CPA firm funding — no one right answer

Today’s dynamic public accounting firm landscape can require firm leaders to think strategically about how much capital investment is needed to lead the firm forward. Whether the firm is contemplating investing in technology or talent, looking for growth opportunities, or facing buyouts of partners soon to retire, capital needs are a key part of decision-making for many firms.

In recent years, CPA firms have tapped into a previously uncommon source of capital: outside strategic investors. New strategic investors in CPA firms include private-equity (PE) firms, family offices, wealth management entities, pension funds, bank holding companies, and more (see “Navigating Outside Investors: Safeguarding Ethics and Independence in Evolving Practice Structures,” JofA, Oct. 24, 2025). In one case, Phil Whitman, CEO of Whitman Transition Advisors, was approached by a technology company seeking a CPA firm purchase so that it would have a “test kitchen” for new tech products before they went to market.

PE firms alone provided over $50 billion in new capital to CPA firms during the last six years, according to CPA Trendlines Research. So far in 2025, there have been 52 PE-related transactions and firm mergers in accounting as of late October, more than double the number in all of 2024. “We’ve never before had external private capital forcing us into this conversation,” said Gary Thomson, founder of Thomson Consulting.

This new outside investment is spurring firms to reconsider the best ways to meet their capital funding needs in a changing market. Although outside investments may be seen in the headlines more often, firms also continue to look to other options. In the 2025 AICPA PCPS National Management of an Accounting Practice (MAP) Survey, 94% of the 1,073 firms that responded were not operating in an alternative practice structure that firms adopt when outside investment occurs.

Big ticket items

Capital funding is as important as ever today for areas that include:

• Investments in technology amid rapid advancements in new tools and capabilities.
• Payouts to retiring partners.
• Financing mergers, acquisitions, and expansions in geography or service lines as firms look for growth.
• Raising compensation levels for new hires and investing in experienced talent who meet a strategic objective.

“It’s important to have the right funding sources in place to accomplish your strategy,” said Rehmann CEO Stacie Kwaiser, whose firm uses owner capital and bank financing for capital needs such as technology, talent, and mergers and acquisitions (M&A).

In some cases, firms may not need new funding at all if they can get necessary cash by boosting their own profitability. Technology can play a huge role, helping firms enhance productivity and potentially enable more profitable use of employees’ time (see “Building a Better Firm: How to Pick the Proper Technology,” JofA, Oct. 1, 2025). Firms can also take steps such as improving their leverage, raising fees, and improving billing and collections processes. For partners who want to continue to run their firms without outside investment, profitability fuels freedom, according to Thomson. “The more profitable we are, the more opportunity we have to use our own resources or create new ones before we have to look outside the firm for new capital,” he said.

If boosting profitability alone doesn’t cover the firm’s capital needs, partners can enhance capital by taking less money out of the firm. “Partner capital is still a very significant tool for meeting strategic objectives without going outside the firm,” Thomson said.

And partners may be more willing to invest in their firms now that substantial PE deals have spelled out firms’ value in dollars and cents. “People see big checks being written for enterprise value,” Thomson said, “and realize there’s an inherent value we haven’t been recognizing.” Firm leaders may decide they can create that enterprise value with investments on their part without bringing in a strategic investor or selling the firm.

At the same time, firm access to outside investors’ significant capital may drive up the cost of M&A and even new talent acquisition, Whitman said. Historically, most CPA firms have left little capital in the business, he said, with all of it distributed as compensation. To enable firms to meet their financing or other strategic needs in a competitive funding market, “it would be very prudent to build up a little bit of a treasury” to have available for capital needs, he said.

External opportunities

In addition to these internal capital funding options, firms can also turn to external sources that include:

Bank financing: CPA firms have a long tradition of using banks for short-term loans — during a period when cash collections were low, for example — but not for permanent debt or financing, Thomson noted. However, firms seem increasingly willing to explore longer-term bank loans. Similarly, while bankers in the past stuck to doing short-term loans against an asset such as working capital, accounts receivable, or work in process, “they haven’t necessarily loaned against the inherent value of the firm,” Thomson said. Once again, publicity around deals involving outside investors have helped them recognize the economic or enterprise value of a firm and decide to loan against it. Beyond banks, Whitman also advised firms to explore the private credit market for funding or consider options such as U.S. Small Business Administration loans.

Vendor financing: “Whenever we consider making a huge investment in technology, we should be talking to the seller about how they can help us with financing it,” Thomson said. The same is true for equipment suppliers and other sources.

M&A: An upward merger — selling the practice to a larger firm — can provide needed capital. Thomson’s own firm made 40 acquisitions over time, and in each case the seller was seeking capital to grow the business, cover retirement expenses, or meet other needs. “It’s a legitimate business discussion,” he said. Not all deals have to be acquisitions. Whitman has worked with larger firms that have made a minority investment in a smaller firm, with the buyer gaining access to new talent or market resources and the seller getting a cash infusion.

What is the right choice?

The current capital environment can present some significant opportunities, Thomson said. “With all this shuffling going around in the acquisition world, it will be possible for strong independent firms that are well capitalized to be able to compete strongly,” he said.

Firms should consider these questions in exploring their need for and access to capital resources, he said:

• Does the firm have a clear vision of where it wants to be in the next five years? “Looking at your funding is about accomplishing your strategy, your mission, your vision, and your values,” Kwaiser said. What strategic priorities currently support that vision? In other words, what steps will be necessary to achieve it (see “How to Develop Your Firm’s Transformation Strategy,” JofA, July 1, 2025)?
• Do we have a detailed plan of the expenses involved in meeting those priorities?
• How will we cover those costs?

Many firms ask the first two questions but fail to give sufficient consideration to the last two, Thomson said. Firm leaders might look at incremental costs for some projects, but they don’t examine the bigger-picture financing needs or how to meet them. The answers to the last two questions can help nudge their plans closer to reality.

New business models

The fluid capital market comes at a time when firms are undertaking significant transformation of their business models to better meet client demands and evolving firm needs. As explored in the AICPA PCPS Transforming Your Business Model initiative, transformation can include challenging a traditional governance model, and associated decision-making around capital financing. Transformation also includes challenging how firms go to market, serve clients, use technology, and work with their clients and their people, Thomson said. With that in mind, “we have to transform our business model to be more agile so that we can move quickly and create resources,” he said. Evaluating funding alternatives strategically can empower firm leaders to drive investments that support needed transformation.

— Anita Dennis is a freelance writer based in New Jersey. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.