A high ratio of staff costs to fees will give rise to concerns from a prospective buyer.
Does it mean that staff are overpaid?
Perhaps they are inefficient?
Are fees are too low?
Could it be that too much work is not charged for?
Perhaps you are not doing enough billable work (too much time on the golf course) ?
Even if the buyer or you can identify the cause or causes the difficulty lies in how to remedy the situation.
If it is a staff performance issue they could be resistant to change, and why would a buyer start with a fight on their hands?
If fees are too low, the clawback clauses will not allow for an increase. Even when they can be raised how will clients react?Will they move if you add £50 to a bill of £500 ? What about £150?
Tricky waters to navigate but its best to get to grips with these things before selling. You'll need to go through the pain barrier yourself!
As a professional firm we take many steps to preserve your confidentiality. Our reputation is as important as your reputation so we understand the importance of discretion
We never state the name of our firm when calling, but advise the matter is personal and we are returning your call.
We phone form a number that does not identify who we are.
When leaving a return number we have a number that is not answered in the name of our company
Your details are only divulged to a potential buyer with your permission
All practice details are anonymised on our listings
We never give the exact location on our listings
Normally it a multiple of the GRF - gross recurring fees, which is essentially the annual turnover for clients that require the same work each year. This is typically tax returns and accounts preparation. The multiples do not vary massively even if demand exceeds supply and there are regional variations.
Fees that are one-off such as commissions or specialist reports do have a value but it is normally less than those that recur annually.
Some of the larger firms use a valuation on super-profits which is calculated on the profits over and above the salaries or drawings taken by partners.
I suspect that your initial reaction may be that you are flattered by the approach.
However, step back , draw breath and analyse the approach in the cold light of day.
Firstly, are you seeking to sell? If the answer is an emphatic "no" then politely advise him or her that you are not selling but will bear them in mind should the circumstances change. Then walk away.
Secondly, if you are actually "on the market" , perhaps even not formally yet, invite them round for a cuppa and ask them what they are seeking out of a deal. You do not need to commit either way but thank them for their time and let them know you will consider the matter in the coming days. If nobody knows you are wanting to sell, then there is no reason to let your suitor know either at this stage. I always advise discretion at the early stages of an unsolicited approach. Playing hard to get may not increase the price in the accountancy world, but the last thing you want is your clients to hear rumours.
Lastly, if you do want to sell and are happy to sell to your rival on the terms offered, consider whether or not you want to do it alone or would benefit from professional support from a broker.
There's nothing to stop you asking for more but you need to be sure that the profitability is sustainable under a new owner. Perhaps you are working 100 hours a week yourself so the wages bill is lower and the billing out is higher. Would a buyer want to work 100 hours a week?
IF you genuinely have a niche or perhaps some other magic sauce that makes you more than the average practice then you can certainly try your luck - the market will speak soon enough and pass it's own judgment.
Buyers can often be focused on the fee purchase itself and may not be interested in the purchase of your building at the same time especially if their long term plan is to merge with another local office they have.
It is best to separate the two issues and achieve the fee sale with your interested buyer. You can look at selling the building later or at the same time to a third party but they would need to be aware of the new tenant and happy to have them in situ, which can make matters slightly more complicated.
Maximiti has an associated company that invests in commercial property and if not interested itself can make suitable introductions to professional investors.
This is a risky move.
Firstly, by approaching the "buyer" you may be assuming that he or she is seeking to make a purchase when in reality they are not or perhaps do want to but cannot finance it.
Secondly, you may well be correct but the wrong approach can spoil it. Are you experienced enough to pull it off successfully?
Meanwhile you have advertised that you are selling and the bush telegraph will do it's job.
However, if you know them well enough and can trust them to keep quiet then it could be a smart move as it removes certain elements of doubt in the transaction and saves you the agency fee.
BUT...they say that you don't really know a person until you do business with them
You need to ascertain the reason for this threat and recognise it for what it is - a threat.
It is never good practice to succumb to a threat, rather find out the underlying reason and address is in a disarming and sympathetic manner. If it is greed then you need to decide whether to feed that greed or whether to let them go hungry by calling their bluff. Simply rolling over and giving in will signify weakness on your part and is likely to be rewarded with further threats.
The problem is that staff, especially senior ones, can make your sale a nightmare or even cause a sale to fall through. Take time to sit down with her and explain that you are upset and surprised by the threat and ask why she is acting in this manner. It could be that something has been festering for a long time and you have failed to notice it and they are simply using the impending changes as an outlet .
However, before doing this work out carefully in your own mind the ramifications of her departure on the firm and what her contract of employment says about the matter. If you have other staff be sure to prevent her from poisoning their minds, perhaps with a proactive meeting explaining the sale and letting them know you will be looking after their interests as well as your own. Perhaps you'll require a mediator.
As the saying goes , "once is unfortunate but twice looks like carelessness" .
You must be up front and open with the buyer about this.
Firstly , honesty is the best policy if it comes out in the wash you may face a lawsuit.
Secondly , it allows you to explain the circumstances fully and mitigate any fallout. For example, they may both be related to a former staff member who was dishonest or grossly negligent or it could have been a due to circumstances that the client may have had no true right to claim on but the insurer preferred to pay , albeit against your wishes , perhaps a tax avoidance scheme where the risks were known to the client but yopur engagement letter was poorly worded.
Whether or not this affects the price depends on how keen the buyer is to purchase your fees.
This question is becoming more relevant as investors seek to broaden their asset classes due to poor returns elsewhere. Accountancy has long been seen a as a cash machine when done well and i snow attracting professional investors.
If you sell to a professional it is different to selling to an amateur such as a friend or family member with little or no understanding of what is involved, in terms of risk and relationship with yourself. We would be very wary of the latter but if a professional approaches you it is worth exploring their aims and seeing if it is in line with your medium to long term aims.
Ideally you will be protected contractually but not unfairly to your disadvantage, and will continue to take home a good remuneration package whilst banking a lump sum. Most likely you would be incentivised to help them grow the practice which is typically their aim.
You need to be comfortable with the fact that you will be transitioning from self-employed to employed and understand how this may impact your lifestyle. Will you have the same drive and enthusiasm knowing that it is lining the pockets of others ?
Another question is what would you do with the lump-sum ? Invest it or squander it ?
Such decisions need to be viewed in light of other factors but if you are in your 60s and looking for a retirement path that gives you more certainty and visibility then it starts to make more sense. Don't forget to seek legal and tax advice - yes , sometimes the cobbler's children go barefoot !
Buyers are usually interested in the quality of the practice rather than exactly who is retiring at what point, although it is possible that they will set a time limit on how long they wish you to stay as a partner.
Anything can be agreed and of course the contract would reflect the fact that there is a partial sale now with the remained at a later stage. Sometimes a remaining partner will sell their entire stake at the time the retiring accountancy partner leaves and remain on a salary or profit share, and on other occasions the remaining partner may sell part of their stake now and part when they themselves retire.
The important thing to work around is what works for everybody and then the contract will be drawn up accordingly.
If you can demonstrate a longstanding relationship that is working well and you have created a brand then you may be able to command a premium depending on market conditions and an ability to convince a buyer that the arrangement can survive your departure.
Once your firm has established a reputation amongst the legal profession for producing good quality reports there is no reason why this cannot support a valuation that is close to the market norm. One area of vulnerability is that future business could be undermined by legislative changes affecting the court process as part of ongoing attempts to reduce legal costs. This could be addressed within the terms of a clawback agreement, which in any event would be different to the normal sort as there is not a standard billing cycle.
Each agent will have different contractual requirements but for a particularly difficult or niche assignment it is quite reasonable for the agent to request sole rights for a period of time , usually 12 months.
It probably will but the extent will of course depend on the nature of the misdemeanour and how well it is publicised. It is advisable to make the buyer aware of any pending action because if they find out themselves it will breach any trust they have built up , which is an essential and fundamental part of any deal.
Whether you are selling all your accountancy practice or some of the fees only, the process is fundamentally the same, although in certain respects it is easier but in others it is more complex.
When disposing of an accountancy practice in its entirety you are handing over the keys to everything including premises and staff potentially, which obviously makes the process lengthy and intricate with more matters to be covered by the contract and greater due diligence by the buyer.
When selling a block of accountancy fees the rest of you operation is untouched as far as the buyer is concerned. All he or she is interested in are the fees being acquired, but it has the potential for problems post-sale, as essentially you are choosing which clients to "kick out" although you have not retired from accountancy altogether, and some of them may feel resentment.
The question is really the reason why you cannot afford to sell. Is it because it provides adequate income that covers your lifestyle and you have no other source to replace it, or is it because the state it is in will not reflect the true value of the accountancy practice ?
If the former then it may be a case of having to weigh up the pros and cons of remaining in practice versus retiring from practice and seeking an alternative income stream or cutting back your lifestyle.
If it is the latter then it is probably worth engaging a consultant to help identify where you are missing out on fee opportunities, growth potential or whether your overheads are simply too high.
The accountancy scene has changed substantially in recent years and the clock won't be turning back, so make sure you don't get left behind and stuck in the rut.
This is a common concern for accountancy practices that are only so in name but in reality specialise in tax advice. Their clients tend not to be recurring although they may have a loyal following of fellow accountants or solicitors who refer business to them on an ad hoc basis.
If you can demonstrate a good track record of clients being referred to you or having a referral channel that is a steady earner, there is still significant goodwill in your practice and that will have a value that can be sold. The clawback may need to reflect the nature of the earnings compared to a typical accountancy practice.
Bear in mind that you may be required to stay on for a period if you yourself have knowledge that is particularly narrow in its speciality and not easily replaced.
Typically the large towns and cities attract more buyers when a practice become available. North and North West London are among the hottest areas and demand exceed supply here even more than other places. When a broker hears the words "I want to sell my accountancy practice" from this area, especially Finchley,Stanmore or Edgware they know that they will have buyers lined up.
Rural accountancy practices are less commonly put up for sale but they tend to make sound investments when they do. The client profile tends to be wealthier and more loyal, and such practices are often part of the fabric of the local business community. If you have ties to a rural locale your chances of successfully acquiring a practice are substantially greater.
However, given that technology has shrunk the world, location is less important for some buyers as it has been in the past. Often they will retain a satellite office or a nominal presence at the location being purchased while relocating most of the work to another part of the country.
The fees can typically vary from 0% upwards to 5% , depending whether the broker is charging the seller, the buyer or splitting it between them. Some agents also charge an upfront commitment fee or a cancellation fee for withdrawing from the market within a specified period. A good broker will be flexible and try to ascertain the nature of the assignment fully prior to advising of their fees and costs, as no two deals are the same. Larger sized practices typically command a lower fee and very small ones may be asked to pay a fixed sum rather than a percentage.
If we do not achieve a sale we don't earn our commission so it is in our interest only to introduce parties who appear to be a good match and can be reasonably expected to complete the deal.Obviously much depends on the chemistry between the seller and the buyer but we do our best by making all buyers complete a comprehensive questionnaire prior to allowing them to meet a seller.This weeds out the "tyre kickers" and timewasters. We also perform online checks using a variety of search tools, but in a specialist area such as accountancy fee brokerage we often get to know who is a rotten apple through our networking.
The best way to find out is to spend time analysing your practice, either on your own or with a colleague or consultant.Very often the owner of a business is too close to the action to notice a problem but an outsider, especially an experience agent, will pounce on it right away.Typical red flags to practice buyers are staff turnover, rising debtors, steady client attrition or increasing work in progress. These things are so easily overlooked in the rush to sell, especially if you simply want to get on with and finally retire from accountancy practice.
You are best advised to use a professional broker as an intermediary.It is much easier to stand firm or extract concessions for somebody who is at "arm's length" and emotionally detached.As you have done the hardest part, finding a buyer, the fees will be much lower but you will also benefit from their experience in selling accountancy practices.
Staff are very often the best people to sell your accountancy practice to as they know the clients and are familiar with your modus operandi.Nonetheless you should still treat it as a formal sale as if you were selling to strangers. We would advise that you use a broker to ensure that you strike a deal that is optimised for both parties, although you can expect to pay much less since you've done the hard part already yourself - finding a suitable buyer.
A retiring accountant needs to consider the demand in their area and also the health of their practice. A further consideration for retiring accountants is whether they wish to continue working after the sale as a consultant, which could be beneficial to the overall terms. As a rule of thumb it is advisable to start planning for an accountancy practice sale upon retirement within 5 years of the planned retirement date. It's never too early to speak to agent and it should not cost you anything.
We use a variety of online and offline methods to market practices, as well as interrogating our own database for suitable matches. We have an extensive list of qualified buyers or we can arrange a bespoke campaign for a practice where we feel it would be beneficial.
For a well run and efficient accountancy practice with all clients on standing orders it could fetch up to 1.5x GRF. If a bidding war ensues for your practice the value could end up higher, but it means you must be prepared to show more than one buyer all the details of your practice
Maximiti is well acquainted with professional and successful property businesses around the UK and will willingly broker a deal between yourselves and them regarding your accountancy practice premises.
This is one of the points where Maximiti differs from other brokers. We have a practicing accountancy practice where we will service the clients who either do not want to move to the acquirer or which the purchaser does not want to take on.
We acknowledge that you have staff that need to be looked after and we will endeavor in our negotiations to have them at the forefront of our minds when dealing with your sale. Most purchasers will want to acquire the services of your staff and you can make it a priority with us when we attempt to find you a suitable match for your practice.
This depends on the size of your practice. For a smaller firm payment is usually received in two stages. The first payment is upon completion of the deal and the second is on the first anniversary. For a larger firm there are normally three stages of payment. The amount at each stage is open to negotiation and for that reason our staff are highly skilled in negotiating to ensure the best possible outcome for all.
It is normal procedure for the vendor to collect his own debts and to agree the level of work in progress at the point of completion, for the purchaser to finish off the work in progress and bill it and remit the vendors share at 85% of sale price on an as collected basis. The 15% is a collection charge retained by the purchaser. Any under recovery is apportioned.
Clawback is a clause in the sale agreement documentation. In the event of the acquirer losing the fees in an agreed period of time (normally one year) they deduct a percentage of the remaining balance. In the event that a purchaser makes a claim under the clawback clause, the vendor has the right of discovery. They may look at the appropriate client files and if necessary, speak to the client and confirm that the loss is genuine. This is one of the more intricate parts of the deal and requires real understanding and expertise to make sure that not just is the clause fair to all but most importantly that you understand exactly what it means for you.
Clawback can be structured so that it tapers with time or is restricted to certain clients or an aggregate loss with a cap on quantum. It forms part of the negotiations betweem buyer and seller.
We will be on hand at all times to explain the smallest query which you might have.
The records over the years have shown that there are two main upturns in the market. The first is between mid February to June and the second is from September to November. Obviously this is the time when vendors come out to sell but the whole sale-acquires process spans over the whole year.
This normally depends on the urgency of both the seller and acquirer. You can expect the whole process to take from anything from six weeks up to six months but at Maximiti we guarantee to respond to all correspondence or queries immediately. We have on occasion sold a practice in 48 hours but there are of course ramifications in terms of price and clawback.
This is a point which is always up for negotiation. With our experience we like to advise for the seller to be involved with the purchaser for a period between one to three months. The advantage is that this will ensure the smooth transition of your clients to the acquirer. Although a direct contact with the clients is not always encouraged after the sale, it is beneficial to all to know that the predecessor is still on hand if need be.
Some buyers will be more than happy to retain you as a consultant on a part time basis.
At Maximiti we are acutely aware of the sensitive nature of buying and selling professional accountancy practices and will at all times endeavour to ensure the highest level of confidentiality and discretion. We will discreetly advertise your firm in the accountancy press, never mentioning your name, practice or location and primarily we will actively try and seek the most suitably matched firm of accountants, for you. This guarantees your anonymity at all times.
A business is normally worth the amount a buyer is willing to pay, however accountancy practices are different in this instance. There is a "going rate" with accountancy practices and purchasers have this in their mind when looking to acquire. The current going rate is between 1 and 1.2 multiplied by the annual recurring fees, in most parts of the country. Obviously by having a significant number of purchasers chasing your practice, it should push the multiple nearer the end of the going rate.The more potential buyers you meet the greater the possibility of asking for sealed bids or holding an auction-style competition.However, this is time consuming and may not be worth the effort. Profitability and productivity is always a major factor in determining the value of an accountancy practice and there are many other factors in the valuation equation. This is where specialist advice is required.