Overcoming a Lack of Technical Experience When Acquiring a CPA Firm

September 01, 2023

by a searcher from University of California, Berkeley - Haas School of Business in San Francisco, CA, USA

I'm a corporate accountant with a Big 4 Auditing background and a CPA license. I've been looking to acquire an accounting firm in the $1MM - $3MM valuation range. I thought I would be a solid candidate to purchase a CPA firm given my Background. But I'm finding most of the firms on the market are tax firms.

I've been having a difficult time selling myself to tax partners due to my lack of tax preparation experience. Most of these firms are being sold by retiring partners who want to hand their business off to an experienced tax pro or existing firm rather than train a younger CPA.

Has anyone had experience overcoming this hurdle?

Here are my thoughts:

Acquire a business in a sector that doesn't require a certification or advanced technical knowledge
Bring on a partner with tax experience who can assist with the technical work post transition
Find a seller comfortable with the lack of tax experience, then outsource the technical work
As a last resort, leave my current job and get tax experience before trying to acquire an accounting firm

Reply by a searcher
from University of North Texas in San Antonio, TX, USA

^redacted‌ while I don't possess a CPA or accounting background, I've encountered a specific hurdle here in Texas that has deterred me from pursuing such opportunities in the past. It wasn't that seller's where concerned with my license, although a question on how I would deal with that hurdle, but that the state's regulations restrict non-CPAs from being the majority partner in CPA firms. This limitation has made it challenging for individuals like me who, while not CPAs themselves, still have valuable expertise and resources to bring to the table. That said, I believe there is substantial untapped potential in the concept of a roll-up strategy within the CPA industry. By consolidating smaller CPA firms and leveraging the strengths of various partners, there's an opportunity to create a more robust and competitive entity. In navigating the Texas regulations, it's essential to explore creative partnership structures that allow me to collaborate effectively with licensed CPAs. Whether that involves forming strategic alliances, finding partners who can act as the majority owner while valuing my contributions, or working within the regulatory framework, I remain committed to exploring every avenue. This challenge serves as a reminder to me of the importance of adaptability and innovation in entrepreneurship. Hang in there!

Reply by a searcher
from Millersville University of Pennsylvania in Mantua Township, NJ, USA

I purchased an accounting business with no tax/audit work so I didn't need to have a CPA or EA. Also the seller has structured the company where they didn't have the relationships and the teams did. So it was a more natural transition for me to take over as a business owner, rather than a managing partner kind of relationship. Many firms in the 1-3M range will still have the owner doing a lot of the relationship and tax work. This is the "traditional" model and they have a traditional model in their mind for how things need to work and who should take over their business. You'll probably need to look at a lot of businesses to find the firm/practice/company that is structured in the right way were someone who isn't going to do the tax work is going to run the company. Also expect to pay a higher multiple for this, as it's highly desirable.

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