There are many reasons why someone would want to sell their accounting firm – from the owner’s transition into retirement, to wanting to free up their finances for other investment opportunities. There are many factors to consider when deciding the value of your accounting firm for sale.
Methods of Evaluation
In general, there are two ways the sale of an accounting firm will proceed:
- Cents to the dollar
This is the more popular method of determining the value of a firm before selling, with the buyer agreeing to pay a set amount per dollar earned in the previous financial year.
- Multiple of earnings before interest and tax (EBIT)
Multiple of EBIT is favoured by businesses that are more profitable than others because they sell at a higher price.
The following factors need to be taken into account:
The location of any business is important – is your business situated in an area that is saturated with competing businesses? Does the company receive walk-in clients and interest because of its location? Is the location prestigious? All these variables affect the value.
- Client Base
During a sale, the client base can become a contentious issue. Usually, the buyer would hope to inherit the firm’s existing client base, so they don’t have to sign new clients after the sale is finalised. However, depending on the type of sale, the seller will either try to hold on to their client base or sell each client to the buyer at a determined price. This can dramatically change the value of the firm, and both parties would need to reach an agreement as they proceed.
When someone is looking buying a business, they also have to consider the existing staff members. The staff can define the ethos of the company, and it may be simpler to keep on existing staff than source new employees. How big is the team? What are their current salaries and will your budget accommodate the payroll? What are their qualifications and worth to the buyer and the company?
If you are thinking about selling your accounting firm, DMY & Associates can help you find a suitable buyer, manage the transition process and ensure that the sale process runs smoothly. Contact us to find out more about our services or go to our accounting firms for sale page to see other comparative businesses.