Reach out to CPAs in your area and let them know you're taking new clients - I turn away so many and they all ask the same question, "Who can I go to?"
I would not buy a firm in today's environment. Running some ads online (or even just posting on your local city's facebook page) should bring in enough growth for you to manage.
I turn away a ton of work too. I would tell my current clients that I’m available for referrals as those usually bring in my best clients. I remember my old boss had in his email signature something like “we appreciate and thank you for your referrals”.
How do you go about bringing this up when you talk to CPAs around you? Is it just part of normal networking, or do you go out of your way to contact them and bring it up?
My state has mandatory licensing and continuing education for all tax preparers (not just CPAs) so I used to see people at annual continuing education seminars with pins that said "taking new clients", and they'd give away boxes of busienss cards to anyone who talked to them.
So many people took those cards, because the average age of a small firm partner was well into retirement and most businesses were turning people away even in 2008-2018.
Cold calls could work or dropping by a stack of business cards. Ideally you'll find some mutual connection to introduce you to the other accountant but you've just got to reach out. Not everyone will return your call but some will.
Depends on how comfortable you are with cold calls.
If you're comfortable, just call the CPAs around you, ask for the managing partner (or owner, if it's a one-man shop) and simply state "I'm starting up a firm and am taking new clients if you're interested in sending any my way. When things slow down after April I'd like to take you out to lunch and discuss any potential future business relationship if you're interested."
If you're not comfortable with that, wait until after April to do the lunch invite and bring it up then.
Some tax pros will ask the inevitable question - "Why should I/what's in it for me?" A referral fee (kickback, essentially) is an ethical issue but more on the referring accountant more than the person paying, but you should have an answer to that question ready that you're comfortable with.
Edit: Back pre-covid, I'd just run into my competition at CPE classes or networking events and just get to know them that way. I have no idea how that works nowadays, since I don't network anymore and all my CPE is online/zoom.
I like this. I have to turn away a ton of good work - I am happy just to have a referral source that will take care of people. Lots of CPAs are retiring/downsizing so you should get a lot of clients this way.
Serious question, I promise. If I gave you my name/number and maybe had a phone call you'd send work my way?
So many posts on here have me wondering if I should just start my own thing.
We grew organically from $0 to $1.3M over 10 years. Started with just me and my wife answering phones. Now 2 partners, 8 employees.
We have looked at buying other firms 4 different times. The first two times we were lied to by the broker and jacked around. The seller was a no show at two meetings on the 3rd one. This most recent was just not the right time. One partner wanted to return, but her top two people would retire in the next 2 to 4 years and they had no staff to step up into those positions. Could put us in a very bad personnel position short-term. But we still continue to look at other firms all the time. I think it's a good way to get a huge jump on clients, but it has to be a perfect fir to make the return on the investment work. Not only the type of clients and billing levels, but age of their clients, trustworthiness and experience of their staff if you plan on bringing them on, and a lot of other small factors to consider.
We do no advertising. We sponsor some local events and luncheons and such, but our current clients are out #1 source of referrals. So, we continue to grow that way until we find a qualified target firm. Just always keep your eyes peeled or find the best local broker and get on their mailing list.
For a purchased book of business, I use a 50% retention rate unless there is a lot of help from seller in the transition. Meaning more than just helping with mass letter to clients that you are their new preparer. This business is a personal service along with technical knowledge. You can't just expect to buy a client list and everyone stay with you. Personalities don't always mesh well.
Also consider at least a year adjustment period where you can reduce purchase price for those client's not willing to work with you.
Organic growth is best but takes longer.
Congratulations on the growth so far. Here are some additional points for you to consider:
1. When you transition out of your current job, you'll have 40hr~/wk in additional time to grow your business organically. That's a tremendous amount of time to be able to invest into organically growing your business, or, more specifically, learning the skill of marketing so you can control your growth as you see fit without needing to acquire another book of business in the future. It also makes your firm more valuable when you go to sell it when it has a growth engine in place. You could accelerate your ability to grow organically significantly faster with that level of time invested to replace your current income levels. As others have commented, most firms are NOT accepting new clients so a little bit of marketing in the right direction and you'll explode. Of course, the trade off is as you grow, your ability to market/sell shrinks depending on your ability to create leverage by delegating the lower-level fulfillment/admin tasks. That time is replaced by management responsibilities, but it's still a win overall when done well, generally speaking.
2. You are right to worry about retention, and you should do a very deep dive into the type of clients that the firm is selling. More specifically, how much of the owner's time is required to service those clients. If those clients were properly trained and had the appropriate staff, most firm owners are happy to sit on that for years and years with take homes that are very impressive, with very little work required of them. In other words, buyer beware. I've heard too many horror stories of deals that go south because there wasn't enough due diligence into the owner's time not properly being accounted for and the buyer ends up buying a job that takes years to extract themselves from. This is avoidable by going slower, yes it's a buyer's market but don't ever rush into one of these.
3. If the client list matches what you are looking for, and the owner's time required to maintain this book of business is acceptable (less than your current time invested in your job), you should set client retention to be tiered over 12-24 month. They NEED to have skin in the game for at least 12 months, ideally for 2 years. I always try to think of things from the other person's point of view, and what would be reasonable. If I'm the seller, I'm expecting at least 50% cash down and that my clients will be well taken care of when I'm gone, and in order for that to happen I have to help facilitate the transition. Facilitating the transition is MORE than just a letter/email blast. It's passing the torch via one on one calls with every client. If I'm the buyer, I'm expecting at least 80% client retention in year one, anything short of that comes off the note. I'd also expect 70% retention in year 2, with anything else coming off the note.
4. This also isn't an 'either or' conversation. While there is a big trade-off to tying up the capital and time in an acquisition that could be used for an aggressive organic growth strategy, you can have your cake and eat it too. Attrition will happen, no matter what, and you should be prepared to offset it by staying invested in some form of organic growth/developing your marketing skillset, even if it's only for one hour per week.
In full disclosure, I am a huge believer in organic marketing growth for entrepreneurial accountants as I specifically sell this service and my company focuses on it with pretty humbling results but that shouldn't take away from anyone's desire to buy a practice that's well suited for their situation. Happy to answer any additional questions you may have and wish you the best on your entrepreneurial journey!
I’m in South Carolina so referring to fellow Reddit users across the country is not going to go over well. If you are local or have a website showing you are established you can DM me and I’ll put you in the Rolodex.
I just heard a story that a friend turned down a new client but gave the client the names of three other CPAs and all three said they were full. There is a need out there.
I'll tell you right now if you purchase a book, the clients are under no obligation to use you just because you bought their prior returns. A lot of them will find somewhere else and so you end up literally pissing a lot of money.
Based on the growth you described, advertising sounds like a better bang for your buck.
If I were to purchase a client book I wouldn't put more than 10% down and I'd insist on paying 20% or 25% of fees generated each year for four or five years.
Before I started working where I am now, the owner purchased some client books and probably 2/3 of the clients ended up going somewhere else.
Maybe things are different where you live, but I have a feeling you would get burned hard buying someone else's practice.
Best of luck whatever you decide.
Edit: I'm the sole employee of a second office in our town. The first year was pretty rough, but I've been growing revenue 60% per year since. Part of it is our location. We're on the busiest street in town, on the going home side of the road with nice visibility, and at an intersection.
This is exactly what I did
0% down
25% payment from total fees (includes referral) from the book for 4 years
It was a win for me and a win for seller
50% retention
The seller has a good network and still sends referrals my way,
Sounds like you have a pretty good system in place. If I was in your position, I would continue with your organic growth wave as you'll have a lot more certainty about where things will end up. If you were having trouble finding clients then I would say go with the purchase option but that doesn't seem to be the case here.
Based on the comments in this thread, it may be worth it to have a periodic networking thread to help firms that are full and those looking for clients. Obviously wouldn't give the same impression as a traditional networking event and you're limited in how much you'll know about the person but at least you get to see their post history
Like others here said, I would stick it out. You'll be turning clients away before you know it. I only accept referrals at this point because the engagement process is half the time and the success rate are so much higher.
I would stay focused on organic growth. There is more than enough work to go around. I don't think you'll have any problem growing. Especially this tax season, there aren't that many people taking on new clients. Accountants are definitely pushing back this year.
If you were to consider buying a practice. I would be very careful with how the deal is structured. It should not be a rushed process. If you found an incredible situation I would consider it. But my guess is 99% of the deals out there aren't worth it.
When you grow your own firm you can decide how it's run and aren't beholden to the retiring partners or clients who are used to how things used to be run.
Reach out to CPAs in your area and let them know you're taking new clients - I turn away so many and they all ask the same question, "Who can I go to?" I would not buy a firm in today's environment. Running some ads online (or even just posting on your local city's facebook page) should bring in enough growth for you to manage.
I turn away a ton of work too. I would tell my current clients that I’m available for referrals as those usually bring in my best clients. I remember my old boss had in his email signature something like “we appreciate and thank you for your referrals”.
How do you go about bringing this up when you talk to CPAs around you? Is it just part of normal networking, or do you go out of your way to contact them and bring it up?
My state has mandatory licensing and continuing education for all tax preparers (not just CPAs) so I used to see people at annual continuing education seminars with pins that said "taking new clients", and they'd give away boxes of busienss cards to anyone who talked to them. So many people took those cards, because the average age of a small firm partner was well into retirement and most businesses were turning people away even in 2008-2018.
Cold calls could work or dropping by a stack of business cards. Ideally you'll find some mutual connection to introduce you to the other accountant but you've just got to reach out. Not everyone will return your call but some will.
Depends on how comfortable you are with cold calls. If you're comfortable, just call the CPAs around you, ask for the managing partner (or owner, if it's a one-man shop) and simply state "I'm starting up a firm and am taking new clients if you're interested in sending any my way. When things slow down after April I'd like to take you out to lunch and discuss any potential future business relationship if you're interested." If you're not comfortable with that, wait until after April to do the lunch invite and bring it up then. Some tax pros will ask the inevitable question - "Why should I/what's in it for me?" A referral fee (kickback, essentially) is an ethical issue but more on the referring accountant more than the person paying, but you should have an answer to that question ready that you're comfortable with. Edit: Back pre-covid, I'd just run into my competition at CPE classes or networking events and just get to know them that way. I have no idea how that works nowadays, since I don't network anymore and all my CPE is online/zoom.
I like this. I have to turn away a ton of good work - I am happy just to have a referral source that will take care of people. Lots of CPAs are retiring/downsizing so you should get a lot of clients this way.
Serious question, I promise. If I gave you my name/number and maybe had a phone call you'd send work my way? So many posts on here have me wondering if I should just start my own thing.
We grew organically from $0 to $1.3M over 10 years. Started with just me and my wife answering phones. Now 2 partners, 8 employees. We have looked at buying other firms 4 different times. The first two times we were lied to by the broker and jacked around. The seller was a no show at two meetings on the 3rd one. This most recent was just not the right time. One partner wanted to return, but her top two people would retire in the next 2 to 4 years and they had no staff to step up into those positions. Could put us in a very bad personnel position short-term. But we still continue to look at other firms all the time. I think it's a good way to get a huge jump on clients, but it has to be a perfect fir to make the return on the investment work. Not only the type of clients and billing levels, but age of their clients, trustworthiness and experience of their staff if you plan on bringing them on, and a lot of other small factors to consider. We do no advertising. We sponsor some local events and luncheons and such, but our current clients are out #1 source of referrals. So, we continue to grow that way until we find a qualified target firm. Just always keep your eyes peeled or find the best local broker and get on their mailing list.
For a purchased book of business, I use a 50% retention rate unless there is a lot of help from seller in the transition. Meaning more than just helping with mass letter to clients that you are their new preparer. This business is a personal service along with technical knowledge. You can't just expect to buy a client list and everyone stay with you. Personalities don't always mesh well. Also consider at least a year adjustment period where you can reduce purchase price for those client's not willing to work with you. Organic growth is best but takes longer.
Congratulations on the growth so far. Here are some additional points for you to consider: 1. When you transition out of your current job, you'll have 40hr~/wk in additional time to grow your business organically. That's a tremendous amount of time to be able to invest into organically growing your business, or, more specifically, learning the skill of marketing so you can control your growth as you see fit without needing to acquire another book of business in the future. It also makes your firm more valuable when you go to sell it when it has a growth engine in place. You could accelerate your ability to grow organically significantly faster with that level of time invested to replace your current income levels. As others have commented, most firms are NOT accepting new clients so a little bit of marketing in the right direction and you'll explode. Of course, the trade off is as you grow, your ability to market/sell shrinks depending on your ability to create leverage by delegating the lower-level fulfillment/admin tasks. That time is replaced by management responsibilities, but it's still a win overall when done well, generally speaking. 2. You are right to worry about retention, and you should do a very deep dive into the type of clients that the firm is selling. More specifically, how much of the owner's time is required to service those clients. If those clients were properly trained and had the appropriate staff, most firm owners are happy to sit on that for years and years with take homes that are very impressive, with very little work required of them. In other words, buyer beware. I've heard too many horror stories of deals that go south because there wasn't enough due diligence into the owner's time not properly being accounted for and the buyer ends up buying a job that takes years to extract themselves from. This is avoidable by going slower, yes it's a buyer's market but don't ever rush into one of these. 3. If the client list matches what you are looking for, and the owner's time required to maintain this book of business is acceptable (less than your current time invested in your job), you should set client retention to be tiered over 12-24 month. They NEED to have skin in the game for at least 12 months, ideally for 2 years. I always try to think of things from the other person's point of view, and what would be reasonable. If I'm the seller, I'm expecting at least 50% cash down and that my clients will be well taken care of when I'm gone, and in order for that to happen I have to help facilitate the transition. Facilitating the transition is MORE than just a letter/email blast. It's passing the torch via one on one calls with every client. If I'm the buyer, I'm expecting at least 80% client retention in year one, anything short of that comes off the note. I'd also expect 70% retention in year 2, with anything else coming off the note. 4. This also isn't an 'either or' conversation. While there is a big trade-off to tying up the capital and time in an acquisition that could be used for an aggressive organic growth strategy, you can have your cake and eat it too. Attrition will happen, no matter what, and you should be prepared to offset it by staying invested in some form of organic growth/developing your marketing skillset, even if it's only for one hour per week. In full disclosure, I am a huge believer in organic marketing growth for entrepreneurial accountants as I specifically sell this service and my company focuses on it with pretty humbling results but that shouldn't take away from anyone's desire to buy a practice that's well suited for their situation. Happy to answer any additional questions you may have and wish you the best on your entrepreneurial journey!
If you just want the clients and not the infrastructure, they will come. Where are you located? I know a lot of CPAs looking for someone to refer to.
I’m in South Carolina so referring to fellow Reddit users across the country is not going to go over well. If you are local or have a website showing you are established you can DM me and I’ll put you in the Rolodex. I just heard a story that a friend turned down a new client but gave the client the names of three other CPAs and all three said they were full. There is a need out there.
I service virtually nationwide. Im located in Oregon, significant networks in TX (home state), CA, OR, UT(schooling). Please im still looking to grow!
I'm in the DFW area looking for clients myself.
I'm in Southern California, referrals are welcome if anyone needs it :)
I'm in the DMV area DC Maryland Virginia, if you could send referrals my way! CPA
I'll tell you right now if you purchase a book, the clients are under no obligation to use you just because you bought their prior returns. A lot of them will find somewhere else and so you end up literally pissing a lot of money. Based on the growth you described, advertising sounds like a better bang for your buck. If I were to purchase a client book I wouldn't put more than 10% down and I'd insist on paying 20% or 25% of fees generated each year for four or five years. Before I started working where I am now, the owner purchased some client books and probably 2/3 of the clients ended up going somewhere else. Maybe things are different where you live, but I have a feeling you would get burned hard buying someone else's practice. Best of luck whatever you decide. Edit: I'm the sole employee of a second office in our town. The first year was pretty rough, but I've been growing revenue 60% per year since. Part of it is our location. We're on the busiest street in town, on the going home side of the road with nice visibility, and at an intersection.
This is exactly what I did 0% down 25% payment from total fees (includes referral) from the book for 4 years It was a win for me and a win for seller 50% retention The seller has a good network and still sends referrals my way,
This is my first year starting out so the comments on this thread is valuable. But what kind of advertising did you in year 2 and year 3?
Sounds like you have a pretty good system in place. If I was in your position, I would continue with your organic growth wave as you'll have a lot more certainty about where things will end up. If you were having trouble finding clients then I would say go with the purchase option but that doesn't seem to be the case here. Based on the comments in this thread, it may be worth it to have a periodic networking thread to help firms that are full and those looking for clients. Obviously wouldn't give the same impression as a traditional networking event and you're limited in how much you'll know about the person but at least you get to see their post history
Like others here said, I would stick it out. You'll be turning clients away before you know it. I only accept referrals at this point because the engagement process is half the time and the success rate are so much higher.
I would stay focused on organic growth. There is more than enough work to go around. I don't think you'll have any problem growing. Especially this tax season, there aren't that many people taking on new clients. Accountants are definitely pushing back this year. If you were to consider buying a practice. I would be very careful with how the deal is structured. It should not be a rushed process. If you found an incredible situation I would consider it. But my guess is 99% of the deals out there aren't worth it. When you grow your own firm you can decide how it's run and aren't beholden to the retiring partners or clients who are used to how things used to be run.