Whether you are looking to expand your current practice with a strategic acquisition or are looking to start fresh by purchasing a new business, there are important factors to consider. Not every accounting practice will fit what you are looking for, making it essential to fully analyze a company before making a decision. Here are 8 things to look at when buying an accounting business in Florida.
Florida is a diverse state that offers promising growth opportunities for accounting practices. Predictions are estimating around 25 million residents by 2032. Accountants are always in demand. This means as the population continues to grow, you can expect your practice to grow as well.
The location you buy a practice may lead to a specific set of clientele. For example, one county might have an older generation while you might expect to find young families in an up-and-coming neighborhood. The type of individuals you want to work with can help you determine the location you want to buy an accounting business.
You should also evaluate the clientele of the prospective accounting firm. How many repeat customers do they have? Repeat customers can indicate steady recurring revenue. If the practice has a high client turnover, that can indicate poor client experiences and problems within the firm. The prospective firm should be able to provide you with reports to understand the number of repeat customers.
Furthermore, the main item you are paying for when you purchase an accounting business is their client list. This list includes all current and past clients that the business has worked with. If you decide to purchase the business, the client list will help you reach out to the right clients to further grow revenue and profitability.
#3: Type of Work
Looking at the type of work of the prospective accounting firm can also be helpful. Do they work with individuals or businesses? If you are looking to prepare individual returns only, purchasing a business with a high number of business clients would not be the best choice. First, evaluate the type of clients you want to work with. Then, start your search for the right accounting business.
Keep in mind that you aren’t confined to the type of work that the prospective accounting firm is doing. One of the perks of buying an existing business is the ability to expand operations into new areas with the help of the existing brand image. Being a business owner gives you the ability to choose where you direct your attention, but having the type of work already present in the practice can be helpful.
#4: Size of Practice
The size of the practice also matters. Businesses that are expanding through acquisitions might be looking to attain a larger practice while an entrepreneur may be looking to start small. Analyzing the revenue of the practice will help you figure out the size of the practice. Moreover, are you looking to work with a team or be the sole individual of the firm? Practices that come with employees will be more difficult to manage.
On the other hand, a business where the practitioner is the sole employee will be more manageable, but the entire burden falls on you. Understanding your needs will be helpful when looking to buy a practice.
#5: Purchase Price
Another top consideration is the purchase price. How much are you willing to pay for a practice? The price an accounting business is listed at will be based on the clientele, location, brand image, and expansion opportunities. There is some leeway in the negotiation process, such as the specifics of the purchase agreement and the financing options.
Most business purchases won’t require you to pay outright, but instead, will offer financing options, such as seller financing or through an SBA loan. The purchase price takes into consideration both quantitative and qualitative information. Both will factor into the overall purchase price. If you are confused about the purchase price or want to counter an offer, reach out to a qualified business broker.
#6: Growth Opportunities
Factor in the growth opportunities of the prospective accounting business as well. A business that is showing stagnant growth might not be the best purchase. You want to find a practice that is generating increasing revenue and profitability. At a minimum, the revenue increase should be matching the rising inflation rates each year.
The burden of growth will often fall on you when you purchase the business. Will you continue to use the same marketing and growth strategies or will you rework everything to fit your style? Purchasing a practice gives you the creativity and ability to implement growth strategies to reach operating and financial goals.
#7: Brand Image
How do clients feel about the prospective business? Are there positive reviews or a large amount of negative experiences? Brand image directly impacts profitability. A business that clients perceive as trustworthy and knowledgeable will experience more word-of-mouth advertising and organic growth. However, a business that has not developed a strong brand image will need to spend more on marketing to attract new clients.
One of the top resources to consider when purchasing an accounting practice is the employees. Employees can not only ensure a smooth transition process, but can also help grow the business. Evaluate the current roles of employees in the company. How do they contribute? Experienced employees are an asset to consider when evaluating a business, especially with the struggle many accounting practices are facing to find qualified talent.
Buying an accounting practice comes down to more than just the price tag. In fact, understanding the clientele, growth opportunities, existing employees, type of work, and location are all important considerations. Whether you’ve found an accounting business you want to put an offer on or are confused about where to start, working with a business broker can help you navigate through the process. Our team at Truforte Business Group is made up of experienced accountants that know what to look for. Reach out today to learn more.