Mitigating Risk in Accounting Practice Sales Transitions

Going through a transition after the sale of a CPA practice or accounting practice is not generally a pleasurable experience for the principals, the staff, or the clients. A transition is simply the acts that CPAs and accounting practices take after a sale to effectively move the employees, and the clients to the new firm. While it may seem like an easy task, nothing is further from the truth. There is tremendous risk in the transition because most sellers allow some portion of the purchase price to be contingent to the successful transition of clients. A business intermediary can help you understand the risks form beginning to end and develop a plan to handle these risks. Mitigating this risk starts with a transition plan and should follow with crisp execution of these transaction tenets. CPA Firm Sales

Keep Employees Happy – Your employees will be talking with each other and clients. Make sure to manage this communication and give clear talking points to your employees as well as outlets to vent their frustrations in a way that you can hear them and take appropriate action. Make sure they feel valued by the purchasing principals and entity and can clearly see the benefit of going through the pains of an integration with this new firm.

Communicate, Communicate, Communicate – This mantra goes to each of the constituents that make up a firm and is especially important to retain clients. Make sure the communication plan to clients is mutually agreed upon in terms of timing and content. While there can be many kinds of written communication to clients, we recommend old fashion snail mail. The letter should be positive, should discuss how changes will impact the client with fees and convenience, and should clearly articulate why this is a good thing for the client. The selling principal should also be willing to get on the phone with clients encouraging them to make the move and highlighting the buyer’s strengths.

Segment the Clients – Segment clients in order of revenue, complexity and risk. Each segment can receive different treatment according to the transition plan discussed above. For example, the top 10% of clients in revenue and complexity might each get a joint meeting or lunch in addition to their letter.   Both buying and selling principals should be in attendance at the meeting and this meeting generally insures the transfer of these high value targets. In another segmentation best practice, the office invited the top third of the clients, which represented about 65% of the revenue to an open house and wine tasting. The middle third received a letter and a phone call from the principal or point of contact. The lower third received a letter and an invitation to schedule a free tax planning meeting.

Ensure System Compatibility – The systems being used are obviously important to a smooth transition, but we often see issues. Many times, there are complications with information transfer within the file transfer process. There may have to be manual entry of asset depreciation schedules or other work arounds. If you are merging or selling to a much larger entity, there will likely be new systems that need to be learned and training for your staff to do so will help the transition go smoother.   There may be new tax software or different flow in the office and most likely an increased push for billable hours, higher realization of billed hours and productivity requirements that you or your staff are not used to. The timing of close is a very important variable with regard to this. Employees and staff need time and resources to complete these items. Most likely, the first year will be bumpy and stressful as you work through these challenges.

Timing – When small or medium sized firms are being merged into larger firms, there will be changes to the flow in the office and the processes will change in many cases. There will be changes to approval matrixes, changes to vacation policy and changes to office policy. There will be new software and new systems. There will be substantial training and coaching required. There will be lots of clients moving from one professional to another and all this is supposed to be completed during the transition and many times during the actual busy season. We recommend a close no later than 12/31 in the year prior to tax season if merging with another firm. We recommend an earlier closing if a CPA and selling 100% of your firm. There are new ethics rules issued by the AICPA and for those members, we recommend closing in September or earlier in order to effectively comply with the new ethics guidelines published by the AICPA with regard to the file transfer process.

While there are many more items to consider inside of a CPA acquisition or merger, the above represent significant ways to mitigate the risk of an accounting practice sales transition. For more on these mitigating factors and other ways to best approach a sale you should consider consulting with an accounting practice specialty broker. Berkshire Business Sales and Acquisitions ( is a firm specializing in the sale of CPA and accounting firms. Call Ryan Gipple at Berkshire to get a free consultation on selling (602-614-3583)!

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