It is important when selling an accountancy practice to make it as appealing as possible to the buyer. You want to present it in the best possible light so that it is attractive to a buyer. This does not mean that you should spend thousands of pounds on redecorating your office or spend hours, days and weeks getting and implementing a new computer system. It means that you should present a well-managed, well run business.
If you were going to put your house on the market you would want it to look good to prospective buyers. An estate agent will come round and take photos of it looking its best. There would be no point putting new carpets throughout in case they were not to the taste of the buyers and, if they pulled them up, that would be a waste of time effort and money. Showing it off in the best light is what a buyer is looking for. The same goes when selling your accountancy practice.
I have spoken to several vendors who are looking to sell their accountancy practice and they have told me that they have a very profitable practice and are keen to find a buyer paying “top dollar”. When I looked into them, I found the vendors were working 70 or 80 hours a week. One poor chap told me he was working over 100 hours a week to keep up with the work load.
That accountant does not have a business; he has a job that is crushing him. With that kind of pressure he was not able to see the wood for the trees and is rushing around in ever-decreasing circles with his health seriously impaired. If he does not sell his accountancy practice the prognosis is not good, and yes, I did tell him that without frills. He needed to know. Unfortunately I have not heard from him since and I worry for his health.
Where a vendor is working 80+ hours a week, it is the equivalent of two full-time people. The profitability of the accountancy may appear good on paper but this is only due to the fact that there is a lack of staff doing the work. A buyer will have to factor in the cost of finding a new full-time member of staff and so the profits will be reduced by their salary. This can have a significant impact on whether or not the accountancy practice is attractive to a buyer.
To find a new full-time member of staff is not that easy in today’s market. I am often told that there is a national shortage of good quality staff available on the market. In the case of the vendor working 80 hours per week, the buyer will have to have the resources to replace the vendor and at the same time find another member of staff.
Where an accountant works from home, the savings can be considerable. I know some accountants that have passed on the savings to their clients and charge a much lower fee than their competitors. However, this does not help when you want to sell your practice. If your fees are too low, it will put off the buyers. If we are able to find a buyer for you then the buyer may have to put the fees up after completion and your clients may not be happy and could move. This is an unsatisfactory outcome for both parties.
We have sold accountancy practices where the vendor spent too much time with each client, offering them a cup of tea and piece of cake at each meeting. This may be nice for the client but it is much more of a drop in centre than an accountancy practice. We have been asked by vendors, who offer this “service”, to find a buyer that will do the same for their clients. This is a difficult, if not impossible, brief to fill. Most buyers run a business and will not sit and chat for too long with the new clients. It can put buyers off. My advice is to stop offering the cake. Just offer the cup of tea if you have to, but a drink of water would be better. Always talk business with your clients and keep the chit chat to a minimum. Educate your clients to expect that you have an accountancy business to run and not a charity. Doing this before you sell your practice will reap rewards with higher retention.
If you have not increased your fees for many years, it can put buyers off. I do advocate that you increase them every year or at least every other year, even if it is only by a very small amount. Buyers like to see that you have a commercial attitude to work and will respect that.
When starting out, many accountants will travel to see clients, but as they get busier this can be a burden. Educate your clients to pick up the phone, email or use the post. Travelling time can be seen by a buyer as wasted time.
Don’t be the only person seeing the clients. You can quickly become the bottleneck. I have heard of accountancy practices where the staff have little work to do because the boss in charge has a pile of files that has not been looked at. The more work delegated to staff, the better. The more the vendor is not needed in the practice the better. A buyer will be more interested in this type of practice than the one with the bottleneck.
Become VAT registered as soon as possible. Clients will be used to paying the VAT even if they are not themselves VAT registered. Most buyers are VAT registered. If you are not VAT registered it can mean an immediate increase on the fees of 20% when the buyer takes them on.
There are many other factors to consider when selling your accountancy practice. If you would like to discuss any of the above or talk about your own situation then please email me at n.draper@draperhinks.co.uk quoting reference Blog 160729. I look forward to hearing from you.