Evaluating Fit Should be Your Priority

It is easy when looking to acquire an accounting practice to get hung up on the numbers of your target acquisition: annual gross, billing rates, average fees for different tax returns, price and terms, etc.  However, the most important element of an acquisition is only partially related to all this analysis.

Most prospective acquirers would agree that client retention is the greatest concern in an acquisition.  While the financials of a practice describe its overall health and profitability, they say little about your ability to retain clients.  To determine ability to retain clients, the most important point of analysis should be how do you, as a buyer, fit with the practitioner who is selling and how does your existing business fit with the business it would be acquiring.  Ask questions like:

•    Are you and the seller similar in personality and business philosophy?
•    Do you and the seller have similar interactions with clients (i.e. use of organizers, interviews with clients, etc.)?
•    Does the selling practice have similar processes and procedures to your office?
•    Are you in the immediate vicinity of the seller or are you willing to operate from the seller’s location for a period of time?
•    Are your fee averages similar or can you accommodate the seller’s fee averages for an extended period?
•    Does the seller think you are a good fit with the clients?

Analysis of personalities, procedures, processes, types of clients, client interface and related questions of fit are all critical factors in predicting client retention.

The same is true on the selling side of the transaction as most practitioners are concerned about the care of their staff and quality of service provided to their clients after the point of sale.  I have worked with many sellers that decline an offer with the highest price and best terms and accept a lesser offer from a buyer that was a better fit for their staff and clients.

Without a doubt the financials and profitability of a target acquisition are very important to determining whether it makes sense to move forward with the purchase.  But the acquisition will be problematic despite strong financials if you and/or your existing business are not a good fit with the seller, clients, and staff of the acquired practice.


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