The demographics in the accounting and tax profession show that a majority of the practitioners are Baby Boomers. Having been in this profession for more than 25 years, I thought the exodus of the Baby Boomer generation, from their practices, was going to occur eleven years ago, but something happened. The Great Recession of 2008 occurred and many practitioners saw their retirement and real estate nest eggs dwindle substantially and they continued to work rather than sell their livelihood. This decision was made because practitioners just could not afford to retire.

Let’s fast forward to 2019 with everyone being eleven years older.  Some of the nest eggs have recovered in value, however in many cases, the practice values have declined by 25 basis points or so. In 2008, practice values in the Philadelphia area used to get 1.25 – 1.4 x gross. Today, they are getting 1.0 – 1.15 x gross. What is consistent, however, is that many practitioners still cannot afford to retire. In my career, I have seen too many accountants, tax preparers, CPAs etc. give their clients “tough love” about selling their businesses and retirement planning, but fail to take the advice themselves.

When a practitioner looks at their retirement situation, they must also look at themselves in the mirror. If you consider the value of your practice as an integral part of your retirement planning, burying your head in the sand is not a good Exit Strategy. The Fed keeping interest rates excessively low for the past decade has made taking income out of a practice a better decision than the 1% interest rate on the cash generated from the sale.

However, other options are available to you:

• Working out a consulting/employment agreement after the sale: or
• Downsizing by selling your 1040 or write up business separately; or
• Selling an office if you are a multi office firm; or
• Getting an employee or outside candidate to buy in; or
• Keeping several clients that would not transition after the sale.

The next five years will probably see more practices come to the market as many practitioners realize, for health, stress or other reasons, that they are not able to proceed on their current course. With millenials and Gen Xers more interested in being employees, I anticipate some pricing pressure ahead. In major metropolitan areas, it may be less apparent and further down the road than in more rural areas. I am already seeing this in Maine, which has the highest median age of any state in the country. Maine dynamics consist of more Sellers than Buyers and that usually has an adverse affect on the sales price.

In writing this article, the goal was to get each practitioner, reading this article, to do some personal planning and focus on this highly emotional subject before a life event forces a family member to!