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. The biggest advantage of own terms is that they allow the seller to move on to his next business without worrying about the practice for years after the sale. They also allow the buyer to completely control the operation of the practice. Fixed-price structures are very easy to document in a contract. The key to a successful transition is to have the right buyer for the practice sold; Otherwise, the 4 current concepts do not matter. Make sure that professional experiences, management styles and customer service philosophies match fairly well. If you are planning to leave your business in the near future and would like to learn more about how Poe Group Advisors is making it easier to buy and sell a CPA practice, please see our 25-minute informative video. Earnouts are popular sales structures for privately sold CPA companies, 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. If there is one section of the agreement to be particularly clear in advance, it is this one. I hope that the seller`s intentions will be revealed and transparent before he reaches the bidding phase. For buyers, this section is usually very sensitive when changes are proposed by the seller. It also helps to know what banking requirements are for the non-compete sector. We have seen separate non-competition agreements, but for the sale of accounting practices, the non-compete agreement can be quite short and concise as long as the primary points below 4 are well documented: due diligence when buying a CPA company tends to be done fairly quickly after an agreement.