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A firm that grew on simple flat-fee, cash-basis billing discovered at the deal table that buyers wanted something it had never tracked.
This firm scaled on a clean, deliberate model: mostly flat fees, value priced, cash-basis accounting, and almost no hourly work. It served clients well, and cash flow was never a problem. The founder saw the simplicity as a feature, and for years it was.
Then serious buyers came to the table, and the model that built the firm became the thing that slowed the deal.
“We were a little, I guess, different, and we didn’t realize we were different. So, the majority of our work is flat fee. It’s always been flat fee.”
Strategic buyers wanted accrual-based financials, revenue recognized when it was earned rather than when checks arrived, plus the utilization and hours the firm had never bothered to track. Closing that gap during diligence, under a deadline, turned into real work. Asked whether he would do it differently, the founder said he would have converted at least a year earlier, before the exit was even on the calendar.
Why it matters to you
The accounting basis that feels efficient while you run the firm can quietly cost you at the exit. A buyer reading cash-basis books cannot easily see earned revenue, margin, or utilization, and what a buyer cannot verify, a buyer discounts or delays. Converting to accrual and tracking utilization years ahead is not bureaucracy. It is making your firm legible to the person who will one day write the check.
Your one thing
Are your books on a cash or accrual basis, and do you track utilization today? If a buyer asked for three years of accrual financials next quarter, could you produce them without a scramble?
Collective 54 is where boutique service firm founders go to make more money, scale with less friction, and build a firm worth buying.
See if it’s a fit →