Many business types grow through acquisition, tax practices and CPA firms are such businesses. If you think about it, it would take a very long time and a lot of money in marketing to get 100 new clients. If you market to 1000 people, you would be lucky to get 30 people to even call you back, and out of those you might close a few. So growing through acquisition definitely makes sense in this industry.
When determining whether the practice is a good fit you, there are several key components. Whether it’s a tax service business or a CPA firm, how many of the clients are mail in and how many require a “face to face” meeting. If it’s mostly mail in, then Geographic’s don’t matter much. However if there are a healthily percentage that require a meeting and your office is too far from the main demographic, then will most likely have a much higher attrition rate.
Another consideration in with CPA firms or Tax Practices, the billing rate should be on par to what you are currently charging. If your rate is approximately $250 an hour, don’t buy a practice that bills at $150 an hour, thinking that you’ll be able to implement a rate increase with these clients. Rate increases are very touchy and they can be increased but after a few years when trust has been established. Trying to do that in the beginning of the transfer will ensure a disastrous attrition.
It’s important to look at the type of business the business is doing. Are they doing personal returns, corporate fillings, booking keeping, etc… you want to find a business that not only compliments your current client base but also you’re skill set. If you’re going to take on a lot of work that’s getting done throughout the year make sure that you have the staff to support it. You are not an Island and during the first couple of years of the transition the clients will be watching you and how you handle them the previous person might have earned some grace after 15 years but you have none and must be at your best.
Finally be ready to pounce! These types of businesses get sold quickly so be prepared. Know what you want, have your proof of funds ready and a resume of the current practice that you’re running. The seller is going to want to know who you are for two very important reasons. One he/she has known these people for a long time moist probably and he doesn’t want the accounts to be put in the hands of someone unprofessional or incompetent. Not only would he feel terrible but he will most like field all the “bad” calls for quite some time. Secondly, these businesses are most always sold with a note and some type of guarantee. The seller will have a vested interest in your success, so he’ll be interviewing you as much as you’re interviewing him.
Stay tuned for more articles regarding buying and selling CPA Firms and Tax Practice Businesses.
Christina Lazuric Woscoff
Certified Business Broker
Broker/Principal of California Business Brokers