Discussion:Buying an accounting/bookkeeping practice

This is my first time posting here as I've just found this forum recently. I am planning to purchase an established tax/bookkeeping practice to work from home while keeping my full time job as a tax accountant at a public accounting firm. When my on side business is stable, I'll quit my current job. I have 3 years experience in tax and 5 years in general accounting. Currently, I am pursuing my CPA. My plan is purchasing a business in the range of 100k -120k and hiring a contractor to help me out during the tax season. Do you think I should go through the broker or search for a retiring business owner by myself? BTW, I am in Houston. Any advice is greatly appreciated.

I guess you would need a broker. I'm not sure how else you would find one to buy. I do see these types of things on Craig's List sometimes, but it's rare. Also, an experienced broker can help you determine a fair price, etc.

Probably like most I went the route of building my practice while working in industry for about 2.5 years with the most significant growth coming in the final 9-12 months. Once I had a handle on how to market and the types of client to go after business just started rolling in.

The thought of owning my own practice has just got in me about a month ago. I've just started looking around for practices for sale and found one that is for sale at around $120k. The owner's broker told me that this business is a home based one. The owner meets his clients at a virtual office whenever his clients need to see him. I'll meet with them next week. Since the broker is on the seller's side. Do I need to find another broker who represent me? I've read through previous posts and got some ideas regarding buying an accounting practice. But I am not really sure if I understand the retention term correctly. For example, the seller had $110k in gross revenue last year, now he wants to sell his business for $125k ($1 for $1.13). I negogiate to make $25k down (20%), the rest will be pay over 4 years, 20% of whatever is collected in year 1, 2, 3, 4. If year 1, my gross revenue is $110k, I'll pay the seller $25k. If I make less than that, I'll pay him less. if I make more, I don't have to pay him more. Is it correct? Sorry for all of the questions. I've just ordered a book "The complete guide to buying, selling or mergin your accounting...practice" from Amazon. Hopefully, it will be arrived next week.

I have a question for the people on this forum with experience buying/selling firms- I would very much like to purchase another practice with a 15-25% down payment and the remainder paid over 2-4 years. Is this acceptable for any size practice or only large ones? I am looking to buy a practice around $75-100k.

Most good practices/sellers will NOT sell to you unless you pay a big down payment because

a-no real track record b- no office c-not committed full time.

Why would a retiring accountant take that risk unless you pay all upfront.

the deal you describe , in my guess, is a very hands on, clients are demanding practice and once they realize you work full time, you may lose many of the clients.

Just playing devils advocate from experience.

I did not read your first post(s) so I was not speaking to , I was speaking to the original poster. Apology.

Where in FLA are you?

Zip- good info. I can easily come up with 25-30% on my own. If it's a great practice and a larger down payment is required my relative will kick in my some help.

Goodwill/client list, capital gain and 15 years amortization. Consulting, SE income and current expense. Non-compete, non-SE income and 15 year amortization.

I saw this in another forum where others smarter than me raised these issues.

FloridaTaxes - do you mind sharing where do you see the sale list without brokers? I've tried Houston CPA org, community ads but no luck yet. I am thinking to put an ad for buying a practice on Craiglist or on my community letter.

You can sign up with them for free as a buyer and they'll send you updates when there is a listing in your area. I haven't found anything yet... but hopefully after tax season.

2- brokers will add 10-15% of the price. For a small $125k practice, not worth the broker fee in my opinion. 3- get an attorney to help you on all the legal documents and to help you on your DD.

Good luck, A

I'll try Craig's list just in case something pops up.

For 125K, the legal fees could be split by using ONE attorney and should be no more than say $1,800 or so. When I sold mine in 1995 it was a 100K practice , we did NOT use an attorney. The reality is if they hose you , you still have to sue etc... the reality is the agreement is no better than those who sign it.

You need a promissory note, a contract, a written asset allocation and maybe a bulk sale form for assets but I doubt it.

Good Luck!

What are your opions on buying an existing H&R Block franchise? There are several HR Block offices for sale on their website.

Everything is negotiable. If they only recently came on the market I would think the seller would say of course they need 50% and no guarantees.......perhaps the word is patience. No sense rushing to buy someone else’s problem. When I've talked to brokers in the past they our course pound on you that this practice won't last.....almost forcing you to agree to a sellers demands. I said pass and of course 3-6 months later the practice(s) is/are still available.

Also, the majority of the firm's revenue is tax work. My worry is that if I buy the firm in the next 2 months, I am getting "jipped" out of most of it's 2010 revenue. Any thoughts on that?

Yes, unless you structure the payout as returns are done (this year and next), you may be getting the short end of the stick.