Agreement For Sale Of Accounting Practice
4. What can the seller actually do after closing? If the seller wishes to retain part of the practice or retain certain customers, make sure that the non-competition agreement is specific and clear. If the seller wants to do other types of work that could be considered “public accounting,” it must also be specific and clear. Often, contracts can be long and repetitive. This can be extremely problematic if it leads the parties to lose sight of what is really important. A successful sales contract is written so that everyone understands the terms of the contract and can move forward in a timely and safe manner. If you missed our last podcast with Chris Sloan on contracts, this is a great resource to get you out of it. Chris has a very rare and refreshing approach to creating contracts. However, your prospective buyer could help you find the person who will replace you as the face of the business. If the buyer`s practice is more attractive to talent, ask them to recruit the person and place them in your business. If this strategy is properly implemented, it can eliminate the risk of sales failure.
You should also give up service in the wrong customers. You know who they are — those who pay late, create problems and are in need or demanding. You don`t need any extra headaches when selling an accounting firm. Earnouts are popular sales structures for CPA companies that are sold for private purposes, but they have big drawbacks. For a salary, a buyer pays the seller using the future profits that the buyer actually lives. In a pure compensation agreement, the buyer does not take any risks when buying and does not pay interest, while the seller takes the bulk of the risk. This misdirected risk often keeps the seller involved in the practice for a long time after a sale. Having too many “cooks in the kitchen” can be very problematic in the management of the company after closing. Imagine how embarrassing and unconfeeded it would be if you were the unfortunate salesman who has to explain to the employees and customers of the company why the CPA you introduced as your successor is no longer your successor. This shows your employees and customers poor judgment and costs you a lot of credibility.
You have also indicated your intention to retire without a successor. This creates uncertainty in the minds of customers and employees, which can have a negative impact on future profitability, market capacity and the value of the practice. To this end, the seller of a CPA practice should never have a substantial conversation with a potential buyer or provide detailed information about the sale until the parties have entered into a confidentiality agreement. If the seller does not take this advice into account, he is irreversibly exposed to the possibility of abuse with negligible recourse. This guide is put at your expense by Xero and our partner Xero Kev Ryan, as we share the passion to help practices everywhere. If you hire an experienced business broker or professional consultant to assist with the sale, make sure that he or she follows good practice confidentiality procedures. For example, a broker or business advisor should never pass on a seller`s name or financial information to a potential buyer without first obtaining a signed confidentiality agreement. If the broker or advisor`s agreement is duly developed, it protects the seller as a third-party beneficiary when it does not identify the seller. Once a potential buyer has signed this agreement, the broker or advisor should provide the seller`s information in published form, without any identifying information. Next, the broker or advisor should have a full interview with the buyer to determine the buyer`s interest and determine whether that buyer meets all the seller`s qualifications and criteria.