We Wrote the Book
The Complete Guide to M&A of CPA Firms
By Cindy Ragan
CVA, Economist
Industry Benchmarks & Trends
The accounting industry by the numbers
Projected industry revenue by 2025, including $8.7B in consulting revenue
$
0
B
Employees in 2025; the workforce has declined ~10% since 2019
0
M
CPA firms operating in roughly 55,000 locations across the US
0
+
Average revenue per employee; average pay is $91K
$
0
K
Projected job growth through 2033 — higher than the average for all occupations
0
%
Of CPA firms have fewer than 20 employees — smaller firms still rule
0
%
The Accounting Industry By The Numbers
- National and Regional Firms are buying accounting practices at a record pace due to above average growth in population and industry in South Florida relative to the rest of the country — aerospace, technology, medical, professional services, etc.
- The majority of large firms need a South Florida presence since they all have at least some larger clients with offices or headquarters here, and of course, they all have or want a home here.
- It is estimated that 60% of all Partners and Sole Practitioners are over the age of 60 and will be over 65 in the next 5 years.
- CPAs are working longer than ever. 65% of those surveyed said they will work past the age of 70 — many lost a majority of their retirement in the 2008–2009 stock crash.
- The day of the Sole Practitioner is nearing its end; its inefficiency is characterized by an endless cycle of too much work, too little growth, too little pay, yielding the proverbial "death at one's desk"!
Why CPAs Consolidate
Two motives: gain resources & gain market share.
Two motives; one to “GAIN MORE RESOURCES” the other “GAIN MARKET SHARE” — It is simply too slow and costly to grow organically. Accounting practice sales, or merging practices, is the most cost efficient and expedient strategy to expanding or exiting your practice for countless reasons.
Key Benefits
Why M&A pays off — instantly.
- Adds clients, staff, services & geographic locations instantly & pays for itself
- Economies of scale yield increased cash flow, profitability & value instantly
- Attracts superior professional talent
- Attracts larger clients — larger firms get larger clients
- Creates a broader career path for existing staff & partners
- Allows partner(s) to focus/specialize more on their talents
- Allows for multiple layers of management while sharing administrative & management responsibilities
- Secures an Exit Strategy for Partners, long-term
- Buys-out Retiring Partners, short-term
- Secures an Exit Strategy for Partners, long-term
Challenges Facing Firms
Smaller Firms Can't Compete, Nor Thrive.
- Not enough time nor cash flow to expand organically at any significant rate
- Cannot attract, nor maintain, young CPAs — no partnership track, can't compete with regional & national firms for talent
- Cannot afford middle management needed for growth
- Owners not billing enough, doing too much admin
- Profitability ratio below market
- Can't offer other needed services to clients
- No time for needed consulting nor quality customer service
- No internal succession plan
Partner Retirement Wave
CPA Firm Sales Pay for Themselves.
- With organic growth, investments in marketing, advertising, and networking are too slow and costly, and the acquisition cost of new clients is impossible to determine.
- Cash flow from M&A Transactions cover Debt Service, Costs and the Down Payment, otherwise not a good deal.
- Cash flow comes from Economies of Scale and Partners retiring or slowing down.
Opportunities for Buyers
M&A Benefits to Buyers.
- Instant scale — clients, staff, services and geography in a single transaction
- Established cash flow with predictable recurring revenue
- Cross-sell opportunities into advisory, financial planning and outsourced services
- Talent acquisition — bring in seasoned CPAs in a tight labor market
- Geographic expansion into high-growth Florida markets
- Economies of scale fall directly to the bottom line
Confidential. Senior-level. White-glove.
Ready to discuss your practice?
Every conversation begins with discretion and ends with a clear plan. Speak directly with Cindy Ragan, CVA.
From Blog
