3 reasons why successful CPA practices consider merging

{4 minutes to read} The value of a Certified Public Accountant (CPA) practice is approximately 50% lower than 10 years ago.

CPA firms are still much in demand, but their value has dropped due to the Baby Boomers, who are all reaching retirement age almost simultaneously. Because of this, the market has become flooded with CPA firms looking for succession. With values dropping from 2x revenue to less than 1x revenue in the past 10 years, most CPA practices are facing challenges in finding their right match to carry them into the last phase of their career.

3 reasons why successful CPA practices consider merging | Cheryl GoldenbergWhy would I ever want to merge with a larger firm?

This is the first question I am asked when I talk to a successful young CPA. “I have my own firm and my independence,” they say. “No one tells me what to do, and I’m making money.” However, you have the opportunity to make a lot more money NOW while you are working, utilizing the services, niches and back up and support of a larger firm. Because of this you can cross sell to your current clients while remaining the face to all of them and pass down work so you can use your time to develop new business. And when you retire, you will have created a strong succession plan with a firm who will buy your practice at a predetermined value that is higher now than it will be in the future.

Here are 3 reasons why a successful CPA practice should consider merging:

  1. Business value decreasing: The value of CPA firms has decreased dramatically in the last 10 years. If this trend continues, in less than 10 years, your business will be worth almost nothing in the flooded Baby Boomer CPA market.
  1. Opportunity: Many large CPA firms have senior partners who are reaching retirement. If a CPA in his 40s joins a Regional firm, there is an opportunity to take over the clients of a retiring partner, especially if the CPA is entrepreneurial, has a niche and a proven track record of developing business for his own firm. The larger firm would appreciate his entrepreneurial skill to run a business and his ability to consult and handle client service.
  1. Small practices cannot grow: A few years ago small firms had an advantage. Without much overhead, they could charge lower billing rates. Now, there is too much competition. The big firms can undercut any smaller firm to get that client in the door. What they do the following year is another story… As a result, the small firm has very little opportunity to grow one client at a time.

Case Study:

A 45-year-old CPA with a 5-million-dollar practice has met with me on several occasions. He sees the opportunity and understands the facts which I have presented. But, he has never worked for anyone. He is an entrepreneur. He does not want someone telling him what to do. However, larger CPA firms are desperate for young talent. He does not realize that they are ready to meet him on his terms.

I explain that I can make some introductions to Managing Partners that will be interested in making his practice their New York office. The firm is based in another city, so they will not be looking over his shoulder. They will be looking for his expertise in the geography, in his niche and his ability to utilize their backup and support and services to capture more business in a market he is familiar with. It can actually double the size of the practice in Manhattan. This brings the level of comfort only a larger firm can provide and a much faster way to grow his practice.

Sometimes, even after the explanations and introductions, CPAs are resistant. They want what they think is the American Dream, but unfortunately, any CPA not merging into a larger firm is going to work very hard trying to build that dream firm. And one day this Managing Partner will turn around and realize merging was a much faster and easier path to growth and freedom. Don’t miss your opportunity.

Why not merge your CPA practice into a larger firm, start making more money now and have a better quality of life and a secure succession plan?

– Cheryl Goldenberg
Goldenberg Consulting Group, Inc.
917-861-6863 cell
Serving the CPA Community Exclusively

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