Buying a CPA Firm: What to Know Before You Acquire

Why CPA Firms and Tax Practices Grow Through Acquisition

Buying a CPA firm or tax service business can be a smart path to rapid growth. Instead of slowly building a book of clients from scratch, many professionals are finding that acquisition provides a more efficient route—if done right.

Assessing Client Geography and Communication Style

When determining whether a practice is a good fit for you, there are a few key considerations. Whether it’s a tax service business or a CPA firm, you’ll want to assess how many clients are “mail-in” versus those who require face-to-face meetings. If most clients mail in their documents, geography doesn’t matter much. But if a healthy percentage require in-person meetings and your office is too far from the core demographic, you’ll likely see higher client attrition.

Aligning Billing Rates with Expectations

Another critical consideration is billing rates. The practice you acquire should bill at rates similar to your current structure. If you charge $250 an hour, don’t buy a firm that bills at $150/hour thinking you can raise rates right away. Rate increases are sensitive and usually only work after you’ve built trust over a few years. Trying to increase rates too soon can cause significant client loss.

Matching Services and Staff to Your Capabilities

It’s important to evaluate the services the firm provides—personal returns, corporate filings, bookkeeping, etc. Ideally, you want a business that complements your current client base and your skill set. If the work involves year-round services, ensure you have the staff to support it. Remember, you’re not an island. During the transition period, clients will be scrutinizing your service closely. While the previous owner may have earned grace over 15 years, you’re starting from zero and must be at your best.

Be Ready to Act Quickly When Buying a CPA Firm

These types of businesses sell fast—so be ready. Know exactly what you want, have your proof of funds in place, and prepare a resume of your current practice. Sellers want to know who’s taking over for two reasons: First, they’ve likely known these clients for a long time and don’t want them handed off to someone unprofessional. Second, most of these sales include a seller-financed note and a guarantee. The seller has a vested interest in your success and will be evaluating you just as much as you’re evaluating them.