You’ve been working for somebody else for years, and now you’re ready to buy and manage your own CPA firm. But when you start comparing CPA practices for sale, you can easily get confused. Which one will be the best and most profitable fit for you? Here are a few factors to consider when shopping around to buy a CPA practice.
All other factors being equal, profitability is king. Look for a firm with above average billing rates and profitability. One way to measure this is through the Seller’s Discretionary Earnings (SDE). This is calculated as a function of earnings plus the CPA practice owner’s compensation, benefits, other discretionary expenses, depreciation, amortization, and taxes on the owner’s salary.
Compare your skill set with that of the CPA practice’s current owner. If you’re both generalists who turn out a high volume of basic tax returns, that could be a good match. Or if you both specialize in a particular discipline, such as medical practice taxation, terrific. But if you’re a generalist and you’re looking at a CPA firm run by a forensic accounting guru, you may require significant assistance from the seller for an extended period of time. This will give you the time to grow into the specialization of the former owner.
What part of town is the CPA practice in? Since most firms draw from surrounding neighborhoods, it’s usually a bad idea to move the office a long distance away from its current location. Often, clients won’t want to drive to the opposite side of a large city to do business with you. So assess the practice in its current location. Whether a firm is in a high-growth or low-growth part of town can have an impact on future increases in profitability. Geography is definitely a factor that can make one practice more desirable than another.
The type of clientele served and fee structure are closely related. You can’t take a low-fee billing model and immediately convert it to high fees and an upscale clientele. Nor will a high-end client base be happy if the CPA firm for sale changes to a “return mill” model after you purchase it. Make sure your style fits the firm’s current client base.
A hard-charging New Yorker is unlikely to charm a slow and gracious Alabama clientele. A non-golfer might feel out of place at the country club. Examine the personality and clientele of the CPA practice for sale. Do your personalities mesh? Or is it more of an oil and water situation? No matter how skilled and experienced you are, people want to do business with someone who makes them feel comfortable.
The perfect deal involves a friendly, helpful seller willing to help the buyer during a predetermined transition period. During the transition period, a seller’s knowledge and experience can help you get over rough spots with clients and unanticipated situations. Choose a firm where the seller will transition you through at least one busy season. If you’re buying a highly specialized firm, the transition could take longer.
Get Some Help
Sometimes it’s hard to be objective when comparing several CPA firms for sale. A third party can help you better evaluate your prospects. Since Accounting Broker Acquisition Group maintains a huge database of thousands of contacts in the field, we can help you find the best practice for your unique situation. Accounting Broker Acquisition Group is the only national business brokerage of its type comprised 100-percent of brokers who are CPA’s with significant “Big Four” merger and acquisition experience. Contact us today to help you get started on your dream of owning your own CPA firm. Let Accounting Broker be the catalyst to your new future.