This blog post may contain references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.
The pursuit of owning an accounting firm in Arizona is a thrilling aspiration that can present itself differently. While some entrepreneurs may dream of starting from scratch, others may see potential in buying an existing firm.
While both paths have their respective merits, this article delves into why you should consider buying an existing accounting or CPA firm instead of starting a new one.
Time-Efficiency
The process of setting up an entirely new accounting firm can be both time-consuming and challenging. There are various considerations like obtaining licenses, securing office space, and buying essential equipment. The most significant hurdle is establishing a reliable client base, which can take years to cultivate. Conversely, buying an existing firm automatically provides you with established operational structures, allowing you to focus on growth and improvements.
Established Client Base
Client relationships are the lifeblood of any accounting firm. A new firm has to start from scratch, investing resources into marketing strategies to attract prospective clients. However, when buying an existing firm, you already have a portfolio of clients. This immediate cash flow can help maintain the firm’s operations, and it also presents an opportunity for growth through upselling and cross-selling to the existing client base.
Established Brand and Reputation
A reputable brand name is an invaluable asset in the world of accounting. It helps attract clients and talented professionals who wish to associate themselves with a well-known firm. When you buy an existing firm, you get to inherit its reputation and goodwill, which can help to quickly establish your credibility in the market.
Risk Mitigation
Starting a new business is always fraught with uncertainty and risks. Will you attract enough clients? Will your processes be efficient? These are among the numerous questions that will linger in your mind. However, an existing firm already has proven systems, processes, and strategies that reduce the element of risk.
Immediate Revenue Stream
As a continuation of the previous point, an established firm means an immediate source of income. From day one, you’re receiving payments from clients. This immediate income can be used to service any loans used to purchase the business and reduces the financial pressure associated with new businesses that may not turn a profit for a considerable period.
Existing Employee Base
An accounting firm is more than just its owner or partners – it comprises a team of experienced professionals familiar with its clients and systems. When you buy an existing firm, you also acquire its human resources. This means you won’t have to spend time on recruitment and training, which can take up considerable time and resources.
Negotiation Opportunities
Often, the selling price of an accounting firm is flexible and can be negotiated. You can negotiate a lower price based on the firm’s profitability, client attrition rate, or other factors. This flexibility is usually not available when starting a new firm, where costs are more fixed and predictable.
Potential for Scale
Existing firms often come with established infrastructure that can support a larger scale of operation than what is currently in use. Therefore, these firms present opportunities for rapid scaling. On the other hand, a new firm may have to start with limited infrastructure and gradually invest more as the firm grows, slowing the pace of scaling.
Access to Credit
It’s typically easier to obtain credit or secure financing when buying an existing business because lenders can see a proven track record of cash flow and profitability. For a new business, without a trading history, obtaining credit can be more challenging.
Business Learning Opportunity
Lastly, buying an existing firm offers a unique learning opportunity. It allows you to analyze an already functioning business model, determine its strengths and weaknesses, and work on improvements. This can be more enriching than starting a new firm where you may have to learn everything from scratch.
In conclusion, while starting a new accounting or CPA firm can be exciting, it comes with unique challenges. On the other hand, buying an existing firm offers various advantages, including time efficiency, immediate cash flow, a ready client base, and reduced risks. However, performing due diligence when buying an existing firm is critical to ensure you get the expected value. No one firms are alike, and the advantages listed here may only apply to some situations, so careful analysis is essential before deciding.
Become an Insider
Editorial Disclaimer: The editorial content on this page is not provided by any of the companies mentioned and has not been endorsed by any of these entities. Opinions expressed here are author's alone
The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.
