If you are a CPA looking to have your own practice, you may be thinking about starting an accounting firm or purchasing an existing firm or tax service. There are risks associated with either route you take, but generally, most people prefer to buy an existing practice that has all the essential pieces already in place.
Acquiring an established accounting practice provides income from day one as you can draw from a built-in clientele. So, if the fundamentals of the practice are sound and the price makes sense, this could be a very lucrative opportunity.
If you are considering buying an accounting firm or tax service business, there are some important questions you should ask:
Table of Contents
- Do The Firm’s Services Fit your Skillset?
- Are there Hidden Growth Opportunities?
- Can you Transition the Practice to Remote Accounting?
- Are there Client Retention Safeguards in Place?
- Be Ready for the Right Opportunity
Do The Firm’s Services Fit your Skillset?
Accounting firms can provide a wide range of services these days. Bookkeeping and tax preparation are some of the core offerings, but they can also delve into payroll, human resources management, and many other areas. Some firms work primarily with consumers and small business owners, while others focus on medium to large-sized organizations. You will have a far better chance of being successful with a CPA practice that closely matches the clientele you are used to working with and the types of services you want to offer.
Are there Hidden Growth Opportunities?
Many accounting practices have outdated marketing and advertising methods, and this is especially true with established firms that have been around for several decades. This might seem bad on the surface, but it could also be a hidden opportunity.
Imagine a CPA firm that has a large and loyal client base that has been built over many years but they have no website or any other digital presence to speak of. If you can implement an effective online marketing strategy, you may be able to build on the established clientele you already have.
Can you Transition the Practice to Remote Accounting?
These days, many accounting practices have gone remote, especially since the pandemic hit. With advanced accounting apps and cloud-based storage so readily available, it is very easy to operate the practice remotely and save money on office space. In most large and medium-sized cities, you can get a virtual office where you can meet clients when they want to see you face-to-face, although many clients these days have no problem doing meetings via Zoom or a similar video conferencing platform.
Are there Client Retention Safeguards in Place?
When you purchase a CPA practice, what you are buying mainly is the clientele. And at the end of the day, your short-term success will depend heavily on how many of the firm’s existing clients you can keep. Toward this end, there should be some safeguards in place to help you retain the clientele you are inheriting.
For starters, the seller should be willing to sign a non-compete agreement. And beyond that, you might want to look at firms in which the current owner is willing to stay for a specified period to help you with the transition and reassure the clients that they will continue to be in good hands.
Another way to help ensure that the seller will help you retain the clients is to insist that they have a financial stake in it. This is often done through some type of seller financing. For example, if the seller is willing to finance some of the transaction, the price could be contingent at least in part on how many of the current clients are still with the firm in one year, two years, etc.
Be Ready for the Right Opportunity
One final thing that needs to be emphasized is that accounting firms are a popular investment right now, and those that are in good shape tend to sell quickly in most markets. For this reason, it is crucial to be prepared to jump on the right opportunity when it comes along.
In your search for the right CPA practice to buy, it is very beneficial to work with an experienced business broker, particularly one that specializes in this industry. A reliable CPA and accounting firm broker will be able to work closely with you and help you find the practice that best fits your needs and goals.
