TaxPro Quarterly Journal Featured Article - Spring

TaxPro Quarterly Journal Featured Article - Spring 2002

Six Steps to Selling Your Practice

You worked long and hard. Finally, it's over. Another tax season is behind you. Like many of your colleagues, you're probably wondering what comes next. Maybe you promised your spouse this would be the last season. Perhaps you set a goal for yourself and would like to make a career change. Maybe you love the business, but you're just tired of the challenges of being self-employed.

Every year at this time, NATP is flooded with requests for information on how to sell a practice. Clearly there are many factors involved in the process. Some practices are unique and have certain issues that must be specifically addressed; however, the following steps to selling your business should apply to almost all practices and hopefully supply you with more than just a starting point.

1. Determine When to Start the Selling Process
Many practitioners wonder when they should initiate the process of selling their practice. My first question to them is, "How many more tax seasons do you wish to work full time?" Most professionals have a significant number of clients whom they only deal with during tax season. It may seem like an eternity to you, but if you give your clients a three-year notice, from their viewpoint, it may only be three visits! To conduct a proper transition, you should build in some time that clients see, or at least perceive, you and the buyer working together. This will create a higher level of comfort for your clients. We'll discuss this further in Step 5. If your practice consists mostly of business clients whom you work with on a monthly basis, less time may be required to conduct a proper transition. But, if a high percentage of your clients are annual, you may need additional time to establish your successor. In an ideal world, sellers would affiliate with their ultimate successor for at least two tax seasons before they reduce their role.

Lease, Equipment, and Staff Considerations. In the event a practice is not dependent on the buyer retaining the exact same location, the date your lease expires may have an impact on the timing of the sale. By signing a lease, you may either eliminate the buyers who may be interested in bringing your practice into their pre-existing location, or put them in the position of reducing their offer by the cost of running a second office location. If your lease is coming up shortly, perhaps now is the time to look into affiliating with your ultimate successor in advance of committing to another extended period of time. If, on the other hand, you have a superb office location, having the option to retain the location may be critical to its ultimate sale.

Equipment has similar concerns for the timing of starting the selling process. You need office equipment, but why purchase new equipment if you are seeking to sell? Maybe this is a good time to affiliate with a successor who has the equipment you need, conduct a gradual transition, and then quit while you're ahead.

Suppose you need to hire some help. Why hire and train new staff if you are so close to selling your business? Instead, an affiliation with your successor, who has the capacity to pick up the work, makes more sense. Now you have help, plus you've simultaneously started the transition process.