CPA Practice for Sale: 5 Questions to Ask
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Purchasing an existing CPA practice can be a big business boost, but it can also be a difficult transition. To keep things as smooth as possible, it helps to find the right CPA practice for sale. The buying process can be long and requires lots of research. To best set yourself up for success, don’t be afraid to ask plenty of questions of your broker and the seller. Here are five questions to ask when looking at a CPA practice for sale.
What kind of clients do they serve?
One of the biggest considerations for a potential CPA firm is the number and type of clients the practice serves. The type of client typically dictates the type of work that will be performed. Getting information on the type of client and typical tasks can help nail down the specialty and ensure it is a match for what you’re looking for. The number of clients can also highlight the workload. A larger client base with involved accounting tasks will likely create a busier workload than a smaller firm with tasks that aren’t as time-consuming. There isn’t a right or wrong answer to this question, but the answer can give you a good idea of if the clients are a good match for the business and lifestyle you want to establish.
What is the existing fee structure?
When taking over the client list, most clients will expect the new owner to maintain the fee structure, at least initially. Ask about how clients are charged and how frequently they pay. Many firms charge an hourly rate, while others may have set costs for each task. Some clients keep their firms on retainer, but others may only pay when they actually need service. Understanding the fee structure can help you understand the cash flow and financial situation.
What are the past financials?
Take a detailed look at how the practice has performed financially in recent years. This includes the number of billable hours, average cost per client, and total revenue. Extreme changes in revenue or unexplained dips could be a red flag and signal an unstable practice.
What is the growth potential?
Growth potential can include new clients in the area and expanding into new offerings to up-sell current clients. The seller can provide a unique point of view of where the firm could grow and what areas can be expanded.
Are there any competitors?
Before purchasing a practice, you want to know who the competition will be. There could be another firm across town that tends to compete for the same clients. In many cases, it might be an online accounting firm that offers unique services. Having an idea of what you’re up against can help you plan for the future. Some people want to take on a challenge, while other people would like to purchase a firm that doesn’t face much competition.
When purchasing a CPA practice for sale, take your time to do plenty of research and ask questions. Doing your due diligence before finalizing the sale can pay off in the end.
Pro Horizons brokerage company that specializes in both sales and acquisitions of CPA practices. Connect with us today to learn how we can help.