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Selling Accounting Practice

Selling Accounting Practice

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If you were thinking of selling your accountancy practice, what would be your chosen method? For example, would you prefer to sell it as a going concern to maybe someone just coming into practice or sell the fees?

I think the former would be better as it gives continuity for the clients; everything remains the same just perhaps the name changes and obviously the owner. What do people on here think?

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By Howard Marks
23rd Oct 2015 11:08

PM's

How many have you had in the last 45 mins @AndersonAccountancy??!

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By AndersonAccountancy
23rd Oct 2015 12:04

Had?

Howard Marks wrote:

How many have you had in the last 45 mins @AndersonAccountancy??!

 

Had what?

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By Maslins
23rd Oct 2015 11:34

From a client perspective presumably not much difference between selling "the fees" and selling the business.  Typically any buyer would want to keep on existing staff at least short term even if buying the fees, as it reduces the likelihood of a mass client exodus.

I'd imagine the difference between your options is more one of tax/admin ease for buyer/seller rather than having any impact on the client.  Also I guess sometimes someone wouldn't sell the whole practice, keeping some selling some based on what direction they/the buyer wanted to take their respective practices.

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By ShirleyM
23rd Oct 2015 11:49

It depends

I'm in the process of negotiating the sale of my practice and I am selling the practice, rather than the fees. We have had higher offers for the fees alone, but I rejected them as I think the resulting client retention would have been very low.

If there are premises and staff (as in our circumstances), then client retention will be much higher if the client facing staff and premises are retained. If the clients have to travel to a new location to meet with total strangers then I imagine client retention would be much lower.

Of course, there will be exceptions, such as the accountant always travelling to the clients premises anyway, or it's a 100% online service.

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By Tim Vane
23rd Oct 2015 13:44

Shirley, are you selling up and moving on, or will you still be with us in some way?

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By Ken Howard
23rd Oct 2015 14:10

It has to depend on the individual circumstances surely...

Depends on the relative sizes and structures.

An established firm may only want a block of fees and may have absolutely no interest in retaining premises and staff.  They may want a clean break with no continuity.

An employee wanting to give up being a wage slave and wanting their own firm may want to buy into a small firm that's already up and running so that the clients would barely notice any difference.

I'm currently in talks with a two practice firm with 5 staff and town centre office.  I'm a sole practitioner with no staff, so I'm looking at a kind of reverse takeover.  My stumbling block is that both partners want to retire fairly quickly and 2 or 3 of the staff are also close to retirement age and initial discussions with them are that they're looking to leave around the same time, so the matter of continuity is really out of my hands - clients are going to see a lot of changes dictated by circumstance rather than preference.  It's probably the deal breaker and unless I can find a solution could well see me walking away!  It was marketed as a going concern but looking more likely that they'll have to sell it as a block of fees instead.

It takes all sorts to make the world!

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By ShirleyM
23rd Oct 2015 14:20

I intend to make the most of my remaining years

I am retiring ... so I'll have even more time to waste on AWeb. :)

Many thanks for the sentiments, @disgruntled.

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Glenn Martin
By Glenn Martin
23rd Oct 2015 16:08

Having had a good go at trying to buy 4 fee banks in last 2 yr.
The best way for you to get the most out of it is if there is some sort of succession within the existing business. Where it could be phased over a few years and you gradually move out, this means you can still earn and client retention will be high as hopefully the transition would be seamless.

The problem with selling your fee block is that it is very difficult to get a fit that will work for all your own clients. Any buyer might have different fee structure to yours, different culture, different way of working so there will be always client drop out. The buyer is protected my the clawback so will only pay for what they get. If you agree 1:1 on your GRF I would imagine you only get between 50-75 % after client drop out. I suspect prices might start to soften now tax relief has gone on goodwill acquisitions also.

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By ShirleyM
23rd Oct 2015 15:44

Agreed, Glennzy

The choice of buyer is very important. It is also important that the client mix is in line with their current client base, and that they are happy with the trades catered to.

The method of handover is also important and that the outgoing accountant is available for a while afterwards until the clients are assured that they will receive the same service as before.

There will always be client losses even where there is no sale, as clients retire, go back into employment, or just die. Sadly, we have had two client fatalities this year, both in road accidents, but if handled well the retention should be in the region of 90-95%. I think the retention would be much lower if I sold the fees, rather than the practice.

I've done lots of research, and I hope my theories work in practice. :)

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Jennifer Adams
By Jennifer Adams
23rd Oct 2015 18:00

May I ask... and to Shirley as well

... where are either of you based? 

I would be interested in the right area of the country.

Also... you might be interested in the article per the link below written by yours truly when I was taking a more active look for a business. I couldnt find anything at the time so backed off but I'm still interested if the right business can be found.

The article considers the different methods of selling an accounting business and the due diligence required. required

www.accountingweb.co.uk/article/how-get-broker-process-right/544815:

 

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By ShirleyM
23rd Oct 2015 18:20

I'm in West Yorks

I'm not looking for a buyer as we hope we already have one. We have agreed the price and just need to agree on the sale agreement. Fingers crossed it will suit both parties and the sale goes smoothly.

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By Howard Marks
25th Oct 2015 10:34

I don't believe so....

disgruntled wrote:

should there be any retribution for tricking someone to a meeting on false pretences and if so what should the retribution be ?

 

...after all, a well known member of this forum has used that ploy a fair few times.

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Hallerud at Easter
By DJKL
27th Oct 2015 11:46

Perhaps

disgruntled wrote:

should there be any retribution for tricking someone to a meeting on false pretences and if so what should the retribution be ?

My object all sublime 
I shall achieve in time—
To let the punishment fit the crime,
The punishment fit the crime;
And make each prisoner pent 
Unwillingly represent 
A source of innocent merriment,
Of innocent merriment!

Or possibly something with boiling oil.

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By JimH
25th Oct 2015 07:53

Good luck Shirley
Very pleased we will continue to enjoy your contributions here.

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By EricO
27th Oct 2015 11:06

Exit strategy

I would be much happier selling the lot at a lower rate of GRF rather than having to earn out as there are too many variables involved in client retention these days.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
27th Oct 2015 11:20

No earn out/ clwaback

EricO wrote:

I would be much happier selling the lot at a lower rate of GRF rather than having to earn out as there are too many variables involved in client retention these days.

 

Do you mean no possible clawback? I would have gone for this if it had been an option, but I think very few buyers would be open to it. Certainly it wasn't an option from the various people I spoke to.

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By EricO
27th Oct 2015 11:27

Exit strategy

Monsoon wrote:

EricO wrote:

I would be much happier selling the lot at a lower rate of GRF rather than having to earn out as there are too many variables involved in client retention these days.

 

Do you mean no possible clawback? I would have gone for this if it had been an option, but I think very few buyers would be open to it. Certainly it wasn't an option from the various people I spoke to.

 

Yes I'm sure it would be a very rare scenario but is my desired option once I want out - I'm sure whether a deal could be done would depend on the discount - I've seen a couple of deals close to my business where the goodwill from what looked like a perfect fit soon dissipated. Good luck with your sale.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
27th Oct 2015 11:35

Dream deal

EricO wrote:

Yes I'm sure it would be a very rare scenario but is my desired option once I want out - I'm sure whether a deal could be done would depend on the discount - I've seen a couple of deals close to my business where the goodwill from what looked like a perfect fit soon dissipated. Good luck with your sale.

Thanks. All looking good this end, fingers crossed retention is good! 

Yes, it's certainly possible. I hope your dream buyer turns up when you want them.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
27th Oct 2015 11:19

Selling

Like Shirley, I am also in the middle of a deal.

My preference was for someone to buy the business, premises, staff, trading name and all, but it didn't happen (it nearly did, but fell through).

I am selling the fees to a nearby firm, along with the name and the staff so it's a bit of a hybrid.

I was also offered better money for the fees alone, but the retention would have sucked, so it was pointless.

Shirley - best of luck! 

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By cheekychappy
27th Oct 2015 11:35

Selling fees or a practice seem to be a hell of a lot of hassle. I hope that one of my children enters the profession so I don't have to go through the process.

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
27th Oct 2015 11:36

not as bad

cheekychappy wrote:

Selling fees or a practice seem to be a hell of a lot of hassle. I hope that one of my children enters the profession so I don't have to go through the process.

It's hectic but not as bad as it sounds. As with many things, the anticipation is worse than the actual process.

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Della Hudson FCA
By Della Hudson
27th Oct 2015 11:47

Some things are worth more than money

I would want to ensure that my clients and staff are looked after, even if it means less cash. If you've spent time restoring a classic car would you want to sell it for spare parts? More commercially, clients of small practices aren't usually suitable for big firms so there would be higher potential claw back from selling the fees

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By ShirleyM
27th Oct 2015 12:17

It is a hassle

Pulling all the required information together makes quite a lot of work, just for starters.

My priorities are my employee, and the clients. I hope that my employee, and the clients, are well cared for, and while I can't guarantee that, it has been at the forefront when making my choice of buyer.

I hope all goes well for you, Monsoon. :)

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