CPA Accountant

Have you considered purchasing an accounting or bookkeeping practice? Or do you own a firm that you are thinking about selling? Hundreds of these transactions occur every day. And, of course, there are benefits to both sides of the deal. There are dozens of motives for both parties, but finding a match for a win/win sale is the important variable.

The buyer may have just received a license and looking to jump right in with their own practice. An accountant might be moving into an area and does not think the population could sustain another practice. But, taking over the duties of an existing profitable firm would suit the community. The seller could be moving away and does not think the destination would support an accounting service. The seller may be looking to retire, or may be changing careers. The only depressing reason for an accounting practice being sold is because of a death.

There are multiple different types of practice sales. There are sales of Certified Public Accountant (CPA) firms, Certified General Accountant (CGA) firms, Executive Advisory (EA) firms, Chartered Accountant (CA) firms, tax and bookkeeping practices, etc. Virtually any type of practice you are looking for, it’s out there for sale.

Accounting practice sales are much like real estate and sometime involve real estate. Any firm of considerable size must operate in a corporate building, even if only employing a few staff members. If the building is owned by the seller, this location may be for sale along with the practice. Many times the space is rented so the buyer does not have an option to buy. This situation does give the option of continuing the lease agreement or packing up to a different building.

Real estate agents and accounting practice sales brokers are paid a percentage of the transaction, to either find a buyer for the seller or vice versa. These brokers generally work on commission and are able to fit the right seller with the right buyer. This professional has more of an opportunity to search what types of firms are for sale at the moment and find deals for buyers and find excited leads for sellers. As with everything else, if you feel qualified to evaluate potential and are willing to take the time and energy to find the best firm for your desires, go right ahead. Before taking the bull by the horns, consider some of the other factors going into purchasing a successful accounting practice.

Accounting practice sales have many more factors that play a role than in real estate. In accounting practice sales, the condition and momentum of the business plays the biggest role in attraction. Other major players are market conditions, the growth or dwindling of the surrounding community, and how strong or weak the economy is. The last reason is probably the smallest factor because there are two ways of looking at a recession. One group tries to buckle down, stop spending any money possible and try to save their way through. The other type of people are willing to still pay for sound financial advice to be fiscally smart to make more profit. So whether the economy is receding or flourishing, there is always a need for accounting services.

Offshoring and outsourcing are headline news today.  Popular news sources as well as business publications carry daily articles on the virtues and vices of offshoring. How does offshoring affect the local CPA firm?
Let us state some axiomatic truths:

Every business today needs to focus on its key competencies.

The internet has made it possible for any job that can be done across town to be done anywhere in the world.

US wages and overhead are substantially higher than costs in other English-speaking countries.

 

Outsourcing accounting and financial services is growing by 30% annually. Sooner or later, every CPA will have to deal with competitors who are offshoring. It is our contention that CPAs who outsource will have more time to attend to their most profitable clients. They would also be freed from the headaches of recruiting and retaining qualified accounting staff. Making use of outsourced accounting services increases profits in the short run as well as the long run.

Outsourcing the responsibilities of one US staff accountant saves nearly $50,000/year.

Many people think of accounting and bookkeeping outsourcing  as simply a way to reduce cost. This perception misses the greatest benefit to be had – giving the CPA the gift of time.

For the overworked CPA, time is a tyrant. Important business functions which lack urgency are often ignored (e.g. business development, staff development, exit strategy etc.).

By outsourcing the less skilled work, the CPA:

gets the time to attend to the top 10 – 20% of their clients, who contribute 80 – 90% of their revenues. These clients are often the best sources of new business.

gets the opportunity to examine the client’s financial affairs and become a trusted advisor. This opens up a myriad of financial services that the client needs and the CPA can provide.

develops a better understanding of value of the CPAs service to the customer, making value-pricing easier.

trains fewer staff accountants, freeing time and money for in-depth staff training.

can invest in marketing.

can accept new business without having to worry about staff, space and equipment availability. 

 

While the strategic advantages take some time to become effective, CPAs gain immediate benefits from offshoring, including:

A simple solution to the vexing problem of recruiting and retaining bookkeeping staff and staff accountants.

An excellent way to handle peak load, especially during tax season.

Higher quality control: a lighter work load allows for closer review and eliminates the pressure which can lead to mistakes.

Significant cost savings. There are two parts to this cost saving  

 

             a. There is the labor arbitrage factor which can deliver 50-70% cost saving. We estimate that the true cost of a US Staff Accountant is $34/hr worked. When you consider that offshore vendors provide the same service for $10 ±/hr. the cost savings are obvious. We estimate that replacing one US staff accountant saves $47,000/year. (Please see the Excel object at the end of the article. You can substitute your own assumptions and derive your own estimate).

          b. The outsourced accounting provider has significantly larger scale than a single local CPA firm. It allows them to invest in process improvements, systematic staff recruiting and training. 

          c. It is not uncommon to see automation reduce the time required by as much as 90%. The CPA firm using an outsourced accounting services firm can improve its quality and lower cost at the same time.

Improved security: Offshore vendors make substantial investment in security, which is not feasible for a local CPA firm. Contrary to popular belief, offshoring improves security rather than reducing it.

 

 

Is an outsource accounting service right for your firm?  As with all tools, it is most effective when used in service of a strategy.   If you are ready to increase levels of service, grow or diversify your practice, or just have more time to yourself for other pursuits, then it is appropriate to consider offshore accounting as part of your business strategy.

Most CPAs don’t have a strong enough foundation on the subject of marketing. Even in college, we focus a lot on accounting theory and hardly learn anything about real world marketing, despite the fact that many CPAs will be, effectively, small business owners running their own practices. If you’re like most CPAs and haven’t spent much time thinking about marketing, let’s start with fundamentals.

I think of marketing as the 3 M’s:

1. Market
2. Message
3. Media

Market first, message second and media third. The order is very important. Most folks get it wrong. They choose how and when to advertise based on which advertising rep solicits them, which means they are starting at the wrong end.

Market:

The first step in developing a marketing strategy is to identify your target market. Many CPA practices make the mistake of skipping this step, but if you truly want to grow your practice, you must begin with a clear sense of your ideal clientele. Identify a group of people or businesses that fulfill the following requirements:

• You would really enjoy working with these clients.

• They will recognize that working with you is essential.

• They can be easily identified and contacted.

• They will happily pay what you’re worth, without negotiating.

Resist the impulse to serve anyone and everyone. You’ve heard the old saying “You can’t be all things to all people”? Remember it every time you’re tempted to try to market yourself to everyone. When you target the mass population (everybody) as the ideal client base, you will have a hard time differentiating yourself from others in your field. In fact, it’s pretty much impossible to create a specific message to speak to everyone in a way that makes them want to work with you – and creating too many marketing messages could be confusing for prospective clients.

Without a clearly defined target market, you’ll also find it difficult to establish yourself as an expert in a particular area, type of client or situation (remember that experts make more money, get more clients, are more sough after by the media, etc.)

One of the most important secrets of marketing is knowing WHO your ideal clients are (the ones who’ll recognize that working with you is crucial to solving their problems, pay you what you’re worth and tell others about you), figuring out WHAT their particular issues are, WHY they’re having them and HOW you solve them. You have to begin by defining your real ideal market:

EXAMPLE of markets or niches that my firm targets:

- Businesses with revenues of $1.0 to $10M, with up to 50 employees, within 10 miles from my office
- Dentists within 10 miles from my office
- Chiropractors within 10 miles from my office
- Service professionals within 10 miles from my office
- Business owners who belong to your place of worship

Notice how far any one of these demographics is from “anyone who’s willing to pay my fees.” That’s not to say, of course, that you’re going to turn away potential clients who aren’t in your niche market. But you can’t begin to effectively target those in your most desirable market until you’ve clearly identified who they are.

Remember, the order is important; market first and foremost, followed by message and then media. Make sure you’ve taken the time to clearly indentify your market.