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.
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Why Consider a CPA Practice for Sale?
If you want to own and run a CPA firm, you have two main options: start your own firm or purchase an existing firm. Both sides have pros and cons, but buying an existing CPA firm can be a great choice to hit the ground running. If you are interested in owning an accounting firm, consider CPA firms for sale. The many benefits of buying a CPA firm can provide a great option for growing your business.
5 Advantages of Buying CPA Practice Over Starting a Firm
Purchasing an existing firm has many benefits to consider, including the following:
- Established revenue stream. An existing CPA firm has a revenue stream that you can tap into right away. Instead of spending time trying to get the business off the ground, you can step in and have instant revenue. When you purchase a CPA practice, you buy every part of the business, including the business plan. You can keep that plan moving forward to have a strong revenue stream right from the start.
- Trained staff. Oftentimes, CPA practice sales include the staff. The new owner simply takes over as the staff continues to do their jobs. Having a staff that is already trained is a huge advantage. Not only do you not have to waste time and resources to train new employees, but the staff already knows what works and doesn’t work and often has relationships with the clients. Trained staff can provide consistency for clients during the owner transition.
- Existing client base. A CPA firm is only successful if it has clients. But finding and retaining clients is one of the most challenging, time-consuming, and expensive parts of running a CPA firm. Many people who start their own firms get caught up in marketing and reaching out to new clients that they don’t have time to run the parts of the business that they really enjoy. Buying a CPA firm means buying the client list and having a built-in client base from day one. You can continue to add to those clients, but you don’t have to chase down new clients to keep the business moving forward because you already have established clients.
- Easy to cross-sell. Because an existing CPA firm is established, you can cross-sell and build partnerships with other organizations. A CPA firm can team up with another local business, such as a law firm, to share business and ideas. It is much more challenging to cross-sell when the business is brand new and doesn’t have clients or revenue.
- Proven brand. Most CPA firms become known in their neighborhoods as people talk about the service, see the sign, and refer it to their friends and family. When you purchase a CPA firm, the brand is established and likely well known in the area. You don’t have to fight through the noise to be heard with a new brand because the existing brand has already been proven. People are likely aware of your firm and know what you do.
Things You Need To Know Before Buying a CPA Firm
Although there are many advantages to purchasing a CPA firm, you also need to be aware of the many steps and issues that can arise during the process.
- Check the legal binding agreement. Purchasing a business is an extensive process and involves many legal steps. Before you sign anything, make sure you know what you are signing and what is legally binding. There may be fine print in the contract that could impact your revenue and growth, so be sure to review all documents with a lawyer.
- Work out staff requirements. Part of the negotiation process is deciding what is included in the sale of the firm. Most sales include the staff, but that isn’t always the case. Be sure to talk through all the details of the staff and know what is required to keep them on board, including what salaries you will need to pay, what benefits you’ll need to provide, and what schedules they need to keep. Trained staff can be a huge advantage, but make sure you have all the information to keep things running smoothly.
- Arrange adequate business capital. Before you purchase a firm, get your capital in order to help the sale go more smoothly. Make sure your assets are liquid and can easily be traded or moved during the sale. The amount of capital will impact what CPA practice sales are available to you and set you up for success with your future firm.