Chicago Tax Preparation with Financial Advising
The owner is one of five CPAs and is willing to stay on up to 2-5 years if desired by the buyer. Located in the Chicago area and with tax return filings in 28 states, this company maintains great profit margins year after year! The firm offers complete income tax preparation and accounting services as well as comprehensive financial planning and advisory assistance. Over 13,000 annual billable hours from 4 CPAs and 3 bookkeepers contribute to the over $1.4MM in sales in 2018.
Business options include bookkeeping, accounting, payroll, and tax work for small and large companies alike. Clients include S corps, C corps, LLCs, estates, trusts, and nonprofits. Services for individuals include personal tax returns, with over 250 personal returns linked to business customers. Additional offerings include personal financial planning education and advice on investments, retirement and estate and trusts. In addition to tax compliance, advisory services offered include tax planning avoidance, reduction, deferral and transfer techniques, CPA taxpayer representation before the IRS, assembly of business books and records in compliance with tax regulations and state laws, business formation, acquisition, sale and liquidation, business valuation, banking and loan covenant compliance, QuickBooks desktop and QBO reconciliation, and litigation support/expert witness reports.
Capitalizing on an integrated view of all available services, this firm works to build long-term relationships with individuals and businesses that require a consistent and reliable financial partner. The well-trained and dependable team collaborate to meet the needs of each customer. With many years of combined experience, this group of professionals works nearly 13,000 billable hours annually. Some employees are full-time, while some are part-time, and a few are contracted as needed.
- Year Established: 1997
- Location and Service Area: Chicago area, filing in 28 states
- Clients: 560-600: Individuals (2/3), business (1/3)
- Services: Advanced tax preparation and financial advising
- Building: 5,000 sq. ft.: Private offices, open cubes, full kitchen, conference room, reception, data room, with shared fitness center and board room
- Reason for Selling: Business succession
- Employees: 7: Administration (1), Managers (3), Staff (3). There are 4 CPAs
- Hours: M-F 8-5
- Seller Training Period: Seller is willing to transition for 2-5 years, if desired
- Growth Opportunities: Expand to audit services, expand to include CPA reviews, increase compilation work, wealth management and financial services, build the team to increase capacity
- Current Owner’s Responsibilities: Financial advising, oversight, tax work
- List Price: $1,749,000
- Gross Sales:
- 2018: $1,439,539
- 2017: $1,375,476
- 2016: $1,306,200
- 2015: $1,298,102
- Cash Flow:
- 2018: $546,594
- 2017: $543,879
- 2016: $472,107
- Assets Included in Purchase:
- Equipment: $260,000: Furniture, fixtures, computers, office equipment
- Intangible Assets: Objective and knowledgeable team, many years of combined experience in the field, respected name in the industry
*amounts may vary
Cash Flow Analysis
|Description of Financial Statement||P&L Statement||P&L Statement||P&L Statement||P&L Statement||P&L Statement||Notes|
|Net Income Shown on Financial Statement||$326,982||$255,750||$195,896||$177,341||$162,334|
|Compensation to Owner||$191,712||$189,401||$171,839||$248,795||$209,286|
|11% Tax on total W2 Salaries||$21,088||$11,352||$12,197||$17,646||$15,319|
|Depreciation||$19,218||$7,366||$4,044||$2,250||$10,135||Non-onward going expense|
|Auto-Personal Use||$6,438||$7,957||$7,800||$10,287||$7,968||Personal expense|
|Non-Business Telephone||$3,450||$3,447||$3,470||$3,406||$3,642||Personal expense|
|Dues & Subscriptions||$1,655||$1,635||$2,014||$1,521||$860||Personal expense|
|Meals & Entertainment||$9,422||$11,352||$17,753||$19,955||$16,830||Personal expense|
|Simple IRA||$5,250||$5,250||$4,680||$5,250||$4,230||Personal expense|
|TOTAL ADDBACKS||$219,612||$288,129||$276,211||$350,958||$319,703||Personal expense|
|Seller's Cash Flow = Total Addbacks + Net Income||$546,594||$543,879||$472,107||$528,299||$482,037|
|Profit Margin||37.97 %||39.54 %||36.14 %||40.70 %||41.29 %|
- 38% profit margin in 2018!
Typical Clients and Services
- S corps
- C corps
- Advanced tax preparation
- Reconciliation and assembly of books and records
- CPA compilation financial statements
- QuickBooks desktop and QBO reconciliation
- Sales Tax
- Personal financial planning and education
- Estates and trusts
- Tax planning techniques including tax avoidance (avoid tax by properly structuring income, assets and financial transactions), tax reduction (reduce taxes by decreasing taxable income or having income be taxed at a lower rate in the future), tax deferral (delay paying taxes to some future period or deferred indefinitely) and tax transfer (transfer assets or income to other family members or charities who can benefit from lower tax rates or tax exemption)
- Business formation, acquisition, sale and liquidation
- Shareholder, operating and buy-sell agreements
- Business valuation
- Banking and loan covenant compliance
- Litigation support and expert witness
- CPA taxpayer representation before IRS for audit tax examinations, installment arrangements, offer in compromise and audit reconsideration appeals
Specific information regarding clients is available upon the receipt of a signed Non-Disclosure Agreement.
- Administration (1)
- Managers (3)
- Staff (3)
- Total CPAs (4)
- Bookkeepers and tax prep (2)
- Expand to audit services
- Expand to include CPA reviews
- Increase compilation work
- Wealth management and financial services
- Build the team to increase capacity
The Firm used a cash flow valuation methodology to determine the purchase price of the business.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.
A multiple is prescribed by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiple.
For this business, a 2018 cash flow was used with a prescribed multiple is 3.2. With this information, the computation is as follows:
$546,594 x 3.2 = $1,749,100
The fair market value found above positions the business list price at $1,749,000.
Purchase Price: $1,749,000
70% Buyer Down Payment: $1,224,300
15% After Year One*: $250,500
15% After Year Two*: $250,500
*Based on performance and retention to show Seller’s vested interest in firm’s success post-sale
Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
**The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.**
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