Have you been thinking of going out on your own and opening your own firm? While many accountants consider starting from scratch, some prefer to purchase an existing practice. For the entrepreneurial accountant going out on their own, some of the advantages of buying a practice are discussed below.
An established firm has a nucleus of existing clients that are already used to a current system of information transfer between themselves and the firm. Veteran staff of the firm already have relationships with the clients. Clients do not have to be educated on the process or necessarily the importance and value of the services rendered. The new owner has only to build on what exists and tweak any improvements that are deemed necessary.
Clients tend to resist change, which includes changing accountants. If the existing client has a relationship with the established firm, even if recently acquired, it is less likely they will want to start hunting a new accountant. In our busy society, most clients don’t feel they have the time to look around for a new accountant. The new owner only needs to firm up the current relationship by effective communication, the demonstration of technical ability, and processing any work on a timely basis. The new owner must show the client that they care about the client. If done properly, clients overwhelmingly stay with the new owner.
Immediate cash flow
The client base acquired has a measurable income stream that takes effect immediately. The income stream provided from the acquired client base should be enough to cover operating expenses, debt service, and a profit to the new owner. If the firm being considered for purchase does not cover these cash outflows, the prospective buyer should walk away.
Also, the newly independent accountant can start their own firm but it’s a gamble and takes much time and effort. They will probably be living on any savings they have in the hopes that obtaining new clients will occur before exhausting such savings (and perhaps going into debt anyway). As the newly minted entrepreneur is going through the learning process, taking on managerial, marketing, employee hiring and training responsibilities, along with producing the work, such added pressure to ‘”beat the clock” in growing organically can be overly taxing and counter-productive resulting in too much stress.
Many acquisitions result in gaining experienced employees, giving the owner the opportunity to delegate work to maximize the owner’s time in management, client relations and/or client development. Also, not having to train employees frees up much of the owner’s time. Again, employees who are already involved with the client base also increase client retention. It also gives the clients some comfort in continuing to deal with the same employee they have in the past. In addition, sometimes the seller will want to work full-time, part-time, or seasonally after the sale. The former owner’s staying in some capacity helps client retention and provides a more experienced knowledge base for the firm. If the owner is staying after the acquisition, they also may feel more comfortable in providing seller financing.