Is it best to start your own tax and accounting firm or buy an existing one? While it’s true there are exciting reasons to launch a startup, the advantages of buying an established accounting practice are considerable.
This is probably the most compelling reason for buying an established tax and accounting practice. You greatly reduce the risk of failure when you buy wisely instead of starting from scratch.
The benefits include:
- In-place systems that let you almost immediately get up and running.
- Substantial first year cash flow, beginning within a few months in most acquisitions
- Predictable revenue and expenses.
- Fully-trained staff who are familiar with the practice and clients.
- Client relationships are pre-established and, in a scenario where the original owner is retiring, clients usually stay with the firm if the buyer is a good fit.
- Client’s are trained and familiar with the seller’s processes and your knowledge about client responsiveness, level of information they provide, how complicated their needs are, and how timely they pay can be understood from the outset rather than learned over time.
- Sellers who are willing to share information and guide you through what has and hasn’t worked in the past as well as which clients require specialized care.
Financing, too, is generally more readily available for acquisitions, whereas startup funds are usually more difficult to secure.
Finding the Right Accounting Practice to Buy
Finding the right tax and accounting practice is key to getting the most out of your decision to buy an established practice. No two practices are alike and many of them will not fit your needs or help you reach your goals.
Of course, there’s no such thing as a “perfect” practice; even practices built from the ground up have flaws. Buying an established tax and accounting practice, though, minimizes the most common struggles you meet on the road to success.
Here are five important principles to think about:
- Who are the existing clients? Do you have the background and expertise they need? Do a majority of them meet your desired demographics?
- Are you similar to the seller? Do you have similar business philosophies and business styles? Do you have similar knowledge and management styles? Do you interact with clients in a similar fashion?
- Are you comfortable with the staff size? Do you and the seller have similar management styles?
- What are the practice’s key revenue streams? One or two small areas that are not your current expertise are fine, but larger problematic ones may rule out the practice as the right one for you.
- Is there plenty of potential? Does the seller have referral networks or plenty of referrals from existing clients? Is the practice well located in order to attract the type of future client you are most interested in attracting?
The Bottom Line
The advantages of buying an established tax and accounting practice can’t be overstated but you need to be smart about it and thorough in your process. Conducting due diligence, understanding how well you fit into the existing practice structure in regards to the seller’s values and business philosophy as well as gaining a clear picture of the types of clients and operations of the firm, will give you a strong head start in making the right choice.
The good news is that whether you want to purchase a modestly sized practice that’s looking for a quick sell or are thinking about investing in a larger CPA firm, there are incredible opportunities out there.
Our best advice? Follow your instincts and judgment and seek guidance from a reputable broker.
ProHorizons offers a personalized approach to selling or purchasing accounting practices. For buyers, our focus is simple: to help you select the accounting practice that meets your personal needs and long-term goals.
We hope the information on this page has been of use. If you have any questions, comments or thoughts, contact us today to learn more and to request a confidential, complimentary consultation.