Purchase a block of fees

Hi All,

I am interested in setting up a practice and think in order for me to get a head start ie be able to earn a regular income the best way to start is to purchase a small block of fees. I am thinking of purchasing a fee value of around £40k.

Does anyone have any experiance with regards to this?

Some of the questions i have are as follows:

 - What is the going rate these days ie 1 x fee base etc?

 - How can i find the block of fees? by agents?

 - Do you know of any good agents i could register with?

 - How is the payment structure normally based? From what i have heard you pay the fees over 2 years.

Sorry these are just some of the questions that spring to mind at the moment.

 

Look forward to your helpful comments.

Thanks 

Comments
Malcolm Veall's picture

Best of intentions

Malcolm Veall | | Permalink

I am sure that this can work well, but even with the best of intentions it can work out that the £40K that you buy turns into a lot less ongoing.

PM me if you would like more details than I can put up on the public forums.

Hi    1 thanks

exceljockey | | Permalink

Hi

I am in the same situation as yourself and this is what I have found:

1. Going rate is anywhere between 1.5 times to 1.75. If you offer 1.75 then you will find a much better range range of blocks of fees to buy. I am buying at 1,25 but there are additional conditions, more on it below.

2. The best place is to register with an agent such as http://www.apma.co.uk/ or goldsmiths. Goldsmiths though take cash from you upfront to do a search (as they did with me) but so far have not delivered anything and I havent heard from them at all so tread carefully with them. APMA are better in that they have more on their books and only take a fee upon success which is fair enough. You need to tell the agent what you are prepared to offer and what you are looking for and then they go out to the sole practitioners they know and put it before them. Also try Foulger Underwood at http://www.foulgerunderwood.com/.

3. Payment is usually structured as follows: 1/3rd up front after intro, 1/3rd one year later and the remainder two years later. I am pay on a more condensed time scale (18 months instead of two years hence the reduction in asking price).

the above is based on my experience, other may have different experiences. 

Good luck on your search and new business.

Hi

Sh_07 | | Permalink

Hi

Thank you, that is really helpfull. I was also thinking around paying 1.2 times the fees but must admit 1.75 seems too high for me at this stage.

 

jeremykitchin's picture

Purchasing £40k of fees.

jeremykitchin | | Permalink

 

Contrary to other peoples thoughts:

  • The going rate is currently 0.9 - 1.2 (the multiple) times the annual recurring fee income.
  • For a block of £40k you are likely to have to pay 50% of the consideration (the multiple x £40k) on completion with the balance on the first anniversary (12 months after completion) subject to losses (the claw back).
  • Additionally, you will typically need 3 to 4 months of the turnover (£13k to £10k) as working capital.
  • You would normally find the competition to buy a £40k block of fees, which was offered on the open market, to be very high indeed.  We sold a £40k block of fees in Uxbridge 18 months ago which attracted 91 would-be purchasers!  As a first time buyer you may not be as attractive to a seller as a local established small firm.

Do some research on our website to learn more - www.apma.co.uk

Serving the profession for 39 years,

Current Fee Multiples

mpwaccontancy | | Permalink

I have acquired 3 blocks of fees over the last 8 years. All have been acquired for between 1.0-1.3 multiples of GRF.
From experience if you are the only interested party looking to purchase the fees then you aim for the lower multiple. If there is more competition then naturally this would be higher. This information is consistent with that from various brokers whom i have used over the years. The last broker I used (Morgan Cox Accountancy) were spot on with the estimated cost and also pointed out that geographical location as well as the type of clients served are two additional cost.
Apparently around London and the home counties a premium can be applied to blocks of fees simply becasue of basic supply and demand forces.This article on accountancy practice valuations is very useful if you are considering placing a valuation on a larger quantity of fees or indeed a large practice. ultimately however it boild down to what you are prepared to sell for and what someone is prepared to pay. Good Luck.

MPW

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