As an investor-owner (not an operator-owner), unless there’s an existing operations manager that will take over the day to day from the seller, I intend to insert an experienced operations manager with a track record of running and growing companies in a specific industry.
I will be in a strategic advisory role as the mechanics and framework are identical across most industries.
FYI, the background of the CEO for the largest accounting firm in Arizona is marketing, not accounting.
I prefer to retain the existing management to run and grow the company post-closing. My approach includes long term incentives for management, along with operational freedom as long as strategic goals are being met and positive culture is maintained. I will only be in a strategic advisory role, staying away from client facing daily operations.
I intend to acquire businesses using a mix of equity, debt and seller financing which is my insurance to de-risk the transaction and mutually share both the benefit and risk with the seller.
I intend to close on a deal right away.
I am open for whatever win-win price and terms for us both, including all cash, after everything has been verified, to make sure everything is as you said it was.
FYI, all cash upfront will bring you the least amount of risk, though be advised that it’ll also be the lowest amount of overall money (30-50% below market value) since the buyer will be taking on 100% of the risk. Not to mention having to pay the broker (10%) and taxes (30-40%).
Here are your buyer options:
1) A solo investor like me with management experience
2) One of your children
3) One of your competitors (strategic buyer) who will merge your company into their company.
4) Big private equity firms, who usually require a minimum annual revenue of $10M, with an aggressive growth track, where they’ll require you to stay for another 3-5 yrs as their employee. Just as an FYI, 73% of those sellers end up being terminated by the PE firm within 4-6 yrs (2018 AlixPartners survey).
Since misalignment is the #1 cause of post acquisition failures (70%*), you want to sell to someone you have alignment with in these 4 areas:
1) Nearly identical core values
2) Similar management style
3) Similar communication style
4) Similar operation style
5) Similar vision-direction-strategy
* https://firmgains.com/business-acquisitions
Factors that increase the value of your business are: management team; recurring revenue %; client-staff retention rate; documented SOP’s; growth; profitability; diversified customer base; location; size and if it’s cloud based (13% higher). FYI, owner dependency is the single biggest risk for buyers.
Just like selling a house, car or any other item, the value of your business is determined by its present comparative market value. The basis of your company’s value is from the adjusted EBITDA. Current market comps for accounting firms:
- For $100k-$1M EBITDA = 1-3x EBITDA.
- For $1M-$5M EBITDA = 3-6x EBITDA.
Recent mid-sized transactions: $10M EBITDA (Cooper Parry) sold for 7x multiple (by Waterland Private Equity) for $70M. In January 2025 Blackstone bought Citrin Cooperman ($133M EBITDA) at 15x multiple.
* Valuations are sourced from M&A consultants focused only with CPA firms; business appraiser that only appraises CPA firms; business brokers that only sells CPA firms; accounting industry experts; and BizBuySell annual report.
When negotiating to sell a business, the seller and buyer both follow the Law of Price or Terms. You either win on the price and concede on the terms, win on the terms and concede on the price, win most of the price and some of the terms, or win most of the terms and concede on the price. The same applies with the down payment or price. The higher down payment the seller demands, the lower the price, and vice versa.
Yes, you can! Just be aware that business brokers sometimes have an upfront charge ranging from $2,500 to $25,000 and a commission of 10% when they close. Moreover, due to the lack of prospective buyers, up to 90% of their listings never sell (International Business Brokers Association, Main Street News Fall, 10-10-19). This means a majority of their income comes from the upfront fees, not from successfully selling your business.
To de-risk the transaction for buyers, 90% of businesses sold will involve seller financing (3-10-year term, 10%-100% LTV). My goal is to architect an acquisition process and deal structure that’s a win-win-win event for the seller, the bank-investors and allows myself to sleep at night.
Standard transaction usually takes 8-9 months (bank, SBA, private funding). However, depending on the terms we agree upon, I have a streamlined process wherein we can close in 1-3 months. Your transition out of the business ranges between 3 months to 3 years, depending on what we agree upon. Due diligence (1-3 mo’s) and bank financing (1-3 mo’s) are the two longest phases of the selling process. The quality of the bookkeeping and timely responses with accurate information are also factors that determine the final speed of the transaction.
The Due Diligence process usually involves: Quality of Earnings, Tax, Legal, and Operations—with each component taking roughly 2-4 weeks, with the last 3 components overlapping each other and crossing post closing.
Though I am a solo investor, I have a thoroughly vetted Acquisition Team: SBA Lender, Quality of Earnings Specialist, M&A Attorney, Tax Specialist, Operational Due Diligence Specialist, Insurance Broker, Escrow Company, Transition Advisor and EOS Expert.
Once we get the ball rolling, you should expect honest, open, frequent and respectful communication from me. I appreciate working with sellers who approach their business and life the same way.
After signing the LOI or Term Sheet, one of many followup conversations end up killing the deal altogether. You can expect to have every last one of those discussions in one sit down conversation with me upfront, before signing anything. So expect to have all the uncomfortable discussions upfront. This ensures that if any deal will die, it’ll be with the first conversation, instead of a multitude of off ramps later, only after much time, energy and money have already been invested.
Absolutely. These will all be discovered during due diligence. Openly and honestly disclosing these things right away will only save time, energy and money for all involved.
So, it is in your own interest to be forthcoming about any issues such as: Back taxes, realistic hours worked,toxic-incompetent employees, poor bookkeeping, no process documentation, bad standing with the state, debts, litigation, liens, etc. so we can both make decisions all data that will eventually get uncovered during the confirmatory due diligence process.
A majority of the time, the seller plays a role(s) in the daily operations such as sales, bookkeeping, managing, operations, etc. Those positions will need to be replaced because I am an owner-investor, not an owner-operator.
The seller’s pay-salary will need to be expended and will not be part of the net profit. If needed, I will be hiring an experienced operations manager and trained by the seller, usually for 3-6 months, to take over the seller’s day to day responsibilities, as I take on the strategic advisory role.
Selling a business without WC is similar to selling a car with no gasoline. It is standard protocol that the agreed upon price is for the entire business, including working capital. Also, a business without working capital will not have the highest chance of success, only setting up the buyer and the inherited team to fail. Lastly, it’s standard protocol for the lender to require the inclusion of working capital in acquisition transactions.
There are 2.5 million businesses being sold on any given day in the U.S., and roughly 3,000+ business owners will be retiring daily for the next 15 years. Because of the growing number of businesses for sale, only 1 out of 10 businesses will sell.
At the same time, there’s also been an explosion of buyers with roughly 98% of them never able to actually close due to not having a dedicated M&A acquisition team, or successfully manage employees due to the lack of managerial experience as well as lack of subject matter experts (SME’s) guiding them post-closing.
So for virtual firms in the largest MSA, it’s a seller’s market. You should expect to be under LOI in roughly a month after going on the market. For the rest of country, it’s a buyer’s market, because of the abundance of firms that are currently waiting to be acquired. Firms that do close usually a median days in the market of 166 days (*BizBuySell Report 2024)
Of course! Just call-text me at 888-973-5394, to set up a time for a chat about your situation. I sincerely enjoy getting to know and providing value to others.
Even if you’re planning on selling in 20+ years, you can’t go wrong in planning on making your business exit-ready.
According to ValueCreationEngines.com, for owner-dependent businesses, the owner need to start the exit planning process 5-7 years before the ideal exit time. Exit Planning Institute says 5 years.
It’ll take roughly 2 years to delegate, optimize processes, automate and systemize everything. It’ll take roughly another 2 years to optimize the marketing and sales engine. And another 12 months to prepare due-diligence materials, QoE report, CIM, etc.
If you are considering selling your business, please click the link below to fill out a quick 5-minute form, or just call-text me at 888-973-5394.