Buying vs. Building an Accounting Firm

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I recently was asked about buying an accounting firm vs. building one. I have looked at purchasing a few firms and have been involved in a few acquisitions. Based on these experiences, I built a consulting firm rather than buying one.

I built my firm because I only wanted to do advisory work. I was also burned out by change management in legacy accounting firms. However, if I were to do it all again, I would consider doing it differently.

In this issue, I will cover my thoughts on buying a firm and my experience in a few acquisitions. The following two issues will discuss building a firm and how I might do it differently.

The Pros of Buying an Accounting Firm  

The biggest reason to buy a firm is speed. It speeds up your learning curve and allows you to elevate and delegate. One of my biggest regrets about building is the time I have spent doing the work. 

I enjoy having strategic conversations with clients, but my passion is in connecting with people and selling. Acquiring a firm would have allowed me to sit in this seat faster.

By purchasing a firm, you have a stable cash flow to start, which allows you to hire faster. Fortunately, I had a stable cash flow, but it was only enough to cover my base pay. It took me a year before I hired my first part-time contractor.  

Buying a firm also accelerates your learning curve. It lets you figure out what you like and do not like quickly. I was fortunate to get these experiences building CAS offerings inside CPA firms. The downfall is it is hard to change what you do not like with legacy clients and staff. 

Accounting Staff Considerations 

Another consideration that accounting firms take with mergers and acquisitions is acquiring people. I have been involved in three acquisitions where this was part of the strategy. All of them went differently than planned. 

In all of these acquisitions, the staff resisted change, including myself. Many left the accounting firm after these acquisitions. And some realized the firm needed them enough that they could refuse the change in the immediate future.

Before I departed from one firm, I met with the President of the top 100 firm that had acquired the firm I was working for. I informed the President that I felt betrayed when, out of the blue, I was told the firm had been sold. 

The President told me about acquiring two firms that merged in the same week. One of the acquired firms gave their employees ample notice and training. The other acquired firm gave no notice to the employees. 

Once their integration began, both acquired firms called to complain to the President. One firm complained that they had already forgotten all the training, and the other had similar complaints about the betrayal I had felt.

The Cons of Buying an Accounting Firm  

It has dawned on me that people are creatures of habit, especially accountants. Change is hard, and it is even harder for a leader to sell. 

Change management is by far the biggest con for me. I was burnout trying to convience people in CPA firms my vision for CAS, so buying and overhauling a traditional CPA firm did not sound fun to me. 

Perseverance is the only way through change management in an accounting firm. Implementing a system such as Traction can assist, but there is no silver bullet. 

The other con of buying an accounting firm is taking on debt. The risk of defaulting on a loan to buy an accounting is low unless you come in guns blazing with change. Plus, it is common for deals to be structured, factoring in some attrition to mitigate risk. 

Conclusion to Buying an Accounting Firm

 Although I started my firm from scratch, the pros of buying an accounting firm outweigh the cons. It all depends on your situation and risk tolerance. The main consideration will be whether you love the change management process. If not, look to find someone to partner with who does.

Thanks for reading, Luke Templin!

P.S. There are four ways I can help you grow your CAS offerings when you are ready:

1. Automate your CAS offering with daily financial digest on autopilot

2. Join my How to Start Offering Advisory Services Cohort. The next one starts in May, with only a few spots left.

3. Mini-courses on CAS

4. Join Megan Tarnow and me at the #CASsaloon every fourth Thursday at 2 PM CST on “X” to talk all things CAS.