When looking into ways to effectively and profitably grow your practice, you will inevitably come across the option of buying other accountancy practices. While this will instantly grow your business and extend your client reach, it doesn’t, however, come without its pitfalls. This article outlines the advantages and disadvantages that come with buying accountancy practices.
Always seek professional advice!
Before we explore the reasons to buy an accountancy practice or not, it’s essential to mention that you should always seek a professional’s advice before making the decision to buy.
A broker that specialises in accounting can not only help you make the best buying decision for you and your practice, but they can also thoroughly evaluate the practice that you intend to buy and negotiate the best deal, both of which ensure the future success of your practice.
Buying accountancy practices: the pros
If you negotiate the right deal for your firm when buying accountancy practices, one that is sympathetic to your budget and firm’s growth plan, you can benefit from many advantages:
- You can grow your practice quickly and effectively.
- You can pay for a practice in installments spread over 1–2 years.
- You can inherit active clients, suppliers, some great employees, equipment and systems, and hopefully a reputation.
- You can sometimes be in control of how much of the practice you decide to take on.
- You can put in place a clawback clause in the sales agreement which means you don’t need to pay for any Clients who don’t stay with you for the length of the clawback arrangement.
- There is potential to extend your client reach whether geographically, demographically, or for a particular type of service.
- There is normally great potential to upsell more services to the Clients you acquire or process their affairs more efficiently.
- There is the potential to add in new services to your current firm offering which you can cross-sell to your existing Clients.
- It’s a great way to add in fees to your practice without having to win each Client separately (Want to win bigger and better clients?).
Buying accountancy practices: the cons
Like everything in life, there are cons to every decision. When buying accountancy practices, even when you do thorough due diligence, there are going to be disadvantages:
- It can slow down the growth of your practice if the deal doesn’t align with your growth plan (Find out the 6 ingredients to growing a 1 million pound practice).
- You need funds to be able to buy the practice.
- As part of the sales agreement, you may be required to take on Clients which don’t fit the profile of your firm.
- You can inherit some poor performing staff members from the practice you are buying (Recruit decent staff with these 5 tips).
- There is no guarantee that the Clients or staff you acquire will stay with you. Or that the staff you acquired don’t leave and take Clients with them.
- If the owner of the Client accounts is still in business or sets up another accountancy firm locally, you are at risk of losing Clients back to them.
- You will need to transition the Clients and staff to your practice’s way of working (Read how to get your staff to support your growth plans).
- Agreeing the sales and implementing the transition plan will incur large amounts of management time. It may have been quicker to win each Client separately.
- There may be restrictive clauses in the sales agreement which stop you from managing your new Clients and staff in the way you want too; e.g. not put prices up for 12 months.
- You are not normally allowed to speak to the staff in the practice you are buying before the sale is agreed.
Take your time when making your final decision
Buying accountancy practices is a big decision, so take your time, do the research and necessary due diligence, and make sure that the one you make is the best one for your firm.
In some cases, buying practices can be a shortcut to growing your business, rather than spending your money and time on marketing and growing organically, but this is only the case when you buy a practice that aligns with your vision for your firm.
To make the best buying decision for you and your firm, weigh up these pros and cons when considering a purchase and try to ensure that as many of those pro boxes are ticked as you possibly can.