Wil Stunkel didn’t go the average route when trying to grow his accounting firm. He realized the opportunity of buying CPA firm (s) could be the fastest route to faster profits.
And he believes it’s worked like mad!
In this interview on the Growing Your Firm Podcast by Jetpack Workflow Software, David Cristello and Wil Stunkel cover:

  1. The first step you need to take when thinking about buying CPA firm (s)
  2. How to think through the terms when buying CPA firm (s)?
  3. Common traps and financing options
  4. And much more… click below to listen to the whole interview or click here to listen in iTunes or here for Stitcher Radio


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From Big 4 to Building His Own CPA Firm: 

Wil Stunkel has been unconventional in many of his “accounting methods.” Wil started off with 4 years at PricewaterhouseCooper (a Big 4 Firm) before striking out on his own to found Stunkel Tax.
His first 3 years in business went by fast and were successful. By the end of it, he had amassed over 200 clients plus brought on two employees to assist. As you can imagine, starting a CPA practice doesn’t come without headaches. Wil juggled all of them as he kept his eye on the prize…namely…Wil wanted flexibility.

With 200 clients, he was doing regular face-time and made sure each client felt they were personally taken care of. He never wanted clients to feel they were being ‘passed off’ after they signed.

Wil never wanted to compromise on that. At the same time, however, he needed capacity to fill-out the firm more or else he’d hit a ceiling…fast!
That’s when Wil first looked into the idea of buying a CPA firm.

The Incredible Opportunity in the “Buying CPA Firm” Space Now…

Wil got on-board with the idea for purchasing CPA Firms-in-order-to-grow pretty quick. He sees a wide-open opportunity for many present firms who wish to double fast…
Right now, many CPA firms are led by aging owners who want a lottery ticket out. The problem is they don’t know how they should proceed with retirement. Wil discovered many of these older executives couldn’t find a way to cash out from their firm, and so he uncovered a real gem.
Wil recommends if you’re a growing practice, start looking around town for smaller firms with older owners. Give a quick call and start a conversation. The worst thing they could say if you ask if they’re interested in selling is “No, thanks.” I believe most might take up the conversation and move forward.

Financing an Acquisition: 

Wil ran into many problems when he first ventured into the acquisition side. For one, he’d approach firms who were interested, but then once they moved forward, Wil realized the firms weren’t near ready for purchase.

  • They didn’t have processes documented
  • Paper was spilling out of cabinets unaccounted for
  • Sellers would demand all the money upfront (and this isn’t common)
  • The sellers had poor financial management
  • Etc…

This added headaches for Wil as he had to spend time sitting down with these owners to outline what the seller needed to do.

That was only the first hurdle. The next is figuring out financing. As mentioned, paying everything upfront isn’t as common as you may think. Typically, sellers should expect monthly/annual payments for years down the line. The only caveat may be if a bank is willing to foot the bill and you pay interest to the bank for the loan. With these types of loans, you’ll most likely still need to put money down (protects the bank’s risk).

Think through what you could afford. What ROI do you expect to see from this new purchase?

Wil went for seller financing. Normally, this involves the seller accepting payments over time (fixed or commissions) This route saves you in bank fees/interest, the only struggle is getting the seller to agree.

3 Main Pieces to Study to Determine if You’ve Found the Right CPA Firm to Buy: 

You’re about to make a big decision…a decision you can’t make lying down. You need to first consider all the angles.
First, what client mix are you looking for? Part of the buying process is going through the seller’s financials and client list. You don’t want to simply look at “revenue per client.” But, also, what types of clients are these? Any specific industry? Are they clients in an industry you want to become an expert in?

The wrong clients hurt your current culture and employee morale.

Along those same lines, what are the implications for these new clients? Namely, do you need to hire more staff? Or, will the seller require you hire everyone under their banner?

If they want you to hire their team, you’ll need to do extensive interviews with their team to make sure everything would work together. Plus, if their employees do things much different from your team, that could cause internal conflicts. That’s another piece to look into.

If you’re purchasing a sole practitioner, you’ll almost definitely need a new team member as there won’t be any new person to bring over.

Lastly, and this is a deadly mistake, you want to look at cashflow and not revenues! Revenues, Wil recommends, are the last thing you look at. Profitability which leads to cashflow are the key components.

Think about it: If you buy a firm for $100k based on last year’s revenue, but their profitability is only $20k/year, you’ll go 5 years making $0 on your acquisition! Sounds like a pretty poor investment to me.

Study the cashflow, how fast clients pay, the burn rate etc. You want to see profit fairly quickly, so that’s the first statement you should look at.

Checklist for Buying CPA Firm (s) or Accounting Practice (s): 

  • Make sure you are financially stable enough to acquire a practice
  • Is your internal process in place to ramp up and bring in additional clients
  • Define what the ideal practice you’d like to acquire (from a size and financing perspective)
  • Try to understand what is important to the seller
  • Determine if you can get financing from a bank
  • Find a bank or broker who has experience buying/selling practices (Bank of America has a dedicated Firm lending section)
  • There will be a competing interest of as much money upfront (from the buyer) to buying options (from the buyer)
  • Look for seller financing (which still requires a down payment)
  • Define your terms of the sale
  • How will you look at each practice, and how will you come up with the offer price?
    • What kind of client mix are you looking for?
    • Understanding the implication of the acquisition (do they have staff, are they bringing over staff) ?
  • Understand terms for the staff of the firm or practice you’re looking to buy
    • Staff increases overhead expense
  • Everyone looks at revenue, but it’s a common buyers trap. It’s all about the cashflow
  • The longer you can structure out the payment, the better (in Wil’s opinion). Because you can continue to make money as you pay off the practice.
  • If you buy a solo/1 person practice, you will have to determine who will take on the work.
  • Make sure to get everything in writing 
  • Have a transition process, checklist, or system for bringing on new clients, new staff, and transitioning into your practice (what system, technology, processes do they use)
  • Wil recommends trying to work inside the practice you want to buy for a few days (even a week) to “live” inside the firm just to make sure everything is aligned (and if not, is already accounted for)

Wil says it takes about 90 days + several hours per week before a deal finalizes. If you have any questions for him, go to his website and go to “Contact.”

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