Buying Fees or trying to.
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Interesting.
Met with an old colleague of mine (who is also my alternate) his view on valuing my practice (were I to walk in front of a bus next week) would be based on a multiple of net profits.
Personally i think this is a far better guide to the value of a business.
So a sole practitioner with one PT member of staff - £100k turnover and say £80k profit before tax (and his salary). Adjust for the cost of a manager to replace the seller of say £45k.
Adjusted profit of £35k - apply a multiple, ranging from say 2 to 5.
This would be far more transparent and would reward an efficiently run practice.
I've also taken the decision to actively grow my practice, 2 PT staff starting this week.
Marketing campaign about to start.
Networking to start again soon.
Lets see how it goes.
Sounds like you don't need to buy any fees then!
Where have the new clients/prospects come from?
Good luck with it, Glennzy (and KA too).
I keep thinking about writing blogs again - but things are a bit dull my end - especially to inflict on others...
I do think the brokers take some notice of the profitability and the quality of the client base/practice - through higher multiples.
I have seen a few go for 1.4 - 1.6 near us. That's expensive business for the purchaser who may have to wait 3-4 years for a return on their investment but it seems to be the norm.
I just hope it is the same when I retire in about 20 years!
I do think that marketing is a much more sure fire way to grow though, as you choose the clients, set the fee, and it can be done for very low cost. And the plus side is it's gradual, rather than a massive influx of new clients all in one go.
A very interesting blog. If you have a look at my blog I too am looking to expand via purchase and have met with a couple of prospects. But I am in Dorset so the number of clients who dont use the high street accountants are small and businesses on offer are rather thin on the ground. Some brokers are good and spend their time with you (I'm thinking Nicola at Draper Hinks here). She told me that the usual multiple at the moment is 0.95 - 1 times gross fee. You only get more if the sellers office is sited by traffic lights - clients are more likely to notice whilst sitting in their cars waiting.
But there are definitely accountants out there who are wanting to sell because of MTD. From what I can see they are waiting until after Jan and then will be putting their firms on the market. Jan being the busy month (more money coming in for those who invoice annually) and gives them a few months hand over time.