Any Market for Client Databases?

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I have an old colleague who had a stroke and therefore is unable to work any longer or make decisions.  He has around 100 private clients who will now be looking for a new Accountant and I have been asked by his daughter if this database of clients has any value to potential buyers or if these clients should just be passed onto another Accountant.  It seems a shame for them not to benefit from this large client list that has taken years to accrue and for someone else to potentially gain £50k - £100k in annual revenue for no compensation so was wondering if there was a market for this kind of thing or not?  Next, the impossible question: how much would it be worth?

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By janelm
11th Jun 2023 16:16

Sorry for your colleague's misfortune. I had a chat with Nicola Draper from Draper Hinks a few months ago, about planning for the hopefully unlikely misfortune of death/being incapacitated. Draper Hinks have been recommended by others on this website a few times, I have had no personal experience of buying/selling a practice otherwise.
https://draperhinks.com/
I think the very rough starting point for valuing practices might be around 1.0 x annual gross fee income, but probably lower if a speedy solution is needed, also depends on due diligence work of buyer as to whether it appears the clients are being charged enough/high/low fees compared to the amount of work involved, e.g. good quality clients with good quality electronic records, or very low fees for lots of 'carrier bag' paper receipts jobs. Usually any sales proceeds of selling a practice will be paid over a couple of years and be partially dependent on whether the clients stay with the new owner i.e. if a transition is made smoothly or not.

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Replying to janelm:
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By Hugo Fair
11th Jun 2023 16:47

All excellent advice ... to which I'd only add the (probably obvious) question that OP *didn't* ask:
"HOW can/should the sale process be handled - starting with a decent pack that sets out the true status of everything + moving on to finding potential purchasers"?

And one other critical thing - if "colleague .. is unable to work any longer or make decisions", then:
a) time is of the essence (from the perspective of existing clients as much as for the colleague/daughter); but
b) without knowing whether this is an incorporated or sole trader business (and if the associated paperwork can be found), is there anyone who is entitled to make decisions on behalf of the business?

My sympathies to all concerned, but you need to be careful that you don't get embroiled in something which could ultimately harm you or indeed your colleague.

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paddle steamer
By DJKL
11th Jun 2023 22:18

I suspect the price will very much reflect what input the seller can offer re client introduction to the purchaser, the transition period and what client retention therefore results.

Does the accountant needing to retire by any chance have an alternate?

In the late 80s the firm I was then with took over half an alternate's practice where the owner had died (Complicated business reasons why just half), of the 50% we were allocated we likely had retained just 50% of that share after two years.The absence of the practitioner who had previously acted making client retention far more difficult ( The transition was also not helped by our not really being geared up for all the extra work)

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By ireallyshouldknowthisbut
12th Jun 2023 10:06

I should add the above points generally the price would be 1-1.2 annual fees (subject to a claw back if clients don't stick), however your friend may be in a poor position for a 'good' handover and therefore accept less.

Time will be of the essence here, as presumably clients will be going elsewhere, and will need to be kept informed.

I would certainly appoint a sales agent in your position, and if there is no assistant keeping this running, put in place "holding" procedures for all client enquires along the lines of "Mr X is unwell, and we are putting in place contingencies". Ie at the very least an autoresponder on emails, note on website and phone message. Ideally do it as individual replies on a daily basis (some may have an urgent deadline), or they will walk.

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