How Do I Choose the Right Practice to Buy?
There are several things you must consider when choosing the right firm to acquire:
- Expertise. Does your firm have the ability and appropriate licenses to assume the work being done by the seller?
- Excess capacity. Does your firm have the excess capacity to replace the time and roles being performed by the seller and whatever staff may not be coming along with the sale? Do you have the excess capacity to bring in the staff and retiring partners into your space to realize the benefit of redundancy reduction?
- Chemistry. Do the seller and buyer seem comfortable with each other personally, professionally and philosophically? If the two parties are not on the same page it typically does not bode well for retention of clients and staff. As discussed in the Transition section clients choose a professional with whom they are comfortable. If you are not comfortable with the other professional (or vice versa), chances are your clients will not be comfortable and client retention will be at risk.
- Culture. The word culture means many things to many firms. There is a culture to how clients are serviced, the work environment, billing methods, IT and so many additional items. If the firm you are acquiring does not fit your culture, this is a deal you should likely pass on.
- Continuity. Most accounting firm clients have a number of firms to choose from. If you feel you would have to make substantial changes that your clients would notice; such as fee structure, billing procedures, using the cloud and portals instead of getting visited regularly..., the risk of poor client retention looms high.
- Strategy. What is the reason you are interested in this practice? Is it their client base? Staff? Synergies? Cross-selling opportunities? Selling price? Do these opportunities fit within your long-term growth strategy?
- Price. Is this a practice you would purchase if the price were 5% higher? (If the answer is no, re-examine the reasons you are purchasing the practice. If you cannot justify an additional 5% there is a high probability the practice is not as attractive as you thought).
- Synergy. Does the practice complement yours or just add mass? A practice that complements is usually more attractive but not always. Adding mass can be also strategic if you have excess staff capacity with skills or abilities within a narrow range such as tax, bookkeeping, etc.
More information on choosing the right practice to acquire:
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