Michael Young·February 1, 2024

How to Buy a $4m Accounting Practice | Michael Young Interview

Michael Young is a former PwC diligence CPA, on the doorstep of partner, who left to search for a business primarily because he wanted control over his time and career. After an 18-month self-funded search that produced three failed LOIs, he started his own outsourced-bookkeeping practice from scratch, reaching $10k/month in fees within a month, and simultaneously connected with fellow guest Patrick Dichter and the PASBA accounting-owner community, which reframed small-business accounting as an under-supplied, recurring-revenue opportunity rather than a commodity tax-prep business. Through a personal introduction at a PASBA conference, he met David, the owner of Bay Business Group, a $4.3m-billings, 35-person Northern Virginia outsourced-accounting firm niched in defense contractors and nonprofits, and closed an SBA-financed, no-broker, no-outside-equity acquisition just 90 days after they met. His brother Matthew, also an ex-Big-Four CPA, joined immediately as a partner. Four months in, the deal has gone smoothly overall, though Michael flags the slow-motion client churn from a manager who left over a year before the sale, and the operational difficulty of migrating long-tenured staff and clients off QuickBooks Desktop, as diligence and execution lessons. He closes by stressing that luck -- both the earlier bad luck of failed deals and the eventual good luck of finding a values-aligned seller -- played an outsized role in his outcome.

Deal facts

multiple: above the ~1x-1.2x revenue market range typical for brokered accounting firms; Michael said he paid above market
revenue: $4.3m in billings
financing structure: SBA loan (used Live Oak Bank), no outside equity, no seller financing mentioned; self-funded down payment with his wife
notes: Firm has 35 employees (about 20 in Northern Virginia, rest remote). Sold on a revenue multiple, not SDE/EBITDA multiple, which is standard for accounting practices. Deal closed 90 days after Michael and seller David first met, no broker involved (off-market, sourced through a personal introduction at a PASBA industry conference). Michael's brother Matthew joined as a partner immediately after close; they are not co-equal partners. Closed August 15, 2023.

Why this business

Michael was a CPA who spent about a decade doing quality-of-earnings/diligence work for private equity at PwC, was on the doorstep of making partner, but wanted more control over his time and career and to be present for his young family. He explored home services, healthcare services rollups, medical equipment maintenance, and association management before narrowing to accounting after talking to Patrick Dichter (a past guest) about the appeal of small-business accounting: a large and growing service gap because fewer people are entering the accounting profession while demand keeps growing, meaning small accounting firms are chronically understaffed and can't be proactive with clients. He also wanted his work to have a more tangible, direct benefit to small business owners rather than helping billion-dollar PE funds get a little bigger. After his 18-month self-funded search produced three failed LOIs, he pivoted to starting his own bookkeeping/outsourced-accounting practice from scratch, reached $10k/month in fees within the first month, then met seller David through Patrick at a PASBA conference and bought David's already-built, PASBA-style recurring-revenue firm (Bay Business Group) instead.

What's working

PASBA-model firms (monthly recurring bookkeeping/controller/fractional-CFO relationships) are more attractive acquisition targets than traditional tax-season-driven practices because revenue is recurring and the technician/owner is not the sole driver of sales
Being a CPA himself gives Michael a credible operational backstop -- he can personally step into a manager or technical role if something goes wrong, unlike non-accountant buyers of accounting firms
Found a highly motivated, culture-focused seller (David) who wanted the firm's identity, employees, and culture preserved rather than absorbed into a larger firm or competitor -- this made the deal fast and clean (90 days, no broker, no complex structure)
Firm's existing niche focus (defense contractors and nonprofits, both of which require specialized bookkeeping) creates a defensible service moat and easier scalability/pattern-recognition for staff
Openness to remote work has significantly widened the hiring pool for scarce, quality bookkeeping/accounting talent versus hiring only within commuting distance of the Northern Virginia office
Prior 10 years of PE-side diligence experience taught him to scrutinize balance sheets and margin consistency across years, which he used to kill multiple bad deals during his own search

What's hard

18-month self-funded search produced three LOIs that all fell apart -- one two days from signing, one in diligence over customer-relationship/churn risk -- which was personally demoralizing and 'publicly' visible to friends and family
Starting an accounting practice from scratch: finding client work was easy, but actually delivering/executing the work with limited staff was the hard part
Underestimated how a key manager's departure over a year before the acquisition would have a long-tail effect: her former clients didn't leave immediately but continued to churn slowly over the four months post-close, longer than diligence suggested
Migrating long-tenured staff and clients off QuickBooks Desktop onto QuickBooks Online has been harder than expected -- accountants who'd used desktop for 15 years, and clients, both resist the change
General execution/implementation of even small operational tweaks ('twisting this or twisting that') inside an already well-run firm has been harder than anticipated
Emotional toll of search failure -- avoiding family gatherings because of constant questions about how the search/business was going

Notable quotes

It comes back to control of like I want to be in various specific areas I wanted to be doing in businesses that I wanted to be involved with and like I feel like you lose some of that independent autonomy if you are raising a fund.

It is a supply of accountants problem right like the demand for accounting services isn't really... the supply of accounting services is definitely going down... a lot of these big firms are sucking up everybody that goes into accounting.

I hate failing and like was failing very publicly with family and friends and like I got to the point where I hated going to family events because everyone would always want to know what was going on.

I found a phenomenal seller and that has made it so much easier.

Ideas are the easy part and like strategy is usually the easy part... it's the execution and like implementation that's the hard part.