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Get ready to absorb an abundance of knowledge! Angela Kays Draffen joins us this week to give us the scoop on the benefits and downfalls of acquisitions. Welcome to Episode 10 of the Grow My Accounting Practice Podcast!
Angela Kays Draffen has over 20 years tax, accounting and auditing experience. She is a Certified QuickBooks ProAdvisor and Master Level Profit First Professional. She opened her firm Encompass, PLLC in 2011 to expand her love of consulting with business owners and helping them grow their companies. She recently acquired an existing firm with 35 monthly bookkeeping clients and over 1200 tax clients.
Every acquisition is different; you have to look at the personality of the company your acquiring and their client base. Since there is a transition period, you want their existing clients to feel safe and comfortable with the sellers blessing to the transition. You may experience some attrition, but try to minimize that.
You also want to look at their firm and see where they’re at technology wise. Stay on top of things! Go paperless, go digital, work with the cloud – this will ease things so clients do not have to be in front of you all the time. However, it can take a lot of extra time and research to see what works best for you and your new clients to synchronize with your business.
You’ve already got the clients, now you can expand your offerings to them whether it’s consulting, bookkeeping, etc. Upsell!
Rule of thumb when you’re buying a CPA firm: It can cost anywhere from one to two times the prior year gross revenue. If you don’t put a lot of money down they will charge you a little bit more interest, but the more you put down the less interest they will charge. Get the seller to finance if you can.
Typically for the first year, any clients that leave – that money comes off the buying price. That motivates the seller to talk to the clients and vouch for the new owner.
Get a good attorney to address all the contingencies before they happen. Have the hard conversation upfront! Clear communication of the agreement is essential. For example, make sure the seller cannot take the clients with them when they leave.
Word of mouth is a powerful tool. Build relationships with the people in your community – you’ll be surprised with the opportunities that will come your way.
You have to remember the good will that’s involved. If the sellers have gone out there and built up their firm to a certain standard, you’re going to pay more for it.
Your existing clients may be wary of not being a priority to you as your grow your firm; take the time to get them on board with your plan and keep them feeling comfortable.
The Psychology of the sale: The Law of Scarcity
When a person perceives that something he or she wants is in limited quantity, he or she believes that the value of what they might want is greater than if it were available in abundance. Less available = more desirable. Examples:
Client meetings – imply that you have a tight schedule and limit your availability.
A prospect you’ve met with/spoken to and sent a proposal to has gone incognito: You may want to reach out to them and reel in the fishing line. Say something along the lines of “the time may night be right for us to work together this quarter because we’re at capacity, however, we are opening up two additional roster positions in 2016. This is your opportunity to work with us, if not I totally understand – I just have a few more prospects to also reach out to (but I wanted to give you this opportunity first).”
There is a difference between manipulation and persuasion. You have to use these strategies ethically, not manipulatively. There’s always consequences of manipulation – you may win that one sale, but it’s not worth it to be bit in the butt later.
GMAP Now Task
Get out there and network with your competition! Look for the folks that are retiring and build a good rapport with them!
Have questions? Email Angela directly at firstname.lastname@example.org
Website coming soon!
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