Everything You Need to Know About Selling Your Accountancy Practice
Selling an accountancy practice is a long and complex process. For whatever reason you are thinking of selling, it is important that you know what you want most out of it so that you negotiate the best deal for you. Here is a guide that outlines everything you need to know when selling your practice.
A buyers or sellers’ market?
You need to know what’s happening in the market right now to ensure that you can offer and negotiate the best deal, and right now, it is overwhelmingly a sellers’ market.
With nearly two-thirds of accounting firm owners being baby boomers starting to retire and each vendor averaging around 15 or more enquiries, there are plenty of opportunities to sell, although the sellers may not be able to influence the price.
Things you should consider before you sell
Deciding to sell your practice is a big decision, one that takes a lot of planning and preparation. Here are a few things that you should consider before you decide to sell:
- Is selling your practice the right decision? – Is it the right decision for your future? Would internal or external succession be more appropriate?
- Are you prepared or can you get prepared for a sale? – Is it the right time for you to sell? How long would you need to get all of the necessary things in place?
- How might your staff and clients react? – Both feature prominently in a buyer’s decision so how can you provide some assurances?
- Are your clients of a high quality? – Are your clients spread over a range of industries? Do you have many clients paying monthly via direct debit? Do you have a client base that is ageing overall?
- What are you looking for in a buyer? – Do you want them to have a similar approach and value to your practice? Do you want them to keep the practice largely intact? Do you want them to pay more upfront?
- What would be the best deal for you? – Do you want to minimise your risk around clawback? Do your employees have a continuity of service?
- How can you increase your selling price? – Do you have a high proportion of clients about to exit your business? Do you want to get paid 100% upfront and/or don’t want to be involved in much of the handover?
How to get the best selling price
As it’s a sellers’ market, buyers aren’t going to be limited with choice when it comes to accountancy practices to purchase.
Here are six ways that you can beat the competition and ensure that yours is one they will want to snap up:
1) Make sure your house is in order – are your time sheets up to date and are all potential bad debts settled? Are all your systems fully compliant? Are your systems well-known and modern? Being organised and up to date shows how efficiently your practice is run and how much potential profit could be made to the buyer.
2) Look at your charge-out rates – are they competitive on the current market? Make sure you are not undercharging as this will put off potential buyers as they will have to increase the rates later which may potentially lose them clients. This may result in losses for you too under the clawback clause in the deal.
3) Review your client base – are they spread out over a range of industries? Are they ageing overall? Younger clients in a range of industries are most appealing to buyers as this is far more valuable and reassures them of their position if in the event of an economic downturn.
4) Check the quality of your staff – do you have an excess of staff? Are your current staff performing well? What is the cost of payroll versus turnover? If you are employing new staff, make sure they are of a very high quality as this is of principal interest to the buyer. The buyer won’t want to take on too many staff as they will have to make redundancies, so review the amount you have and consider what you can do to make the sale more attractive. A payroll cost of a third of turnover is considered about right so check that this is the case for your practice.
5) Do your research – is selling the best option for you, your client, your staff, and your firm? Look at all of your options and seek the advice of a reputable broker who specialises in accounting.
6) Decide how you will approach your sale – think about what is the best deal for you and work with a broker throughout the selling process so that they can negotiate a deal as close to your ideal as possible.
Selling an accountancy practice is complex
Buyers will only pay what they think your accountancy practice is worth, so it is down to you as the seller to do everything that you can to increase your value and make the deal all the more attractive.
To get the best price when selling, ensure that the quality of your fees is high, you have an easily transferrable record, you have good client relationships, you have a potential for growth, and you guarantee an effective handover.
All these influencing factors will ensure that you then have a bottom line payout.