One of the biggest concerns for a seller is confidentiality. Sellers do not want their staff, clients or competition to know that they are considering selling their practice. Inevitably, in order to sell the practice, you will have to market and interview potential buyers. When should you meet face to face with these buyers is the question? There is no question it is a sellers market at the moment. There are way more sellers of accounting practices than buyers, yielding the seller a higher market value for their practice in the end. However, this does not ensure that every buyer is going to buy the practice or even worse, want to buy the practice but unable to do so. You may have rapport with the buyer, come to a verbal agreement, go through due diligence only to find out that they are not qualified, either financially or professionally to purchase your practice. You have gone through all the hoops and hurdles and nearing the finishing line when, bam, you get word that the buyer is pulling out.
One way to prevent this from occurring is to prequalify them prior to disclosing your name or your firm’s name. How do you do this? The most effective and efficient way we have found is to have the buyer sign a nondisclosure agreement (“NDA”) as well as give some background information, including financial information, so that you can have somewhat comfort level with the buyer prior to meeting with them in person. The nondisclosure agreement is in place to confirm that they will not use the information they are obtaining against you and that they will not tell anyone that your firm is considering a change in leadership. The financial and background information is used to confirm that the buyer has the experience level necessary in order to retain your existing clientele. If the buyer does not qualify professionally and will not adapt well with your current client base, a purchase should not be consummated. Ultimately when selling your CPA practice, you will need to disclose some sensitive information, it is always better and more comforting to know firsthand who is getting this information and that they are qualified and will not use this against you should a deal not pan out.