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Selling Business


windmill

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I am starting the process to sell my business.  Asking for some tips.

I have contacted one person who also works out of their home, but use to have an office front. 

Any advice of how a transition should/could happen.

Don't need to write a book about this, but one or two tips and/or cautions.

Thanks

 

 

 

 

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I was approached by HRB a couple of years ago, and I followed up on the call. They offered me the price of one year's gross receipts paid over 3 years. I was to work with them through the transition. I didn't ask any more questions because I wasn't going to sell right then.

My financial advisor told me that when I'm ready to retire, I should keep my Top 20 clients and bring that income to the retirement equation.

So, there are a couple of quick thoughts just off the top of my head. Not a book!

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You are selling to someone who operates from their house?

Were they expanding prior to this, or contracting?  Since they used to have an office elsewhere, it seems they are not growing.  Can they pay you? 

Are you going to do some transitional work to insure that the clients go with the new preparer?  Will you negotiate a rate for this?

Are you moving out of town, and leaving it all behind?

Different scenarios can create different answers.

Rich

 

 

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The biggest issue I found when trying to sell my business last year was "buyers" who were not certain (or upfront, but I'm trying to be charitable) about what they wanted.  Got all the way to an offer to buy with one set, who at that stage changed everything we had been talking about and only wanted the file-by-April 15th clients; no one else.  Another guy who was all fired up about getting an office west of Boston where he has as slew of clients - then changed his mind and decided to move all operations to inside Boston (and he was mainly interested in storefront businesses).  A lady who thought she could run my business part time while working elsewhere (hah!).  

Standard pricing seems to be roughly 1 x annual, paid out over a couple of years after a big down payment.  Make sure you have a lawyer look at the contract, and make sure there are provisions for increasing your take if, for example, new clients call you and you refer them to your buyer.  Non-compete covenants are getting increasingly hard to enforce, which can work on your side but also means your take will be less if clients do not transition over.

I ended up dumping the thought of selling and instead will merge my practice with some colleagues I've known for years, and then gradually back out.  They'll pay me, over time, for all the clients who stick with them.

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On 5/31/2017 at 7:21 AM, Possi said:

I should keep my Top 20 clients and bring that income to the retirement equation.

 

I'm confused by this, are you saying you'll just continue doing the work for those 20 clients only and sell the rest?

My "retirement" plan is to drop down to about 20 clients at the age of 60 and just handle those and only them. As they die or move - I don't replace them. Those 20 would pay for the healthcare costs for my wife and I until we hit Medicare. My top 3 clients would pay for our health insurance.

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My financial planner doesn't want me to sell the business. I don't think he understands how much I want it. I would love to sell the business and work for whoever buys it, for a few years. To get this business out of my house and be able to be off, truly off, after April 15th would be a dream come true. The older I get, the harder it is for me to deal with late filers, extensions, and just plain WORK in the off season.

So, he would rather I just keep working, a lighter load, and keep the business. Yes.

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6 minutes ago, Possi said:

he would rather

Maybe he needs a reminder that he works for you, and not the other way around.  Try calling him at home on a Sunday afternoon with a planning question.  Or after dinner.  Several times over the course of a couple of weeks.  He might get it, then.

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16 hours ago, Possi said:

So, he would rather I just keep working, a lighter load, and keep the business. Yes.

This is something that has been on my mind as well.  Just received my Medicare card (saves me $9,600/yr or about 48 tax returns) so I decided to make a decision when I'm 66 about how to retire.  If I do what Possi's CFP says to do and keep 20 clients, that's an option, just need to be sure I have something to do with myself after the second day of tax season.  

But my big issue is the selling or not selling but transfer of clients.  All my business is mail in but my clients are not faceless.   I know them all very well as we have crossed paths in life and many clients are now their kids, or other family members or friends, some I have not met but I do bring it to a personal level.  This may have been a bad idea..  I keep a running file on their life issues and a calendar if they have an event coming up so I can call, especially if it is a medical procedure.   These people are important to me, so how can I sell and have them go to some clown, or a Lady Liberty impersonator.  What if they are unhappy?  Who do you think they will call?  So, my plan is to put in my letter next year that I am thinking of retiring soon and they should think about who will be their new preparer or they can ask me for a referral.  I have a good sense of how everyone here is dedicated so I would feel comfortable recommending you for my out of state clients, so many have retired to warmer climes.   If I refer the bulk of my NY or MA clients to someone I would expect some kind of arrangement to cover the transfer costs, but I could not sell these clients willy nilly to the highest bidder.   I'm fortunate enough not to need the money, and will feel peace of mid that everyone will be taken care of with someone I feel is competent and a good fit for them.  I know many of you feel the same.  When everyone gets settled in, I'll change my phone number.

Or maybe, I just may be writing this when I'm 70, I sure hope not, because then it will be even harder to do.

 

 

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I am 75 and hope to keep working far into the future.I have two different sets of clients. My walk in office I would not hesitate to sell to HRB they call every year. My mail in and people that come to my home I feel as FDNY does and have no idea how to handle them when the time comes.

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I turned 70 last fall and plan to keep working as long as my health stays good, since I enjoy what I do.

Most of my income comes from 9 monthly writeup/payroll/tax clients.

The largest ones I also function as their contract controller/CFO.

These are all clients, that I have had for many years, so it would be very difficult for me to sell my practice.

Last year I did less than 70 tax returns, so I don't have any walkins.

Occasionally I will get a new client due to an unsolicited referral.

Financially, I am now in a comfortable place, now that I am on Medicare, plus I started receiving SS last year.

It's a wonderful life, now that I am working about 20 hours a week.

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I too plan on working until I don't want to anymore because I love what I do.  At some point I may not want the grueling hours of tax season so may go to work for a big practice or tax attorney doing legal research to derive "substantial authority" for positions clients might want to take.  And/or do estates and trusts only, especially estates since they have their own fiscal years and don't get bunched up into a few months.

I understand everyone's concern with letting go long-term clients and worrying about them getting into good hands.  Don't.  Long ago when I was with HRB I put off leaving for too long because of concern for loyal clients, many of whom had been with me for years.  (I was always booked solid every hour I worked and fortunately didn't have to deal with walk-ins.)  After I bit the bullet and left, a couple of dozen found me even though my new position wasn't anywhere near the HRB area.  The rest I trust got settled with someone else or somewhere else.  I still think about the deaf client whom I always started with a big sheet of paper so we could write each other notes, and the one who couldn't read but wouldn't admit it so I had to read things to him.

Now I too have lots of mail-in clients I've worked with for years, and almost all need advice or opinions from me year round.  You know what, though?  If and when I retire, they might just find someone in their locale and realize it's better for them that way.  This year I picked up two new clients (referrals since I don't take new clients) who had been dealing with out-of-state preparers and finally decided to go local.  Both were thrilled with the ease of getting their returns done, dropping stuff off, etc.  It will happen to your clients too. 

Maybe the hardest part of letting go is admitting we are not indispensible.

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I like the last three responses as they are an argument and my thought about not retiring.  I too enjoy what I do,  look forward to the start of tax season, finishing CEs before the start, and catching up with old friends/clients.   I've said to myself, be careful what you wish for in retirement, with so much leisure time, would I really make good use of it?   Crossword puzzles are not my thing and as much as I love TV I run out of stuff to watch now.  When I travel I can't wait to get home and my 4 car garage is meticulously organized, could eat off the epoxied floor.   There is nothing left for me to fix other than changing watch batteries and if I work out anymore I will burn out my Fitbit.  

So staying in the business may be a good fit for good health and mental fitness for me.  Really makes you think....65, 70, 75 years of age is not old at all, as long as you think young, keep moving and enjoy work and life.   Who has it better than us?

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I am not thinking about retirement this year.  Or even next.  But I do think about changing the way I work.  I would love to not be responsible for everything.  And I am sure that if I  do decide to change, I could keep a few bookkeeping clients and prepare taxes for another firm.  But it is hard to change to doing things the way another person wants when I have been used to doing it my way for so long.  Not that my way is perfect; I just like getting to decide what changes to make each year.  And I get really tired of the attitude I perceive from the IRS.  If anything drives me out of this business, that will be it.

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I'm 81 and didn't do tax returns this year.  I am still doing some payroll and sales tax and a little bookkeeping.  I quit doing income tax because my mind is just not functioning as well as it used to and I was beginning to have trouble keeping up with the changes in the tax law.  I just felt that it wasn't fair to my clients to continue doing tax returns.  I just gave my tax business to a friend that saved my business for me when I had a massive heart attack nine years ago.  Another big factor that caused me to quit taxes was that I am having more and more trouble getting my computers to do what they are supposed to do.  I used to be able to work with DOS without any problem, but windows is getting to be more and more of a problem for me now.  My mind is slowing down and computers are getting more complex.  I believe God intended for us to work for as long as we are able but to be able to recognize when it is time to slow down, but even then we should stay as active as we are able to.

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All I do are tax returns. No accounting, no payroll. I'm not ready to retire yet, but at 61 I am still thinking about how many more years I want to work. "WANT" being the operative word. This year I did clean up my client list by sending several clients away, for a better fit. We all know what that means.

I don't want to work forever. I am getting less and less enamored with being locked to my computer for 4 months, having over 40 extensions, and having the tax season drag on until October 15th. I want to play. I want to go outside and play in the sun. Without any work hanging over my head. I love my clients, love my work, love the challenge. But most of all, I love the "seasonality" of the business. And that season is spreading out too much.

The responsibilities and complexities of being a tax professional might be what actually has me whipped. It's almost like I have to stay sober all year long.

Geez...

 

;)

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Since I started this thread, I want to give an update.  The first potential buyer called and said he didn't think it was fit after reviewing some of financials. However, he did mention a friend of his who might be interested.  This second potential buyer and I had a two hour meeting getting to know each other.  The one take away was we agreed that January 1 would be a good takeover date.  Of course, many other details will be worked out over the next months.  We have another meeting scheduled for July. Looks promising.

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  • 1 month later...

Had a second meeting with potential buyer.  He is looking for a store front on a main street here in town.  We haven't got to the purchase price yet, but he did indicate 1 to 1.5 of gross revenue for the year would be a reasonable purchase price in his mind.  Of course, I would work in the new store front the next tax season. We agreed that we would split 50-50 whichever fees that I would take in on a per return basis. No hourly wages. Just based on production. We talked about 20 percent down.  I think I'll do a credit check as I am carrying the note.

Comments?

 

 

 

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Not sure why you would be splitting revenue if you are paying 1 to 1.5 of gross, unless this is part of the payment plan.  Make sure you have provisions saying what happens if revenue exceeds prior year, and if revenue is less than prior year.  You don't want to end up paying him full freight if even a fifth of the clientele leave.

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