Or is it? Growing firms are scouring the terrain for acquisition candidates. Is your firm going to be ready when opportunity knocks?
by Rick Telberg
At Large
With an economic recovery underway and the prospects for an expensive new cycle of technological and regulatory retooling for the profession, many CPA firm-owners should be thinking about cashing out.
So why aren't more CPAs in the market to sell?
The reasons are varied and complex. But most experts seem to agree that firm owners are facing a three-to-seven window beginning right now to plan for an orderly exit and successful retirement. If you're planning a move, now's the time.
By some of my own off-the-cuff estimates, buyers outnumber sellers by at least three to one these days. That is, there are three firms looking to buy a practice for every firm that's in the market to sell.
By that economic reasoning, it should be a seller's market. But that's not necessarily so. Too many small or solo practices are not ripe for sale. In real estate parlance, they lack "curb appeal."
Preparing a firm for sale is worthy of a book, and there are many of them, so we won't go into all the aspects here. But, essentially, too many CPAs have fallen prey to the classic "e-myth." In other words they've spent too much time, effort and money working "in" the business instead of "on" the business -- working hard, but hardly building transferable asset value. For these people, and there are many, considering that perhaps half all firm owners are now in their 50's, time is running short to get their practices in shape to maximize the return on their life's work.
"The accounting profession is changing with more medium-sized firms trying to grow and some want to do it with mergers or acquisitions," agrees Mark Lilling, a Great Neck, N.Y. CPA , who peer-reviews about 1,000 firms regularly, maybe more than any other firm in the state. "The older professionals are not planning for the future and just keep working and aging. The buyers are looking at accounting like a business and want to grow, but the older CPA's are not reacting.
"Many CPAs are completely willing to work past retirement age," according to Max Krotman, general counsel of GlobalForce, perhaps the nation's largest brokerage for CPA firms mergers and acquisitions. "They just don't know when to quit."
But done properly, with intelligent transition strategies and sensible financial arrangements, Krotman and GlobalForce are making good deals all the time. "The problem is that too many prospective sellers just don't know where to start." Well, one answer is to call someone like Krotman before it's too late.
"The new regulatory environment has been a boon to larger firms, including those whose practice doesn't include SEC work," said Bruce Marcus, co-author with August Aquila of the new must-read book, "Clients at the Core: Marketing and Managing Today's Professional Services Firm."
"For the smaller firms, it means greater competition, and a need to learn new ways to do old things." Marcus said. "At the same time, increased sophistication in marketing has given the edge to larger firms, particularly those who understand that marketing is now an integral part of a firm's practice."
It's a wonder, then, that many firms don't feel it's more profitable to sell than to retool to compete and to function under new regulations.
