If you want to own and run your own CPA business, there are two options: start a new one from scratch or purchase an existing one. Below, we’ll describe the benefits of purchasing an accounting firm instead of building a brand-new one from the ground up.
Hit the Ground Running
The primary advantage to purchasing an accounting firm instead of attempting to start your own is you can hit the ground running because you already have a built-in stream of revenue from existing clients on the books. Most accounting clients will remain loyal, even if the ownership changes, so all you have to do as the new owner is communicate that you’ll offer the same quality of service that clients are used to.
When starting a brand-new CPA practice, the primary objective for the first months and years is to build up the revenue stream and attract new clients, which is difficult and time-consuming. One of the biggest reasons accounting firms go out of business is a lack of stable revenue, but with an existing firm, there’s much less to worry about.
Running a private accounting practice always includes some risk, but the risk is much less when purchasing and accounting firm instead of starting a new one. Buying into the firm gives the owner a practical record of the practice’s revenue and a predictable measurement of its future.
Balancing the revenue and expenses is one of the biggest challenges for new businesses and one that could take months and years to sort out before finding the right balance. When purchasing a firm, you get a look at their books beforehand so that you know what to expect when you take over.
Easier To Find Financing
Another benefit of purchasing an accounting firm is it’s typically much easier to find financing for the purchase than it is to find financing for a new venture. As we all know, starting a business from scratch has many risks, and it takes years for a new CPA practice to see its first profits as it slowly builds its revenue stream.
For all those risks and more, financiers and banks are less likely to provide financing. But if the financing is for purchasing an existing CPA practice with a track record that the new owner can show to financiers as a predictor of its success, finding investment becomes much easier.
What to do After Closing the Sale
You decided you were all in on purchasing an accounting firm. You have conducted your due diligence, made an offer, and now you’ve closed the deal. Now, you own a new private CPA practice – now what? After purchasing an accounting business, you need a transition plan and integration team.
Depending on the practice’s success before your purchase, you may either need to make big changes or steady the ship for the first few months. Then, later on, you can make more significant changes as you set the foundation for your ownership.