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Block of bookkeeping fees valuation

Good morning

Does anyone have experience of valuing a block of bookkeeping fees?  How would the charge out rates affect the value?

Thanks for any input.

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10th May 2012 11:46

Valuations

All valuations are guesswork. The value of something is what someone else will pay for it.

Typically, accountancy practices sell for 0.8-1.2 x GRF, usually spread over a number of years, with clawbacks and uplifts. Often the deal will be split 1/3, 1/3, 1/3, with installment one on completion and 2 and 3 on the second and third anniversaries

The bookkeeping practice I bought in 2003 was on a similar basis, but the multiple I agreed was 0.5 GRF as the work is more labour intensive and so less profitable to a practice.

If I was advising you, my first question would be are you buying or selling? If buying, I would try for the 0.5 end of the deal. If selling, try for the 1 x GRF end and ensure you have a good line of spin ready to justify your asking price

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10th May 2012 14:34

Thanks for that.  I am

Thanks for that.  I am looking at buying so the range of 0.5 - 1 x GRF was interesting as I have been presented with the starting point of £ for £.

More comments welcome,

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10th May 2012 19:12

Purchase vs Marketing

@Anne - £ for £ is what I have seen , although I accept Steve's points. It surprised me that bookkeeping work was as valuable as accounting.

Now, depending on your personality you maybe better off investing in marketing. 

Marketing can cost you less and you can decide who to work with. Plus you can bring clients on-board gradually. However, buying fees can get you up and running quickly and you can leverage the relationships to win referrals.

How much GRF are you after?

What I would say is that the biggest danger of buying fees is that you will not need to think through your strategy. And, you could end up being too busy earning a living to make a profit, if you know what I mean.

Either way, good luck.

Bob Harper

Crunchers Accounting Franchise

 

 

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11th May 2012 13:00

Speak to a broker

I had to consider this for my own practice recently, although from the opposite side of the fence to you.  I had a chat with the director of Vivian Sram and ran through details of the practice with him.  Key factors were size of clients [a small number of bigger clients being easier to transfer than many smaller ones], geographical location, and growth/stability.  My work could be done from just about anywhere in the UK, which carries a premium and I don't have many very small clients.  

The work I do includes quite a lot of basic bookkeeping, but because of the other factors working in my favour he estimated a multiple of 1.2 to 1.3 times turnover [not GRF], which struck me as quite high.  Of course he might just have wanted to attract me as a client.

I think you need to have a chat about location and the effect that will have on multiples.  You shouldn't expect to pay for the advice.

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14th May 2012 13:47

Thank you for your feedback

Anne

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