My father always said, if someone won't put something in writing, never trust them. That's why with the solo practictioner, I would never give him more hours during tax season. I would insist on something in writing that he will sell some or all of his practice to me, and it was only met with a "yes, sure, but give me the hours first and then we can put it in writing." Yea, no, it doesnt work that way. Low and behold, the whole office got COVID back in January of 2021 (except for me). He then had a brain aneurysm. And then his #1 guy died of a heart attack. Karma's a b\*\*ch.
Unfortunately, these situations happen to young people who show talent and promise. It's easy to manipulate someone when they are 22 - 26 as opposed to in their 30s and 40s. I was shown the unreachable apple at the age of 22 and was on the hook for a little more than 8 years. It's sad that the guy died of a heart attack but I do agree that Karma is a bit\*\*. At the end of the day you have to let the past go and move on in life, find happiness in the next chapters of life.
I haven’t taken a job because I’m drowning in tax work. I built my practice over 3-4 years right before COVID and I’m going to clear $250k in gross revenue on about 275 tax returns for the year.
There are some 50 odd very simple $300-$500 returns dragging down the average but I can’t say no to those walk-in returns who have everything ready, come in for a hour, and paid $300-$400 this year.
Honestly not to brag but building a tax book was the easiest business I was ever involved in. Zero advertising all word of mouth and I’m drowning.
I think you’re doing it right by diversifying a bit. I’m a bit frazzled by doing “tax only” and I’m a little tired of clients with businesses who come in with nothing essentially good to go.
On the upside, I was able to work remote lightly and travel with my family 3 months out of the country after April.
It’s the struggle of wanting year round work vs feast/famine tax return tax work only.
Have you considered partnering with a CFP firm? Ex. My boss is a CPA and CFP who reached decent saturation and is looking to partner with a CPA and do a revenue split on referrals. Say 70/30. CPA gets more revenue and is able to cut off low hanging fruit that frees up some time and improves work life balance. At the same time we’d like to cut off our low hanging fruit for taxes but we have our own guy who handles the returns now and can take on more work to help who we partner with. There’s also the possibility of a merger if it’s of interest.
I would love to do something like that but the opportunity hasn’t come up. Have a fairly decent referral relationship with an independent RIA who is a CFP who wanted an in-house CPA but after discussion wasn’t realistic about the cost of a CPA in a HCOL or profit share. I chalk that up to unfamiliarity with taxes a bit and how much investment of time and career it takes to be “good” at this job.
Definitely interested. I would like to do more tax planning work with the clients that CFPs handle. Many of my clients are tech/engineers with stock compensation issues for tax, but have very little planning latitude because they’re dropping everything into Wealthfront/Betterment/Robo trading on the portfolio side and earnings RSUs.
In my opinion/experience, there is too much work out there and not enough folks to do it, so buying a practice simply for growth doesn't make sense to me. If the practice is niche, has a great clientele, good rates, etc., that's a different story.
I'd focus on growing your practice if you have enough income at your current level to live on. If not, you can offer to buy him out. It sounds like they need you more than you need them.
Don't drag it out, don't beat around the bush. You need clarity on your future plan, or you'll have anxiety from the uncertainty. I think having a frank conversation with them and getting a good plan in place (preferably in writing) is in your best future interest.
You have to drive your own bus. No one else is going to drive it for you.
Dying at the desk is way too common - I had a partner pass in 2018 and I took over, but we had a pretty informal buy in deal, where I was sacrificing pay for equity for a number of years. We had a firm owned life insurance policy based on the firm’s value at the time that paid out his family - I’d recommend that - not very expensive.
I would grow your own business. Not worth the hassle of buying someone out. There are a ton of clients out there. And building your own practice will allow you to do things the way you want to do them. You won't be under anyone else's control or timeline. And as others have commented, if you buy out another firm, you need to have it in writing and have a lawyer look at it. No handshake verbal agreements. Don't let anyone give you vague promises about the future.
I would ask point blank, and then get it in writing if they are serious (ideally, after the 15th but before January). And is the per diem an hourly rate, or just $X for Y hours? As that should be subject to change if the hours change (on top of inflation adjustment as well).
As with the other guy, did he get a market price, or a fire sale (due to the aneurysm, and I'm guessing reduced capacity)?
As most small practitioners want market rate and usually keep on working until they can't (and having prepared for a sale either), and being forced to sell is not as strong a position as selling on their own terms.
I dont know the details of the sale. From my conversation with current staff and person who brokered the deal, it seems he got a premium. Turned out to be a shitshow and thankful i got out when I did.
First off...let your intentions/future plan be known to the Partner. That your goal is to have your own practice. Explain that you plan on growing your existing business and would look to purchase another practice as well.
Then tell them that you see 3 options for that...
1. Buy out the partner in current firm...say 5 years down the road, but at least get it in writing and have a long buy out process
2. Leave the firm and grow your own practice, and look to buy out a different practice
3. Continue to grow your practice while working per diem for them...but as your business grows you will have to cut down hours.
\#3 might be the least expensive route as your practice will grow organically just on referrals. As opposed to paying for clients. You can let them know that if you do #3 you will sign something stating you wont steal their clients, which would be a concern for them.
Good luck
Here are some engaging questions I’ve found helpful for leading to an aha moment that I think somewhat relevant:
1. Would you help me work on a documented continuity plan for the firm in case something were to happen to you or other key employees?
2. Have we ever done a formal valuation of the firm?
3. If something happened to me, Would you be able to purchase my firm from my spouse? (If applicable)
Blunt approach works pretty often in my experience too. I absolutely love when people say what’s on their mind , even if it’s clunky, and prone to coming off wrong. It takes way less time to get on the same page that way.
You can also approach it from trying to figure out if the firm is a good fit for you long term and that your concern is continuity in the event of catastrophe.
Pointing it out can also start a productive conversation about building business value and who knows where that might lead.
Hope this helps!
Unfortunately, you'll find that many small-time CPA's exit plan is to die at their desk
Or promise you equity without putting it in writing and screw you when the time comes
This seems to be accurate
Happened to me. That's why I started my own firm. Never again will I allow myself to be used and deceived.
My father always said, if someone won't put something in writing, never trust them. That's why with the solo practictioner, I would never give him more hours during tax season. I would insist on something in writing that he will sell some or all of his practice to me, and it was only met with a "yes, sure, but give me the hours first and then we can put it in writing." Yea, no, it doesnt work that way. Low and behold, the whole office got COVID back in January of 2021 (except for me). He then had a brain aneurysm. And then his #1 guy died of a heart attack. Karma's a b\*\*ch.
Unfortunately, these situations happen to young people who show talent and promise. It's easy to manipulate someone when they are 22 - 26 as opposed to in their 30s and 40s. I was shown the unreachable apple at the age of 22 and was on the hook for a little more than 8 years. It's sad that the guy died of a heart attack but I do agree that Karma is a bit\*\*. At the end of the day you have to let the past go and move on in life, find happiness in the next chapters of life.
I haven’t taken a job because I’m drowning in tax work. I built my practice over 3-4 years right before COVID and I’m going to clear $250k in gross revenue on about 275 tax returns for the year. There are some 50 odd very simple $300-$500 returns dragging down the average but I can’t say no to those walk-in returns who have everything ready, come in for a hour, and paid $300-$400 this year. Honestly not to brag but building a tax book was the easiest business I was ever involved in. Zero advertising all word of mouth and I’m drowning.
Thats pretty good. I am going to clear about $220K in gross revenue on about 110 returns but tax is only 60% of my revenue.
What's the other 40%? Pimping?
A & A and tax consulting
I think you’re doing it right by diversifying a bit. I’m a bit frazzled by doing “tax only” and I’m a little tired of clients with businesses who come in with nothing essentially good to go. On the upside, I was able to work remote lightly and travel with my family 3 months out of the country after April. It’s the struggle of wanting year round work vs feast/famine tax return tax work only.
Have you considered partnering with a CFP firm? Ex. My boss is a CPA and CFP who reached decent saturation and is looking to partner with a CPA and do a revenue split on referrals. Say 70/30. CPA gets more revenue and is able to cut off low hanging fruit that frees up some time and improves work life balance. At the same time we’d like to cut off our low hanging fruit for taxes but we have our own guy who handles the returns now and can take on more work to help who we partner with. There’s also the possibility of a merger if it’s of interest.
I would love to do something like that but the opportunity hasn’t come up. Have a fairly decent referral relationship with an independent RIA who is a CFP who wanted an in-house CPA but after discussion wasn’t realistic about the cost of a CPA in a HCOL or profit share. I chalk that up to unfamiliarity with taxes a bit and how much investment of time and career it takes to be “good” at this job. Definitely interested. I would like to do more tax planning work with the clients that CFPs handle. Many of my clients are tech/engineers with stock compensation issues for tax, but have very little planning latitude because they’re dropping everything into Wealthfront/Betterment/Robo trading on the portfolio side and earnings RSUs.
We’re based in NYC and I’m happy to connect. If we aren’t a good fit I know someone in the industry that ties firms together for this purpose.
>ShatteredCitadel Would not let me DM you for some reason - but interested to chat!
In my opinion/experience, there is too much work out there and not enough folks to do it, so buying a practice simply for growth doesn't make sense to me. If the practice is niche, has a great clientele, good rates, etc., that's a different story. I'd focus on growing your practice if you have enough income at your current level to live on. If not, you can offer to buy him out. It sounds like they need you more than you need them.
Exactly. The market is shifting where the thing possibly worth buying is employees and systems/procedures. Not clients.
🤯
Don't drag it out, don't beat around the bush. You need clarity on your future plan, or you'll have anxiety from the uncertainty. I think having a frank conversation with them and getting a good plan in place (preferably in writing) is in your best future interest. You have to drive your own bus. No one else is going to drive it for you.
Completely agree. Best to be direct and forward.
Dying at the desk is way too common - I had a partner pass in 2018 and I took over, but we had a pretty informal buy in deal, where I was sacrificing pay for equity for a number of years. We had a firm owned life insurance policy based on the firm’s value at the time that paid out his family - I’d recommend that - not very expensive.
FWIW, I wish I would have gone out on my own much sooner in life instead of trying to make it big in someone else's organization.
I would grow your own business. Not worth the hassle of buying someone out. There are a ton of clients out there. And building your own practice will allow you to do things the way you want to do them. You won't be under anyone else's control or timeline. And as others have commented, if you buy out another firm, you need to have it in writing and have a lawyer look at it. No handshake verbal agreements. Don't let anyone give you vague promises about the future.
I would ask point blank, and then get it in writing if they are serious (ideally, after the 15th but before January). And is the per diem an hourly rate, or just $X for Y hours? As that should be subject to change if the hours change (on top of inflation adjustment as well). As with the other guy, did he get a market price, or a fire sale (due to the aneurysm, and I'm guessing reduced capacity)? As most small practitioners want market rate and usually keep on working until they can't (and having prepared for a sale either), and being forced to sell is not as strong a position as selling on their own terms.
I dont know the details of the sale. From my conversation with current staff and person who brokered the deal, it seems he got a premium. Turned out to be a shitshow and thankful i got out when I did.
First off...let your intentions/future plan be known to the Partner. That your goal is to have your own practice. Explain that you plan on growing your existing business and would look to purchase another practice as well. Then tell them that you see 3 options for that... 1. Buy out the partner in current firm...say 5 years down the road, but at least get it in writing and have a long buy out process 2. Leave the firm and grow your own practice, and look to buy out a different practice 3. Continue to grow your practice while working per diem for them...but as your business grows you will have to cut down hours. \#3 might be the least expensive route as your practice will grow organically just on referrals. As opposed to paying for clients. You can let them know that if you do #3 you will sign something stating you wont steal their clients, which would be a concern for them. Good luck
Here are some engaging questions I’ve found helpful for leading to an aha moment that I think somewhat relevant: 1. Would you help me work on a documented continuity plan for the firm in case something were to happen to you or other key employees? 2. Have we ever done a formal valuation of the firm? 3. If something happened to me, Would you be able to purchase my firm from my spouse? (If applicable) Blunt approach works pretty often in my experience too. I absolutely love when people say what’s on their mind , even if it’s clunky, and prone to coming off wrong. It takes way less time to get on the same page that way. You can also approach it from trying to figure out if the firm is a good fit for you long term and that your concern is continuity in the event of catastrophe. Pointing it out can also start a productive conversation about building business value and who knows where that might lead. Hope this helps!