On this week’s session, I’ll answer a question from Harry from Dallas who asked what options are available to him as the owner of a tax practice he wants to wind down. Harry has 532 tax clients and has been in the business for 22 years. He still loves the business however the workload is getting to be a lot to him. He has long lasting relationships with most of his clients even down to knowing their families and children and stories. He doesn’t want to abandon them as many are friends and have trusted him for years or decades. He has actually stopped taking on new clients 2 years ago even though he still gets plenty of referrals. Harry, there are a couple of exit strategies.
1st, you can continue on as you are are doing now. Manning your appointments, nurturing your client relationships, preparing the tax returns and overseeing your assistant. It is unfortunate to say however I have known many in the tax business who have literally died and never got a chance to enjoy the benefits of working so hard for so many years. Clearly, that is not your goal or you wouldn’t have emailed me.
2nd, you can sell your tax practice. Typically a tax practice sells for between 1 and 1.5 times revenue So for example, if your revenue is $100,000, your practice should be worth between 100 and 150 thousand dollars. In some cases, the buyer would want the deal to be contingent upon retention. That is a sticky subject as some clients will leave because they are used to doing business with you Harry. And others might not want to do business with the buyer. Or the buyer may not run the business in the same way that you do. However, from a buyers’s prospective, there is always a concern that the seller could sell them the tax practice and continue working the clients which is not cool. So there lies the negotiation. Finding a balance between what is fair for both parties. Additionally, most buyers will want you to carry back financing and pay you off over a number of years. Which could be hard to collect if they don’t do as well as you do.
3rd, you can become a Happy Tax franchisee and still maintain your relationships with your clients and yet not have to do any of the nitty gritty tax preparation work itself. All Happy Tax returns are prepared by licensed CPA’s and have free audit protection included with every return. That way your clients will still get to meet with you and give you their documents, talk about the year they had and reminisce about old times yet you don’t have to do the tax prep work or worry about processing and filing the tax returns. Our royalties are the lowest in the business and you’ll get to remain autonomous and get our industry leading support and marketing to add to your expertise.
Have a wonderful and productive rest of the week and take care.