As a business buyer, you must understand when to bring on the help of an Accountant and to how hire those with the right experience. Accountants are not business advisors, although some actually are Attorneys. I don’t recommend using the same person as your Attorney and Accountant. That situation usually does not end up working to your advantage as you may think.

First things first about Accountants; you need to use a CPA. This skill set is much different than a bookkeeper or a friend that is a CFO at another company. Accountants are very good at one thing; history. They crunch numbers based on historical data to let you get a true picture of the business you are looking at and find any hidden finance related inconsistencies. They can also sometimes model forecasts but are mainly very adept with past/current financial data and tax related implications regarding the purchase and operation of the company.

If at all possible, you should ask around to other business owners that you know or you can ask your Business Broker or Business Advisor. It is best to stick with someone that is both local to the area in which you are buying the business or local to your home. Your attorney may also have access to a good business savvy Accountant.

Like I mentioned before, the Accountant must be a CPA. They must also have experience with businesses and preferably businesses of the size you are looking to buy. Someone who just handles personal accounting issues is not someone to bother with. Even better, but not necessarily a must, familiarity with the industry you are buying in would be a plus. This experience should really include knowledge of the due diligence process. Additionally, you want to set yourself up with someone that you feel will treat you with importance even after you buy since this is the person you should have on your team throughout the life of this business venture.

Once you have done all of your prep work including knowing exactly what type(s) of business you are looking for, then you should start looking for an Accountant. With this key information settled in your head, now during your interviews you can ask about their background with those company types. Do not actually bother hiring an Accountant until you are sure you are going to submit an offer on a business, which starts your due diligence.

First off, I should warn you that what you don’t want them doing for you is performing a valuation, unless they have a lot of experience doing so with the industry you are looking at. This is not their strong point. They should be taking the due diligence financials (P&L’s, Balance Sheets, Tax docs, etc.) and comparing them to what you were told via the Seller’s business profile as well as making sense of them to paint a financial picture for you.

A CPA should be able to show you past performance versus current performance. They may also be able to give you an idea of the future performance. Hopefully they can set up a spread sheet for you to try and run some possible projections by adjusting numbers on the spreadsheet. A good Accountant will also apprise you of any tax related issues that may come about regarding the business itself and with financing the purchase of the business with personal, bank, or seller funds.

Don’t bother asking their opinion of whether to buy or not. Even if they have one, it shouldn’t sway you either way. You have seen the business and during due diligence you should be observing it even more in action. That in conjunction with the financial picture the Accountant paints should be your indicators. Even if the business has numbers falling off, as long as there is no missing information (like a ridiculously low payroll) it does not mean the business is a bad buy. It may mean that the current owner is just flat due to being ready to retire or just plain losing interest. That’s why a Business Broker or Advisor can add good insight with the financial picture from the Accountant.

Unfortunately you really need an Accountant for your due diligence and you will most certainly need one for when you are actually running a business. If you chose one correctly by experience and fit with your personality, it will be worth the money. Although the rates can be all over the board depending on where you are located, generally the rates should be in the range of $120-$175 an hour. With this said, it will probably cost in the neighborhood of $1200-$2000 for most small business purchases. Not ridiculous but it adds up quick if you are not prepared and end up going to due diligence on 3 or 4 businesses instead of 1 or 2.

Making the right choice regarding an Accountant is crucial but much of that choice is based on your preparation before starting to hunt for a business. Do not overlook this fact. A good Accountant will also help to make sure you get all of the key financial docs from the Seller. Those key docs are based on the type of business you are looking at. Again, that’s why knowing what you want to buy and hiring an Accountant with a background in that business along with due diligence experience is important.