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value your practice
iStock_Johnny Greig

Know the value of your practice

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13th Jul 2016
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In this country house prices remain a common topic of conversation at social and business functions, second only to the weather. Although one doesn't normally discuss the former as an ice breaker with a stranger.

Everybody is an expert on the state of the housing market and can tell you how much their small corner of this "green and pleasant land" is worth; to the penny no less. So why is it that just over half the accountants we surveyed recently did not have any idea of even the approximate value of their practice - but more to the point it begs the question of whether they would conduct their affairs any differently if they did?

One of the major aspects of the profession is that of its traditionally staid nature immortalised in the Monty Python Sketch starring John Cleese. For many practitioners once they are established they are content to coast along supported by recurring fees and the odd referral or new client who finds their own way through the door.

This may have been a reasonable recipe for making a living in past years but we all know that the profession is in flux and it is time to understand what drives the value in your practice, because nowadays it cuts both ways.

The traditional wealth warning that "the value of assets can go up as well as down" needs to be drilled into practitioners before they wake up to a shrinking clients list that has developed a momentum of its own.

Two weeks ago a firm who for the past six or seven years steadfastly refused to do anything to attract new business and had hit a glass ceiling in terms of growth came to me and sheepishly admitted that they had now undertaken a major website revamp (which I was pestering them to do for a long time), and gained three clients in a single week as a direct result. 

But it goes beyond simply realising that more clients equals more income. The key issue for me is that over a period of time the growth translates into a serious capital sum and market presence that can be sold on or used to leverage the firm to an even higher level by merging or creating synergies by working with other professions.

Conversely, those practitoners who are unable or unwilling (perhaps due to their age, lifestyle or health) to take the necessary steps to develop their practice or protect their fee base should be seriously contemplating about whether they should remain in business or perhaps cash in on a lifetime of hard work while that value remains intact.

Even what appears to be a stagnant operation is often actually a soundly run firm that is an excellent basis for the right person to grab and use as a springboard to bigger and better things; perhaps allowing the incumbent to share in some of the fuutre gain as part of a succession strategy.

As well as the raw facts and figures relevant to your own practice there is the general market, both in your locale and nationally to consider together with the general economy and appetite for investment. But if you don't know what's going out there you cannot make an informed decision, and although a bad decision is usually worse than no decision, in a rapidly changing market no decision can also turn out to be a bad decision. 

They say that knowledge is power but in this case it is more than that - it is tangible wealth. 

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By Vaughan Blake1
29th Jul 2016 16:40

and?

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