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017, welcome to this web site.
25 years ago, I bought an accounting business.
Advice. Find somebody selling an accounting practice.
Prepare a Business and Marketing plan.
Due diligence is a term used involving
either the performance of an investigation of a business or person, .
It can be a legal obligation. Do you have a Lawyer??
Do you know about SCORE?? SCORE is FREE.
Thank you for the welcome and thank you for the advice.
At the current moment, I have already the accounting/bookkeeping practive I want to buy. I have even made some financial projections (I have an insider feeding me information).
I do need to start a Business Plan though.
Based on what I know of the company and prior history, the purchase price would be around $500K. Do you know if with a solid business plan a bank will lend me that kind of money or would I have to go a separate route such as a venture capitalist or something else?
Also, I will need a lawyer by the time I will be ready to make an offer and do the negociations since it is a delicate situation because of the insider.
Please let me know what other advice you can offer. Thank you again for the help!
im not quite sure if this helps.. but i found an article that about Growing Your Accounting Business in Five Easy Steps. eventhough you're still asking for advices on how, atleast you get to be optimist and know what to do in the near future once you finally have your business going..
hope it helps!!
Thank you that will be helpful, maybe not now, but definitely for the future.
One of the above sites sells a manual that has some helpful information. It was $130 three years ago when I bought it.
Valuations are typically a multiple of either revenue or cash flow. If you are using a lender, they are also doing due diligence on the transaction. That helps a little in making sure the numbers work.
Most of the bigger accounting brokers have cash flow lenders in addition to the SBA. They can be more flexible and may not require a lien on your house.
Just remember that if you use a broker that they represent the seller exclusively. THEY DON'T HAVE YOUR BEST INTERESTS IN MIND. They may say that they do. They may even believe that they do, but it isn't accurate. You have to watch out for your own interests. I am not saying that they are unethical, but they work for the sellers and themselves. There simply isn't room for them to take into account your interests.
Don't get bullied over terms. If something isn't right for you, walk away. Better to miss out on what might be an ok deal than to lose on a bad deal. That is not to say you won't have to make concessions, but when it feels like too much, it probably is. There can be a better opportunity in the future despite what the brokers say.
Due Diligence is big. Review at least two years of bank statements, tax returns and any accounting records to make sure revenues and expenses are close to those represented.
Have your attorney check with the IRS, SEC and all of the state licensing agencies for any license the person has held - insurance, investments, real estate etc. Check with the AICPA and state CPA society or other relevant body if not a CPA practice. You may be able to use what you find as leverage or just walk away.
Fell free to email me with any questions. firstname.lastname@example.org
Thank you! You have given me very wise advice and I appreciate every bit of it.
In regards to due diligence, I do have an insider that aside from helping run the practice (it is not really a CPA practice, it is an accounting/bookkeping business) also maintains the financial records of the company. I guess what I would need is a search to make sure there are no liens on the business or pending litigation or the like correct????
In regards to business valuation, I just want to make sure the business is really worth what I will be offering since I dont want to over do it. Another reason is to have it as support for my business plan.....
Thanks again, any other advice will be apprciated.
What is the entity type of the target? Are you looking at asset only or stock? If the seller only wants a stock sale for tax reasons, there may be some attractive ways to get him or her to budge to minimize successor liability.
The company is currently registered as an LLC...... I think it would be asset only.....
<<I want to buy an accounting business; can someone offer me some advice as to what steps should I take, such as business valuation, best financing options, performing a due diligence? And refer me to someone that can help me with such things! Thank you!>>
You may want to consider a business broker. It will add 10-12% to the price, but you're buying expertise.
Contrary to Dublin's advice that the broker represents the seller; it depdnds on what state you're in, and the choice of the brokerage. When I was a biz broker in Florida, I was "Transaction Broker"; representing neither the buyer nor seller, but rather, just attempting to bring the two together.
As to valuation, this is done with comparisons, just as realestate transactions. As Dublin indicated, it's based upon a multiple of cash flow, the amount of cash flow, and the "going multiple" for that type business. EXAMPLE: A business yielding an adjusted cash flow of 35-40K, isn't worth much more than assets + a consideration for employees and everything being "in place". If the cash flow is 100K, it may be worth a 2.5 multiple. - etc.
HOWEVER... the evaluation is just an indication of the average sales price. The MARKET actually determines the sales price. That is - what the buyer is willing to pay that the seller is willing to except. Often it is influenced by the urgency required by the seller to sell.
As to Due Dilligence....It's simply confirming that the financial statements that are presented by the seller are (essentially) factual, and that there are no "hidden hammers" hanging over the head of the business.
You're wanting to buy an accounting firm.. If you can't do your own due dilligence, perhaps you shouldn't be considering purchasing an acccounting firm.
Confirm remaining length of the lease, and if a short term, make the purchase offer contigent upon a lease renewal with terms satisfactory to you.
Negotiate for as lengthy familiarization period as reasonable, and additional telephone counsel, when needed, for 6 months, or so.
And finally; don't buy the "company" (corp, LLC, etc.); instead buy the assets, customers, name, Non-compete agreement, etc. The "company" may have some hidden alligators" that you don't want to jump up and bite you.
I am attaching a link take a look and give them a call, Mention that you were sent a link via this website and they will help you. They do mergers and acquisitions for the accounting industry, they have been doing this for 20+ years. They will talk to you and give you advice.