Accountants who are entrepreneurially inclined may decide to be their own bosses. Perhaps a firm down the street is for sale, and it has you thinking, "I can buy this firm and make it my own." It's a tempting proposition.
You'll be the owner of an accounting or tax firm that already has income and all of the essential pieces in place.
But I encourage you to consider the pros and cons of starting your own firm instead of buying one. I'm going to provide a little firsthand insight from my years of experience as a firm owner that can help you look at buying versus starting a firm with a clearer perspective.
Buying vs. starting a practice: pros and cons
When you start your own firm, you can choose your clients, services and niche.
You're starting the firm from the ground up and can niche down to serve the clients you love and offer the services that you enjoy. When you purchase a practice, chances are there are services in place that you don't necessarily enjoy performing, and clients who are offered "special" services or are grandfathered into services.
Additionally, client relationships may transfer in the business sense but not in the personal sense. You don't know your biggest client or their kids' names, or have the rapport that the former owner had.
These clients may leave, and some of them may not be the right personality fit for you. Starting your own practice allows you to:
- Set your own tone with clients;
- Choose a tech stack you like and are confident in;
- Charge clients how you want and not how the former owner did; and,
- Control how your clients interact with you.
Buying a firm may look good from the outside, but imagine a firm with a lenient owner who doesn't mind a crazy rush before a deadline because it allows clients to miss submission deadlines. You may be buying yourself a headache because clients who are used to this level of leniency will likely be resistant to change.
Startup costs
Today you can start your own firm with quite minimal costs. When you break down the costs of starting a firm, you will need to pay for insurance, office supplies, computers, software, etc.
Another cost I recommend including in your startup budget is funding for networking. You'll want to consider joining professional groups and taking professionals out for lunches and dinners. While the costs to start your own firm may not be a lot, it's important to note that when starting your firm, the biggest investment will often be time.
On the flip side, you'll have a major upfront expense when purchasing an existing firm, which far exceeds the startup costs discussed above.
Personal values and goals
When you purchase an accounting firm, you're not just purchasing their book of clients and reputation — you're purchasing their values and mission.
If a firm has been in business for years or decades, its clients and staff will be accustomed to the way things "have always been done." You will inherit their communication policies and their operating hours. Clients and staff will expect those trends to continue if the previous owner took unscheduled meetings and never took a day off.
However, if you can find a practice that's aligned with your values and goals, you can get a head start on success by leveraging the firm's established reputation and clients.
The trouble is this kind of firm likely won't be easy to find.
When you build your own practice, you can establish your values and needs right from the start. You have the power and freedom to:
- Set boundaries;
- Only take calls on certain days of the week;
- Not be available for unscheduled meetings;
- Take a day off if you want; and,
- Hire your dream team.
Building up your own firm takes hard work and dedication, but you have the opportunity to build something you love. More importantly, you ensure that your firm's values and goals are aligned with yours.
Standard operating procedures
Accounting firms of all sizes can benefit from having standard operating procedures in place. SOPs outline all of the steps in the tasks you perform for each service. They help ensure consistency, so your work is always carried out in the same way.
When you purchase a practice, they may already have well-established and effective SOPs in place, which will save you time. However, there's also a good chance that they do not have SOPs or their existing procedures are not aligned with how you want to run things.
Practices that have been in business for decades may not have had the time or technology to implement standard operating procedures.
When you start your own practice, on the other hand, you have the opportunity to create your own SOPs from Day One. You can implement workflows, templates and organizational checklists right out of the gate. But do keep in mind that you'll need to train staff on your SOPs, which will require time and resources.
Final thoughts
One of the main reasons people purchase practices is to buy their existing book of business. But it's important to remember there's a sea of tax and accounting clients. Every individual and business has filing requirements, and savvy business owners are looking for advisory services.
There's also a shortage of good accountants that offer great service. Right now, there's a golden opportunity to take the dive and start your own firm (or purchase one, if you decide to go that route).
It's important to weigh the pros and cons of both options carefully to determine which one is right for you.
And if you happen to be a firm owner who's considering selling your services in the next five to 10 years, I recommend making your practice sellable now. Review the above, and create a firm that people will want to buy.
