Purchase Accounting Practices in the West Coast
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There are two ways to grow your accounting practice:
- Organically build your current practice a client at a time through targeted marketing and sales strategies; or
- Buy or merge with an existing accounting practice to assimilate their book of business.
Each has its merits, depending on your time frame, cash flow requirements, resources, and marketing and sales capabilities.
Why Practitioners Buy Instead of Build
For starters, an existing practice has a track record and can usually generate income to begin offsetting the initial investment from the first day after acquisition. This achieves goals sooner and avoids the often painstaking slowness of organic growth, particularly in highly competitive markets. Some other advantages to buying rather than building:
- Actual client history, revenue, and results rather than projections and proforma
- Established, trained clients and referral sources
- Existing facilities and operations (that the clients are familiar with)
- Trained staff in place
- Availability of financing
- Training by the seller
- Expansion of your practice into new service lines
- Expansion of your practice into new geographic markets
- If you already have a practice, significant bottom line contribution due to economies of scale
The following illustrates the financial differences between buying a practice and building a practice using assumptions based on real-world client case studies:
Buying assumptions
- Practice grosses $350,000
- 50% profit
- 5% annual growth
- 100% financed
- Buyer provides the working capital
Building assumptions
- Base of $100,000
- 20% annual growth; reduced to 5% annual growth when $350,000 gross is reached (same as buying example).
- 65% profit is achieved until year 5, then reduces to 50% profit (same as purchase example)
- Spending is consistent with additional marketing costs of $25,000 annually
| Buy Scenario | 10 years | Build Scenario | 10 years |
|---|---|---|---|
| Gross | $ 4,402,262 | Gross | $ 2,421,188 |
| Expenses | $ 2,515,579 | Expenses | $ 1,130,074 |
| Net Profit | $ 1,886,684 | Net Profit | $ 1,291,114 |
| Debt Service | $ 594,750 | Additional Marketing exp | $ 250,000 |
| Net Available for Buyer | $1,291,934 | Net Available for Buyer | $1,041,114 |
| Buying vs. Building | $ 250,820 |
Buy a Practice
Experienced current practice owners, former firm owners re-entering the market, and newly minted CPAs, EAs and other tax and accounting professionals share common concerns when looking to buy a practice. Have these crossed your mind?
- Is the practice I’m buying really worth what I’m paying for it?
- How much do I need down?
- I need help with financing—is that even possible in the current lending climate?
- How will I know the firm clients will stay with me?
Interestingly, the last question represents one of a seller’s primary decision-making drivers. In most cases, sellers want to make sure they will find the right person to take care of their staff and clients. Price and terms often run a very close second. ProHorizons addresses both—personality fit and acceptable terms—to ensure the priority needs of both parties are successfully met. Here’s how we achieve this:
Our Formula for Your Success
- Our buying process—refined during hundreds of sales transactions since 1995—offers a prescriptive, structured approach for managing a sound deal.
- The quality of our practices for sale—we take on a limited number of clients each year, so we make sure they are motivated to sell, their practices are sale-able, and each is appropriately priced based on our analysis and experience in the market.
- We leverage long-standing relationships with stable lenders to offer secure Financing opportunities.
And underlying these services is Our Commitment to You, guiding principles that support professional, ethical, collaborative working relationships—a critical factor in creating a successful transaction for all parties.
Resources to Support Your Buying Decisions
Contemplating the benefits of hiring a broker to help you acquire vs. acquiring on your own? Read How to Select a Brokerage and Consulting Vendor for some insight on how to query and evaluate the brokerage services available to you. This complimentary tool helps you discriminate between empty guarantees and realistic, valuable services to support your search for the right level of service.
Hear how we can connect you with relevant buying opportunities and provide expert guidance throughout your transaction. Contact us today for a complimentary, confidential Initial Consultation.
