Questions to Ask When Considering Buying an Accounting Practice
These days, the opportunities for accounting practices are virtually unlimited. Countless new businesses are forming every year, and this is likely to happen at an accelerated pace in the coming year as we continue to recover from the pandemic. CPAs can specialize in numerous ways as well, such as catering to specific industries or focusing on a specialty such as payroll, financial advising, setting up and managing QuickBooks, and many others.
There is also more than one way to get set up an accounting practice. You can start from scratch and build up your practice over time, or you can purchase an established practice that already has existing clientele. For those with the financial capability, buying an existing CPA practice is usually a better route as you can bypass the grueling startup phase and enjoy a good income from the outset.
Before you begin your search for accounting practices for sale, however, it is important to clarify what you want and how you want your practice to look. Here are six questions to ask when you are considering purchasing a CPA practice:
What are my strongest skills and areas of expertise? This goes back to what we talked about earlier with areas that accounting practices can specialize in. Think about your background, professional expertise, and personal traits, and consider how you would use your unique skillset to make your practice successful. This will also help you identify who your ideal client is.
What are some areas where I am weak and need to improve? After you have identified your strengths, it is important to look at some areas where you may not be so strong. For example, maybe you are great at crunching numbers, but you are not so good at managing staff. Once you know where you are lacking, you will know what kind of help you will need to make your accounting practice run smoothly. Using this example, you would want to look for a CPA practice for sale that already has an office manager.
How large of a practice do I want to purchase? Accounting firms range in size from one or two-man operations to dozens or even hundreds or more employees. The practice could have a book of business of 20 clients, 100 clients, or thousands of clients. Based on your strengths, weaknesses, and financial capability (more on this later), think about the size of the CPA practice you would like to buy.
Am I willing to relocate out of the area for the practice I want? There are usually a fair number of accounting practices for sale in most population centers, but this is not always the case. There are also times when it is a seller’s market and available practices are in limited supply. When these circumstances are present, there is always the chance that you might have to move yourself and your family to a different community in order to take over the CPA practice you want. Consider whether or not you are willing to take this kind of step; and if so, how far are you willing to move and what are the traits you would look for in the community in which you would be locating?
How much do I have to invest? The size of the accounting practice you buy will be largely determined by how much capital you have to invest. You do not necessarily have to have 100% of the purchase price in cash, but you should try to have at least one-third to put down. Sometimes, however, it might be difficult to finance the rest of it through a bank. In such cases, you can look for CPA firms for sale in which the seller is willing to finance some of the purchase price.
How much assistance do I need from the seller during the transition? Another way of asking this is, how prepared are you to jump in and run your accounting practice? Normally, you should expect the current owner to stay involved in some role for at least 30 or 60 days. If they are financing the purchase, then they might be willing to stay involved for a lot longer, at least in an advisory role. For a large number of new owners, the 30 or 60 days of consulting is usually sufficient, but some might want additional support. Think about your needs and how you would like to work with the current owner after you take over.
Obtain Expert Guidance on Accounting Firms for Sale in your Area: Finding the right CPA firm to fit your budget and skillset can be difficult, and for many buyers, it makes sense to work with a business intermediary to help navigate this process. Business intermediaries work closely with buyers and sellers to bring the two sides together toward a win-win transaction. Through their assistance, buyers can quickly narrow their search and zero in on the practices that best fit their criteria.