You’ve decided that you’d like to own an accounting firm for the first time or expand the practice you currently run – with minimal cost and complications. Before you start searching for available accounting firms for sale, you need to carefully consider the reality that if you make the wrong choice, you could end up saddled with dead weight you don’t want or need.
The following four considerations are important for valuing the potential of the accounting practice you’re looking to buy and ensuring it fits in seamlessly with your existing operations. Ready to begin?
Is the firm ready for purchase?
An accounting practice that’s ready for purchase will have its business processes and operations costs available for your consideration. It will save you the headache of having to rummage through their books to work out their margins and future projections. The owners should have a clear figure in mind in regards to the sale price, and if they don’t, it’s a red flag that signals they’re not yet ready to negotiate the sale.
Look at cash flow, not revenues
A stronger indicator of the viability of a business is its cash flow rather than revenue. A cash flow statement provides you with critical information such as how fast clients pay and to the profitability of the practice, instead of what is tied up in investments.
What is the firm’s client mix?
Establishing the current client base is important, as is identifying their specific industries. How will you best serve each client’s interests? Client retention is a top priority as it relates to the stability of the business operations and ROI so you don’t want to lose any in transition. You also need to factor in how the new clientele will fit into your current book, especially in regards to workload and resource management.
Use of technological tools
One of the most valuable drivers of expansion is technological tools. Has the practice invested in up-to-date technology? If not, it may cost you significantly in money and resources in the transition process bringing their data onto your platforms.
Acquiring an accounting firm should form a strategic part of your vision for growth. Need more help or advice on how to successfully purchase an accounting firm or where to start your search? DMY & Associates are experts in mergers and acquisitions and will help you throughout the entire acquisition process. Contact us today!