It is commonly accepted that where a practice is being run by a sole practitioner, the majority of the clients will reflect the age of the practitioner. This can also be true of a larger practice where there are two or even three partners that are of a similar age. We are finding that the average age of our vendor is increasing year on year. It is not unusual for us to be working with sole practitioners in their mid seventies.
When we sell a practice we ask the vendor to give us a breakdown of their top 20 clients by fees charged in the previous year. We also ask for the ages of the clients and how long the vendor has been acting for these top 20 clients. A buyer is looking for a good retention of clients post sale. If some of the clients are very elderly, this can mean that the buyer is unwilling to pay money for them. The buyer will look at how long the client will remain with their accountancy firm post sale and it can mean the difference between a low offer being made and no offer being made.
If a vendor can show that there is succession within the client’s business, then this will help secure a good price for the practice being sold. We recently sold a practice and the purchaser was interviewed by the clients with the highest fee. They wanted to know that the purchaser was not a fly by night because they wanted to forge a good working relationship with the new owner, like the one they had had with the vendors. The clients were brothers running a property portfolio with a large number of properties rented out. The purchaser phoned me to let me know that he had been interviewed by these brothers only to find out that they were both aged over ninety. They had no intention of giving up work and so age can be deceptive.
However, when we are asked to sell a practice, the age of the clients is very important. Some buyers will back off and not even meet with a vendor, if the ages of the clients is high. We have had offers this year in the region of 0.3x fees because of the age of the client base. You cannot assume that just because you have a loyal client base that there will be a buyer out there that would like to pay for your practice.
If you want to talk about this, or any other matter please email me at firstname.lastname@example.org quoting reference Blog 141008