Here are some reasons practitioners prefer to buy rather than build:
For starters, an existing practice has a track record and can usually generate income to begin off setting the initial investment from the first day after the acquisition. This achieves goals sooner and avoids the often painstaking slowness of organic growth, particularly in highly competitive markets. Some other advantages to buying rather than building:
- Actual client history, revenue, and results rather than projections and proformas. From day one, you know what services clients need, what they are comfortable paying for those services, and whether they pay promptly.
- Established, trained clients and referral sources. The clients are familiar with an accountant and, if you are similar in process to the seller, will be comfortable working with your needs and service. As for referral sources, they usually transfer with the sale and could result in a significant ongoing stream of new clients and revenue.
- Existing facilities and operations. An established office space can result in, literally, a turn-key transaction in which the buyer simply moves into the seller’s space and the business continues as if almost nothing changed.
- Trained staff in place. We often hear that good, trained staff is hard to find these days. So, this is often a key consideration and motivation of many buyers in the market. In addition, having staff remain in place will establish some continuity for the clients, which should improve retention of those clients.
- Availability of financing. Thanks to the higher than average net cash fl ow of tax and accounting practices, conventional and SBA lenders have created specialized loan programs for practice acquisitions.
- Training by the seller. The typical seller of a practice is not only transferring his or her client base, but is also providing years of experience to a buyer during the transition period.
- Expansion of your practice into new service lines. New service lines that come to your clients or you provide to new clients through an acquisition, can result in significant add-on revenue and growth beyond the acquisition itself.
- Expansion of your practice into new geographic markets. An acquisition is, more often than not, the most logical route to achieve an immediate long-term presence in a new geographic market.
- If you already own a practice, significant bottom line contribution due to economies of scale. Redundant operating expenses can be reduced or eliminated, providing a substantial and instant addition to the buyer’s net cash flow.