Other customary closing conditions that must be recorded in the sales contract are bank financing and leasing contracts. The seller`s financing is usually documented in the price or conditions section and accompanied by a separate debt instrument. 3. Understand some of the types of clients in the practice, which includes sectors, longevity and complexity of the work. If you are buying or selling a CPA company, your sales contract should cover precisely, in full and simply these five essential terms and conditions. 2. Size – There is a «Sweet Spot» for businesses. In general, there are more buyers for audit firms that can be purchased and operated by a single owner. Firms under $1500,000 generally fall into this category. 5) Timing: The date of the financial statements is becoming more and more important, as the percentage of income related to the tax return increases within a company.
If it is primarily a tax company, the seller will want to sell as close as possible to May and the buyer will not want to close until November or December. Many tax practices have negative cash flow during 2-4 quarters, so a buyer must negotiate financial statements to that effect. The greater the practice, the greater the negative cash flows that need to be taken into account. 1. The essence of the non-competition clause is to prevent the seller from serving the customers of the practice sold. The non-compete agreement should cover a complete list of all customers sold and all customers held by the seller (if applicable). The seller should not be able to serve or promote the company`s customers, regardless of distance. Also remember that non-competition has tax consequences. Part of the purchase price should be allocated accordingly. In our experience, the majority of practices are sold between 0.9 and 1.3 times gross costs. Note that most of Poe Group Advisors` accounting practices are sold at a fixed price at closing.
We will devote a section to the conditions below, but unfortunately, in transactions with quota conditions, much of the practical value can be lost due to bad transitions and bad service after conclusion….