Advantages of Buying an Accounting Practice
The following is an excerpt from On Your Own! How to start your own CPA practice. It will be available through the AICPA in late 2012.
Because at first, the owner of the practice IS the CPA practice, building a solid client base is the greatest challenge a beginning practitioner faces. Because of this concern, buying a practice does have appeal. It cuts out the need for all of the work and time required to build up your client-base.
This expectation is reasonable. Buying the right practice immediately gives you a reliable revenue stream. It typically will require an investment of 90 to 125 percent of gross fees, sometimes more. Although the client base may be the most alluring factor in buying a practice, the entire package must be carefully assessed….especially the staff of the firm.
What can you expect to get for your money? The following are highlights of the major returns on investment:
- You become productive sooner. Without a purchase, there will be a longer period where you will lose money while you are working to establish a client base.
- Clients. You receive a chance to establish your own relationship with the clients of the firm. Essentially you will receive a client list and files, an introduction to the clients, and the opportunity to serve the clients and demonstrate your service, skill, and knowledge.
- Seller’s good name. The seller’s recommendation of you and your work to your new clients is critical. To the degree that the seller has a good reputation, this endorsement helps assure that the established client base gives you a chance to serve them.
- Operating aspects of a practice. You receive information on filing, billing, time systems, client histories and files, as well as contacts with bankers, local suppliers, and organizations. If you also acquire the office, you can expect contacts with personnel you may want to hire and with people within the building who can help you with the transition into your new business. In addition, you should receive the furniture and equipment of the practice, which has the advantage of maintaining the same familiar surroundings for clients.
- Potential to multiply client base. The ability to increase the size of the practice based upon the acquired client base is one of the single most important factors in buying. You can grow the practice through referrals as well as by offering additional services to existing clients.
About the author
Brannon Poe, CPA
An author and experienced intermediary specializing in accounting practice sales, mergers and acquisitions, Brannon has efficiently and effectively facilitated hundreds of successful practice transitions. He has a unique ability to help creatively integrate information to develop clear, focused plans. He enjoys helping clients implement these plans to achieve their most important goals.