Thoughts on buying a CPA practice/ Book Keeping Business

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August 22, 2022

by a searcher from University of Colorado at Boulder in Georgetown, CO 80444, USA

We decided to focus our search on book keeping/ CPA firms... We have a few Indications of Interest out there, how do you feel about having to replace CPA's as they retire? What kind of things would you look for in a good deal? Would love to hear your thoughts or connect with anyone who purchased a CPA/ Tax or Book keeping business.

Thanks!

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commentor profile
Reply by a searcher
from University of Denver in Boston, MA, USA
So many negative Nelly's on this thread haha. I bought one and love the space.

What's every searcher looking for? Recurring revenue, Capex light, sticky clients, 20-35% EBITDA margins. Accounting firms check a lot of those boxes. There's numerous accounting firm owners our national association, PASBA, who make $500-1M profit. We all share firm statistics.

Is it people intensive? Yes. Are there less people going into the field like plumbing? Also yes. Hello pricing power. Does the competition suck? Yes - most don't know how to service clients or run a biz.

What to look for? SDE over $300k, virtual or more modern firms, modern pricing with recurring revenue, 20-50% bookkeeping and not just all tax. Feel free to listen to a pod I was on or Chris was on:

https://acquiringminds.co/articles/patrick-dichter-appletree-business-services

https://acquiringminds.co/articles/chris-williams-system-six
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Reply by a searcher
from University of Pennsylvania in Boston, MA, USA
You can certainly "replace the CPAs as they retire", but the question is at what costs and risks. I had the opportunity to look at a raw data from an accounting practice before the brokers got involved. The difference in productivity is just staggering. It could be more than 3 times between the highest producer (the owner) and the lowest producer (a remote worker). I still can't figure out how you can test for an applicant's productivity before you hire them. Another problem to be mindful of is the seasonality. Tax practices generate a lot of cash during Feb, Mar, Apr, but for the rest of the year the owners have to draw on a line of credit. Bookkeeping practices are not so seasonal, but margins there are razor thin, as Matt pointed out there.
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