurance, or retirement accounts can impact SDE. Take notes on potential adjustments and consider cutting unnecessary expenses, compiling a to-do list for post-tax season.

5. Assemble Your Team: Selling your business requires a reliable team. Seek out a broker and an attorney specializing in financial services firms. Building relationships with industry-specific professionals during tax season can be advantageous as it is often a slower time for them where they are more likely to be taking on new clients.

Conclusion: Preparing for the sale of your accounting practice during tax season doesn't have to be daunting. By following these five strategies – raising rates strategically, documenting crucial information, planning staff changes, optimizing your profit margin, and assembling your team – you'll set yourself up for a successful sale when the time comes. Don't wait until May; start preparing now to make this tax season your step towards the next step