BusinessPostCorner.com
No Result
View All Result
Wednesday, July 16, 2025
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
BusinessPostCorner.com
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources
No Result
View All Result
BusinessPostCorner.com
No Result
View All Result

Art of Accounting: The vanishing buyers of small practices

August 19, 2024
in Accounting
Reading Time: 4 mins read
A A
0
Art of Accounting: The vanishing buyers of small practices
ShareShareShareShareShare

Enjoy complimentary access to top ideas and insights — selected by our editors.

There is no question that there is widespread consolidation of accounting practices, but this is taking place among the larger firms. You can read about a merger or acquisition multiple times a week in Accounting Today. The trend I have seen is difficulty in small practices finding suitable buyers.

I believe the shortage of buyers of small practices is because the potential buyers are not qualified to handle a small practice. When I “grew up” in public accounting, I worked for small firms where I needed to do everything a client needed done. Sure, it was a less complicated period, but I needed knowledge and skills preparing all types of tax returns, as well as financial statements that were mostly compilations but still with a fair amount of reviews and even some audits. I also had to do systems review, not just filling out internal control questionnaires but helping a client work through weaknesses they had discovered or that kept them awake at night. The job involved speaking with bankers about what they wanted, the purpose of the business’ covenants and compensating balance amounts and quality of collateral.

We were reviewing escalation clauses in leases, calming down IRS revenue officers when a client fell behind paying the withholding taxes, helping a client understand the total costs of their products and their breakeven sales amounts, the layered structure of payments to their salespeople and representatives, how to calculate their interim inventory and industry expertise. We also became sounding boards to our clients and “unlicensed” psychologists. I tell a lot of stories about this in my Memoirs of a CPAbook. 

What has been occurring over the last two dozen or so years is a trend toward specialization or partitioning of skills. The reasons are the growing complexity of tax returns, combined with digitization of the input and many of the repetitive processes, along with the even greater difficulty of financial statement preparation, reviews and audits.

The use of virtual work has been growing over this period, with a great acceleration since the COVID shutdown in March 2020 that has reduced the relational interaction with clients. That was an important driver of queries and discussions, providing insights into a client’s thinking and concerns. A lot of higher-level discussions were with the partner but plenty of them also took place with the “kid” spending that day with the client. None of this is good or bad, it is just different, and while it raised specialized skill levels it also served to reduce the one thing that I felt created the smaller firm’s raison d’être as well as a training ground for future CPA practice owners. 

Do not misunderstand me: The relationships and interactions still exist, especially with older practitioners. But it is a declining skill or talent. The younger staff are not being presented with the opportunities that were ubiquitous during my and some later generations, but no longer so. This means that the skills needed to succeed in a smaller practice have declined and this serves to decrease the pool of available buyers.

Furthermore, moonlighting, which was prevalent in my day, has become less frequent, primarily because of the longer work hours. When coupled with the drop in skill levels needed to properly service smaller clients, it has reduced the staff people’s “desire” to seek out after-hours work opportunities. Again, things have changed, not just one thing but a confluence of actions.

Considering what I suggested here, the pool of available buyers of small practices has declined. It has not exactly vanished as the headline title suggests, but I think we are past the beginning of this trend. That has made it harder to sell a small practice and has served to reduce the prices and lengthen the time to consummate a sale, stretching out the exit period.

Twenty years ago selling a small practice was pretty easy since there was an abundance of buyers. That’s not so anymore. This is a trend that is occurring because of changing circumstances, not because of any predestined plan or conspiracy. 

These comments are based on my limited observations of colleagues I have met or spoken with who have had extreme difficulties selling their practices that I know would have been easy sales 20 years ago. The purpose of sharing my thoughts is to provide a heads up of what might be expected, including a longer sale process and a lower sales price. I suggest factoring my thoughts into your planning. If I am wrong, you will have lost nothing.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.

Credit: Source link

ShareTweetSendPinShare
Previous Post

UK tech tycoon Mike Lynch among six missing after yacht sinks

Next Post

Synapse crisis aftermath shows ledgers are key

Next Post
Synapse crisis aftermath shows ledgers are key

Synapse crisis aftermath shows ledgers are key

Bhutan Government Moves .73M Bitcoin to Binance Again – Timing the Market?

Bhutan Government Moves $23.73M Bitcoin to Binance Again – Timing the Market?

July 10, 2025
Why it’s time to rethink expense report workflows for company-paid credit cards

Why it’s time to rethink expense report workflows for company-paid credit cards

July 11, 2025
5 best CRMs for property management businesses in 2025

5 best CRMs for property management businesses in 2025

July 14, 2025
Reddit introduces age verification in the UK ahead of new rules

Reddit introduces age verification in the UK ahead of new rules

July 15, 2025
Trump threatens Russia with tariffs while unveiling new Ukraine weapons plan

Trump threatens Russia with tariffs while unveiling new Ukraine weapons plan

July 14, 2025
Reform UK targets ‘broken’ system of council funding for special needs

Reform UK targets ‘broken’ system of council funding for special needs

July 9, 2025
BusinessPostCorner.com

BusinessPostCorner.com is an online news portal that aims to share the latest news about following topics: Accounting, Tax, Business, Finance, Crypto, Management, Human resources and Marketing. Feel free to get in touch with us!

Recent News

Moscow Exchange to Launch ETHA-Tracking Ethereum Futures Index Fund

Moscow Exchange to Launch ETHA-Tracking Ethereum Futures Index Fund

July 15, 2025
HMRC does not know how much tax billionaires pay, say MPs

HMRC does not know how much tax billionaires pay, say MPs

July 15, 2025

Our Newsletter!

Loading
  • Contact Us
  • Privacy Policy
  • Terms of Use
  • DMCA

© 2023 businesspostcorner.com - All Rights Reserved!

No Result
View All Result
  • Home
  • Business
  • Finance
  • Accounting
  • Tax
  • Management
  • Marketing
  • Crypto News
  • Human Resources

© 2023 businesspostcorner.com - All Rights Reserved!