I am looking to purchase a block of practice fees, are there any rules of thumb that can be used as a basis of valuation?
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Between 0.5x and 1.2x of Gross Recurring Fees depending on:
* Distressed / Non-distressed sale
* Level of due diligence allowed by the seller (a very detailed monthly aged debtors report for the previous year to start)
* Guarantees offered by the seller (all clients and top 10 clients)
* Experience / Qualification of the practice partners
* Percentage of significant customers (If they make a disproportionate percentage of the fees)
* Sale with / without employees
* Timing of payments / tranches (ex. 40% now, 30% in 9 months, 30% in 16 months)
* Willingness of the seller to smooth the transition (discuss with clients)
* Ongoing commitments / work in progress for current customers
* Existing goodwill / reputation / marketing investment in the practice
* Many other issues that I might have missed.
Hope it helps!
Article on the subject here - incl due diligence questions...
... 'How to Navigate the Broker process'
https://www.accountingweb.co.uk/article/how-get-broker-process-right/544815
- as the article states its not a straightforward exercise. I dont want to put you off but as you can see by the 'opportunities' Section of this site there are many buyers but hardly any sellers.
also have a look at the website of Draper Hinks - there are articles there and a list of what you should ask as 'due diligence'