Reasons firms buy other firms:

• Geographic expansion
• Obtaining or adding to a niche
• Obtaining people
• To be bigger
• To obtain a client base

To align your firm to fit the above objectives:

• Become a specialist. Specialized services permit higher fees and can sometimes be delivered by non-CPAs.
• Invest in technology to increase efficiency and reduce dependence on staff.
• Be selective about the clients you serve.

Think about the information acquirers need:

• Client demographics—ages, length of time as clients, size of clients, industries served, services provided, etc. Are clients in declining or growing industries? How will they be affected by globalization?
• What are your seasonal peaks?
• How much business have you been generating that can be characterized as annuities? As one-time engagements?
• How often do you see your top clients? Your other clients?
• How does your realization from top clients compare with that from other clients?
• What is your client loss history?
• What is the quality of your accounts receivable?
• Who is in charge (partner, manager, senior) of your top clients? Your other clients?
• What strengths and weaknesses have been disclosed by client surveys?

The following may suggest becoming more selective about client acceptance or implementing policies to upgrade clients:

• Evaluate realization, revenues vis-à-vis minimum fees, revenue growth, and seasonality of specific clients.
• When interviewing prospective clients consider whether they seem too concerned with fees. How profitable is the prospect, and how much has it grown recently?
• Does the prospect meet regularly with its current accountant? Is it a sophisticated company? Will it offer cross-selling opportunities? Will its management refer other prospects to your firm? Will it appreciate the value of your services?
• Will the prospect be loyal? Does it have a culture of ethical behavior?

From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, January 2006, p. 10.