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 you are ready for the sale of your accounting 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.
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Things you should consider before you sell
The sale of your accounting 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 sale the right decision for your future? Would internal or external succession be more appropriate?
- Are you prepared or can you get prepared for the 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? Would 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?
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How to get the best selling price for your accountancy practice
Here are six ways that you can beat the competition and ensure that yours is one they will want to snap up:
1) Get organised – are your timesheets up to date and all potential bad debts settled? Are all your systems fully compliant, well-known, and modern? Being organised and up to date shows your practice is run efficiently and the potential for future profits.
2) Look at your charge-out rates – are they competitive on the current market? Undercharging will put off buyers because if they have to increase the rates later they could lose clients. This may also result in losses for you under the clawback clause in the deal.
3) Review your client base – are they spread out over a range of industries? Are they ageing? Younger clients in a range of industries are most appealing as they are far more valuable and reassures them of their position in the event of a downturn.
4) Check the quality of your staff – do you have too many staff? Are they performing well? What is the cost of payroll versus turnover? If you employ new staff, make sure they are of 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 may have to make redundancies, so review your staff 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? Consider all options and seek the advice of a reputable broker who specialises in accounting.
6) Decide how to approach your sale – think about the best deal for you and work with a broker so that they can negotiate a deal as close to your ideal as possible.
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Selling an accountancy practice is complex
Buyers will only pay what they think your accountancy practice is worth, so it is down to you to do everything that you can to increase your value and make the sale of your accountancy practice 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.