What do you do when the time comes to sell your accountancy practice? If you have plans to retire to sunnier shores, or even look at completely different opportunities, you may be ready to put your tax calculator away for good. The recent recession saw a lot of consolidation as a lot of the medium and larger companies grew through acquisition.
The average age of vendors has also increased; recently the average age was 56, but this has been pushed up to 63 mainly due to the low interest rates offered on investments. With many accountants having to work for longer than they originally planned, getting the best price for their practice is now more important than ever. So now that you have decided to sell, what is the best way to approach it?
What are you worth?
Firstly, it is important to assess the practice value in the most objective way possible. You might think that your firm is worth x amount, but you need to ensure that your valuation stands up. After all, your practice is only worth what someone else is willing to pay for it. You can help maximise your sale price by following these steps:
- Have the financial facts at your fingertips. Surprisingly, there are some accountants out there who fail to practice what they preach. If you need to put your house in order, this is the vital first step. Buyers will want to know how many clients you have, how many audits you do a year, general running costs and staff overheads. Try and make sure any late payers are chased so that you demonstrate you run a tight ship. Just doing this in itself can give you a rough idea of what you are worth. It can also help a buyer to identify areas of potential growth.
- Organise and update all your admin. Getting all your paperwork up to date reassures a buyer regarding a smooth handover. Check all engagement and compliancy letters, and organise your client database so that any information you need is just a couple of clicks away. Categorise them into contact details, type of business, what type of work you have undertaken for them, payment details, profitability and age of the client etc. This general bit of housekeeping may not seem important, but a lot of information can be gained from about the firm’s saleability. You want your buyer to see the potential and worth of your practice quickly and easily.
- Portability of clients. This is another important factor – if the vendor can service these clients their office, it serves to increase profitability and increase the chances of retention after the changeover. If these clients are happy to maintain contact with their accountant via phone and email, this will save time and the location of the office becomes less of an issue.
- Review charges. This obviously ties in with profitability. How long has it been since you increased your rates? If you are deliberately very competitive, and this is how you have always run your business, you may need to have a closer look at your pricing strategy. What is acceptable for you may not work for the accountants taking over. Check what local prices are as you may need to bring them in line with what your competition charges. Offering rates that are below the average threshold may put someone off buying your practice.
- Step up marketing activity. Your firm may have been happily chugging away for the last few years, but an injection of enthusiasm and dynamism should see your value soar. This should really be seen as a more long term tactic as this is something that you could be considering a couple of years before putting your practice up for sale. What is your average client age? If it is quite high, this makes your firm a less attractive acquisition. Actively seeking out new business will add more longevity and potential to your worth. A lot of sales include tranches, so it’s important to protect client retention and bringing in fresh blood will offset those clients who either retire or decide to go elsewhere.
- Keep employees motivated. Staff morale plays a big part in the sale; if the buyer is going to be inheriting his team, he wants people that are going to be hard-working and conscientious. Don’t let lethargy affect the price of the sale or even jeopardise it altogether. Incentives (or just downright bribery!) are a popular way of getting people to come up with new ideas to benefit the company. Reward your staff for targets they have met and keep them feeling involved by holding regular meetings and getting their opinion.
Now that you have an idea of what boxes you need to tick to get the best possible price for your firm, it may still be worth seeking extra advice before putting up the ‘For Sale’ sign.
Going through a broker might be worthwhile as they have the experience in overseeing sales, and they can provide guidance on issues you may not be sure about. Do some research first, and find out what the market rate is. This matters as you will only get one opportunity to get the price you deserve.