For many accountants who want to start their business, but don’t want to go through the hassle of finding clients, acquiring an existing practice might seem like a good option. It can also be a good option if you’ve been working for the same firm or company for a certain number of years and are looking for some independence.
However, while it does have its benefits, it has its drawbacks as well. So, it’s always better to look at it from as many angles as possible before you make your decision. Let’s take a look at some of the pros and cons of acquiring an accountancy practice.
The Pros of Acquiring a Practice
The first and most obvious benefit of acquiring an existing practice is that you’ll have access to a large number of clients. This means that you can decide to start from scratch, or use the practice’s contacts to grow your own. And the best thing is that you don’t necessarily have to buy the practice in one piece. You can always buy the practice in instalments and stretch out the payments over a longer period. This allows you to still profit as you pay for the firm without having to wait.
You also don’t have to buy the whole practice. You can buy only a portion depending on how much you want to invest, or your particular objectives. And, if you are worried about some of the practice’s clients leaving, you can always include a clawback clause that will prevent you from having to pay for clients that end up leaving during a certain period.
Other benefits include being able to expand to different sectors, or different geographical locations, and being able to increase your range of service and expertise.
Cons of Acquiring a Practice
One of the issues that a lot of people don’t consider when buying a practice is that it could actually end up slowing down the growth of your own practice if it doesn’t align with your particular growth plan. You may also end up having to deal with clients that don’t actually fit the profile of your firm.
Then there’s the staff you’ll be inheriting. There may be some that you feel are incompetent, and you may not gel with some of them or vice versa. Not all team members will appreciate the change, and chances are some will leave, or you’ll have to let some go.
Tips for Acquiring the Right Accountancy Practice
If you decide to buy a practice, you have to make sure that you focus on buying one with which you’ll have a natural synergy. You also shouldn’t buy a firm just because it’s cheap, or as an act of goodwill. And last, but not least, it’s important that you do your due diligence.
The solution here could be to work with a third party that will vet practices for you, and make sure that the valuation is fair to both parties. Services like Retiring Accountant, for instance, have a large bank of existing practices up for sale. They have a reputation to maintain, so they’ll at least make sure that you’ll avoid unpleasant surprises, and will facilitate the buying process.
Now that you know some of the pros and cons of buying a practice, you can now start your search and see if it’s truly the right option for you. Whatever you do, don’t make the mistake of chasing bargains, and favour firms that will be in line with your current operation.