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The Practice Wheel

Post Date: 1/28/2019

Blog Archive/ Written by Derek Leroux, CPA
Contributor: Transition Consulting, Practice Value Management, Practice Acquisition & Sales 

    It was an afternoon in late September, and I was having one of those all too common "timing of sale" conversations with a seller client. After a couple of years in conversation (Mostly, right after tax season), my client had finally decided to hit the market just 2 months earlier, and an offer was on the table. Here is what the dialogue sounded like, and I paraphrase...

  • Client: "In a couple of weeks, things will really slow down, and then the holidays are here". 

  • Derek: "Well, this is a good time to close with a clean year-end cutoff, an easy transition window, and besides...this is a great offer, so what are your concerns?"

  • Client: "If I just wait a few months, I'll make all of the revenue from tax season, and I'll still have the practice to sell right after tax season...So, we could go back on the market then..."

  • Derek: "Yes, but this is a tax practice, and the upcoming tax season revenue was a factor in the offer...and, there is no guaranty that this buyer will still be around in 6 months or so..."

  • Client: "I know, but after some rest, I may be up for one more tax season..."

  • Derek: "It's The Practice Wheel"

  • Client: "The What?"

  • Derek: "The Practice Wheel...Are you ready to jump off?"


    Have you been mulling over the possibility of selling your practice for awhile, over a year, maybe even many years? If so, does this exchange or the mindset sound familiar to you? You know it's time, but work and life make it feel like you're running in place. Many factors can sway your commitment to a sale throughout the process...Here are some:


  • Seasonality of practice demands from Spring Tax Season to Year-End Close and everything in between

  • Emotional ties to the practice and employees

  • Family Support

  • Client relationships

  • Compiling practice information, necessary to seriously begin the process



    So, when you finally decide to take the plunge and really start the practice sale process, it's easy to lose sight of the forest for the trees. 


    For you, like most accounting professionals, the sale of your practice will probably be a once-in-a-lifetime endeavor. I'm sure you would agree that any event like this deserves a plan, even if it fits on the back of a napkin, so to speak. It's important to stay on track from the day you start thinking about selling to the day you sign on the dotted line. Here are 4 easy steps to take before you get started - When referenced through the process, these will be reminders to help you stay focused from start to finish.

Step 1:  Define the reasons why selling now makes sense.  In other words, what has kept you from selling before, and why would you be concerned about waiting? Retirement is inevitable, but each practice owner will have a unique set of factors that affect the timing of a practice sale. Before getting started, objectively define all of the reasons why you have decided to sell now.  


Step 2:  Describe your ideal buyer. To be clear, this exercise should be used to outline the type of buyer profile that would be ideally set up to successfully takeover your practice. By stating the credentials of a compatible prospect ahead of time, the vetting process should be more straightforward for all involved. Using this description along with a bit of "...I'll know them when I meet them...", you will be ready for a targeted buyer search. 


Step 3:  What would be an acceptable offer? Before you begin fielding offers, it's vital to, first, understand your practice's valuation range, customary sale models and the factors that affect transition structures. With that knowledge, you should consider the overall purchase terms that would be acceptable to you before getting started. Carefully and conservatively defining your expectations should avoid the potential for a moving target through the process. 


Step 4:  Be honest with yourself on the intangibles. In contrast to Step 1, here is where you throw logic out of the window. In my many years of working with clients, I have seen the practice transition process derailed for many reasons. Often times, predictable "softer" issues come into play that the seller did not properly account for early on. The concerns of a spouse, thoughts of life after the practice, and other emotional reservations can surface if not dealt with in a transparent manner. 


    Distractions are sure to crop up...But, if you own the logical, emotional and business rationale for your decision before getting started, these reminders will help you stay on track . As I point out with each of my clients, think of the approach you've taken in managing your retirement portfolio, buying your home or making any significant business investment in your life...Be deliberate!  For many practice owners that are grappling with the decision to sell, The Practice Wheel is always there to offer distractions...Make sure you have a plan to jump off. 

The Practice Wheel

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