Can Your Firm Attract Buyers?

CPA Leadership Institute - February 14, 2020

Source: The Rosenberg Associates

The following includes excerpts, reproduced with permission, from an article by Marc Rosenberg.

With so many sellers flooding the market, buyers are able to cherry-pick the best firms and offer prices that are often below sellers’ expectations.

What makes your firm less attractive to acquire?

Few and/or weak staff.
High compensation demands from sellers. Acquiring firms have to make significant investments when merging in a smaller practice: higher staff compensation, training, technology, more support professionals, etc.
Revenues are so attached to the owner’s personality and presence in the firm that the buyer worries about client retention.
Retirement-minded sellers with few, if any, younger partners and staff.
Retirement-minded sellers who want to merge with a buyer, continue to work on and control their clients for an undetermined number of years AND expect their purchase payments to begin immediately.
Smaller sellers often have a client base that larger firms find unattractive. Mainly, a large volume of low level 1040s and lots of write-up work.

Most buyers are swimming in opportunities. Successful sellers have to positively differentiate themselves from the pack.

Here are some options:

A few years before putting the firm on the market, commit to reengineering the firm by (a) recruiting top notch staff. If sellers can hand over to buyers a cadre of attractive staff (relatively young and talented) on a silver platter, they will find themselves in a much stronger negotiating position and (b) moving your client base and the services upscale.
Invest in technology to make your firm more efficient.
Accept the fact that you will get a lower price for your firm if you have inadequate staff and a low-level client base, and no one but the partners has the expertise needed to service clients.

From The Rosenberg Associates blog, January 13, 2020, https://rosenbergassoc.com/.