CPA Makeover

With all the conversation about weather-related events in other parts of the country, the Northeast has experienced what is known as an “Indian Summer” – with temperatures reaching in the mid-80s at the end of September. In fact, I established a personal record by re-starting my air conditioning the first week of October.

So taking advantage of sunshine and abnormal temperatures, I took a long walk the other day and noticed one of my neighbors speaking to a home improvement contractor. He explained that he was putting his house on the market and was just now getting to all the projects he had put off for years.

“Gotta get it ready for when the real estate brokers start bringing people in,” he explained. “Especially the kitchen and the bathrooms because that’s what really sells a house.”

I thought about it and realized that he was right. Whenever I visit someone’s home I usually notice both of those areas first.

So it would stand to reason that the same principles would apply to a CPA practice that had made the decision to merge and intends to polish it up for potential suitors.

I’m often asked by practitioners how to make their respective firms beautiful for a sale – or merger. Obviously there’s no set answer for that – much of it depends on the condition of the firm – and trust me I’ve seen both ends of the spectrum.

I worked for a time with a practice in the financial district of New York that had stacks of paper so high they looked like missile silos and holes in the sheet rocked walls so large that it looked like an NFL lineman had charged though them.

I’ve also had a practice that was so spit polished and clean it could have served as an operating room if need be.

Regardless of what shape your firm is in, it doesn’t always require a complete physical makeover. Of course, a nice décor is important but there are a number of unseen selling points. For example, state of the art technology – such as being paperless, multiple screens or having up-to-date applications. Another is having a command of your firm’s metrics – profit margins, realization rates etc. I can’t tell you how many times I asked a managing partner what the firm was dropping to the bottom line and was met with the following response – “whatever’s left after all the salaries, perks and benefits.”

If I was a potential suitor and heard that, I would thank him/her for their time and exit stage left.

So if you’re thinking of entering into a merger, it would be prudent to take a holistic view of your practice and honestly assess what it needs to make it more attractive. Otherwise your version of an “open house” might more resemble a haunted house in terms of attendance.