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How do you buy a practice?

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Jul 30, 2007 10:49 pm

I liked the idea of waiting for a recession, but a few thoughts on that. Isn’t a recession  the best time to get new clients through “prospecting” bc everyone thinks their advisor sucks during bad times, so they are more willing to talk to new people?

Has anyone done that, called up a bunch of people in your city about buying their prospects, I feel like there must be a simpler way.

I am a CPA at a medium firm that is trying to start the financial planning end of the business. I have a lot of warm leads, but since the business has a higher probability of success than a normal practice, I think buying a book would make sense. Any thoughts?

Jul 30, 2007 10:57 pm


Jul 31, 2007 1:26 pm

I don't see what the problem is. Fo r the first part, a broker is seriously doing something else if he says "No, I don't want to work with a CPA firm that will pay me for my book and then pay me to run it as an FP."

Many brokers would offer out a nut of your choice for access to you customer list (assuming you are with a medium cpa firm that has 10,000 clients). Which brings us to the next point...

The idea is to convert your clients from a one time per year relationship to a year round, fee based relationship. Why do you want to dilute that with some outside book? You already have the relationships, you just want to develop them. Get on the phone and convert these people.

If its a salesman you need, then go get one. Go to the bank, go to the local brokerage branch etc etc.

As far as waiting for the recession, this is the world's stupidest idea. You want to be up and running before the bad times hit so that you are the place to go for your clients. Your client, Mr. Ant Trepenuer comes to you in 2009 with a buttload of losses on his 1099b and the conversation starts "Hey Mr.! We're just starting a brand new money management division!would you like to talk with our guy?" he hears "Wanna be a guinea pig? it's likely to cost you big time, but since you're losing anyway what the hey?"

Not to mention, that during recession, getting the partners at your CPA firm to go for an expansion is not gonna happen. Here we are after a 3.5 year bull and you're looking at expansion.

Meanwhile I thought you Financial Planning types were big into the "Don't time the market" mantra. Saying, "I'm gonna wait for the recession" is market timing; boobie.

Jul 31, 2007 1:47 pm

CPA firms for the most part, are immune to recessions. Who doesn't file their taxes or need an audit during a recession? Also, I wasnt going to wait for a recession to start this branch,its already started, its just easier to grow with a solid referral base, that we could possibly get some accounting out of also.

I agree with most your points overall though and I will take them to heart. The idea to not to dilute with an outside book, is an interesting point, unless the book can be converted to accounting clients also, and their book is decent. Can you give me more of your thoughts on this?

Jul 31, 2007 2:24 pm

Again, I might be missing something but this doesn't seem this complicated.

You're looking for one of two situations (perhaps three):

1. You're looking to hire a broker to bring his book to your firm and affliliate with your CPA firm.

2. You're looking for someone who wants to retire out of the business.

3. You're looking to snatch the asset management division from another CPA firm.

or a combination of the above

2+3 seems to be the likeliest. Find some guy who has been doing taxes and "Financial Planning" for a number of years and is looking to retire. I can think of at least two within miles of my office right now (I've made contact but...). The advantage you have is the checkbook . Point here being that his book of clients will be looking for a new CPA anyway. You can even set up buyout deals "when/if needed" so that if the guy gets hit by a beer truck on the way home one night (or a gin bottle, as has been known to happen) there is a transition in place so that his family is compensated (heck, then you could use insurance to pay for the deal).

3 Means that maybe your firm buys a smaller firm that has an established program. If the broker is good, he'll be happy to be making money off a larger asset base. You may need to make some accomodations to the CPA but overall the deal should make moe sense than just buying a book (and the idea that there is another CPA firm looking to hire away the broker will motivate the CPA somewhat to merge.)

1 is straightforward and might come into a combo play if the oldster has his kid working the asset management side but then that's just the same as 3.

I don't know. Maybe you should call me. However, I will say that a flat out broker is not always the greatest referral streamer. My clients have CPAs that they have had for years. Unless a CPA gave them a compelling reason to switch... Not to mention that I'd want to keep doing business my way too at least. 

Jul 31, 2007 3:28 pm

Good ideas. Thanks again. I'll have to talk to some mroe people here and see what direction they want to go

Jul 31, 2007 4:09 pm

It's not that complicated. Right now, everybody wants to buy. In a down market, there will be more sellers, just like the last down market. Get ready now.

Jul 31, 2007 8:27 pm

What, if any, are the disclosure requirements to current clients, for setting-up a future first-dibs buyout deal with another advisor, from both the buyer and seller standpoint?

Jan 22, 2008 10:33 pm

I am one of the consultants with FP Transitions and just thought I would chime in. There are very few practices that get listed in the NY area for some reason, we have the same frustrations you do, believe me. There is over 100:1 buyer to seller ratio in that state. Most deals we do there tend to be one-on-one, buyer and seller find each other and we help with the valuation, guidance, terms, taxes and contracts…feel free to give me a call if you want to talk about acquisition strategies 800.934.3303. More than happy to help.