Thank you for your article. I am a broker of accountancy practices and I deal with all sizes of practices for sale. Prior to selling a practice I will ask the vendor two questions:- can you afford to sell and what will you do with your time when you have sold your fees. You will be surprised at the number of accountants that cannot afford to retire and give up work. My heart goes out to those that want to retire but have to stay on, they get more and more stressed and then end up with heart attacks or strokes. I have had to deal with widows where selling their husbands fees is the last thing they want to deal with but have to in order to get something from the practice. Industry norm is for a vendor to be paid in three tranches but we have will do deals where one off payments are made with no clawback, two payments are made with 12 months clawback, three payments are made with 2 years clawback, earn outs are made over a period of 4, 5 or even 6 months with negotiated clawback periods. As a broker I often find that the vendor has not sold before and so wants to understand how the process works and wants to know they are getting a good deal for their fees. Typically they will only ever sell their fees once so it is important to get a good commercial rate for the fee base. Sometimes the buyer has not bought before and they need hand holding through the process as well. I was once asked to define my ideal client and I said "a seller that says they want to sell and then does". We can have five offers for the one practice for sale and each will be entirely different. There is an increasing trend for vendors to keep some clients to work on from home after they have sold and so they have a continuing income that diminishes pver time as the clients retire or move away. The vendor is happy to sign a non compete clause. The average age of our vendors is increasing, ten years ago it was late 50's now it is late 60's and beyond. A good deal is one where the vendor is happy and the buyer is happy. Our fee is paid for the introduction of the buyer and seller and for monitoring and making sure the deal goes through. If a vendor goes direct to a buyer they do not know if they are getting a proper market rate for their fees. We take huge pride and effort in what we do for our vendors and our buyers.
Accountancy is far more about relationships than figures on paper. If there is not a good match with the accountant and the client then the client can be difficult - often on purpose. Moving clients to another accountant at a cost to the aquirer can help both parties. The price will be reduced. A buyer will not part with money if they do not think they are going to get some value to their practice. We sold a tranche of fees for a three partner firm who did not want them any more and the buyer was a national firm. Never assume someone out there will not be interested in your fees.
If you have no track record of running your own business then buying fees can be a problem. A vendor will see selling to you as being very risky and may prefer to sell to someone who has a successful track record of running their own business. If you have to borrow money to fund the acquisition this too can be a problem as a lender will want you to have proof that you can run your own business and without that will be less likely to lend you money. However, it can work for some. It depends on the fees for sale and the attitude of the vendor. If a vendor has the time to work a hand over period then bedding in new clients with an enthusiastic new owner can work very well.
My answers
Selling your practice
Thank you for your article. I am a broker of accountancy practices and I deal with all sizes of practices for sale. Prior to selling a practice I will ask the vendor two questions:- can you afford to sell and what will you do with your time when you have sold your fees. You will be surprised at the number of accountants that cannot afford to retire and give up work. My heart goes out to those that want to retire but have to stay on, they get more and more stressed and then end up with heart attacks or strokes. I have had to deal with widows where selling their husbands fees is the last thing they want to deal with but have to in order to get something from the practice. Industry norm is for a vendor to be paid in three tranches but we have will do deals where one off payments are made with no clawback, two payments are made with 12 months clawback, three payments are made with 2 years clawback, earn outs are made over a period of 4, 5 or even 6 months with negotiated clawback periods. As a broker I often find that the vendor has not sold before and so wants to understand how the process works and wants to know they are getting a good deal for their fees. Typically they will only ever sell their fees once so it is important to get a good commercial rate for the fee base. Sometimes the buyer has not bought before and they need hand holding through the process as well. I was once asked to define my ideal client and I said "a seller that says they want to sell and then does". We can have five offers for the one practice for sale and each will be entirely different. There is an increasing trend for vendors to keep some clients to work on from home after they have sold and so they have a continuing income that diminishes pver time as the clients retire or move away. The vendor is happy to sign a non compete clause. The average age of our vendors is increasing, ten years ago it was late 50's now it is late 60's and beyond. A good deal is one where the vendor is happy and the buyer is happy. Our fee is paid for the introduction of the buyer and seller and for monitoring and making sure the deal goes through. If a vendor goes direct to a buyer they do not know if they are getting a proper market rate for their fees. We take huge pride and effort in what we do for our vendors and our buyers.
We sell blocks of fees for lots of accountants
Accountancy is far more about relationships than figures on paper. If there is not a good match with the accountant and the client then the client can be difficult - often on purpose. Moving clients to another accountant at a cost to the aquirer can help both parties. The price will be reduced. A buyer will not part with money if they do not think they are going to get some value to their practice. We sold a tranche of fees for a three partner firm who did not want them any more and the buyer was a national firm. Never assume someone out there will not be interested in your fees.
Buying fees
If you have no track record of running your own business then buying fees can be a problem. A vendor will see selling to you as being very risky and may prefer to sell to someone who has a successful track record of running their own business. If you have to borrow money to fund the acquisition this too can be a problem as a lender will want you to have proof that you can run your own business and without that will be less likely to lend you money. However, it can work for some. It depends on the fees for sale and the attitude of the vendor. If a vendor has the time to work a hand over period then bedding in new clients with an enthusiastic new owner can work very well.