Guidance on Gross Recurring Fees (GRF)
When a practice is valued its value is based on the Gross Recurring Fees at the time of valuation, but in reality the value is the client base and future income stream and not the value of specific contracts. Is there any guidance from CCAB, ACCA, ICAEW, CIMA or legal cases on this subject?
Lets say you had 3 clients and you were valuing the practice for sale:
A = £100 in current contracts
B = £200 in current contracts
C = £700 in current contracts
Total GRF = £1000
If 12 months after sale A increased to £300 and C dropped to £500, would the GRF still be £1000 (A £300, B £200, C £500), or would the GRF be £800 (A £100, B £200, C £500)