With the Baby Boomer generation beginning to reach full retirement, there is an abundance of accounting practices available for acquisition. For CPA’s working for another practice or within a large organization, now may be a great time to go out on your own. However, while there are many options for buying a CPA practice, it is important that the transaction be handled properly to ensure a successful purchase and a smooth transition. 
It is important for the buyer of a CPA practice to do an in-depth analysis before proceeding with the deal. They will need to know that their new business will be a good fit for them and provide a good living. This is where it can get tricky; while buyers want to know as much as possible before committing to the purchase, they need to make sure this is done in a discreet manner that does not upset the current operation. For this reason, it is always best to pursue this type of transaction with the assistance of a professional business broker that specializes in the buying and selling of accounting practices.
That said; there are a number of areas that the buyer must analyze before moving forward. Here are some of the most important:
Cash Flow versus Expenses: A cash flow analysis will likely be necessary to determine the level of profitability of the firm. Some important factors to consider when it comes to cash flow include how quickly clients tend to pay invoices and the seasonal nature of revenue in the accounting business. If the firm has a number of late paying clients, this may be some cause for concern. It is also important to have a good idea of what the cash flow will look like during the slow months and whether or not it is likely to be enough to cover operating expenses.
Clientele Stability: The client base of the practice is extremely important to its long-term viability. It is essential for the buyer to understand how loyal the clients are to the firm and the likelihood of retaining a large percentage of them. Along these same lines, it would be helpful to know what kind of assistance the seller can offer with client retention. For example, if the seller agrees to stay on with the firm as a part-time consultant for a set period, he/she can be there to reassure clients that they will receive the same level of service under the new management.
In Part II of this series, we will discuss inventory, billing rates, staff, and the terms of purchase.
