News has been conflicting regarding the UK’s bounce back after the countrywide lockdown. One day the press reports positive gains, the next it covers how the recession is all doom and gloom.
But you don’t need the news to tell you if your accountancy firm is struggling.
Whereas as the hospitality sector got a “Eat Out to Help Out” campaign, the accountancy sector got no such scheme. Too often, when businesses look to pinch their pennies, they look at their accountants — especially if those accountants aren’t in the habit of delivering “add-on” services to their usual fee income.
A business is far less likely to write off its financial advisor than its accountant. But too few accountancy practices have branched out into additional-value services and therefore plenty of firms are now in the position where they’re considering putting their accounting practice up for sale.
Selling an accounting firm — what you need to know
The first thing you need to know about, when looking to sell your accountancy practice, is that it very likely will have a reduced valuation in a post-COVID world.
The value of an accountancy practice is determined primarily from its annual fee income.
But, even if that fee income is high, it won’t take away from the fact that the economy is shaky and people and businesses are looking to save their pennies.
If your clients are primarily small businesses who don’t have to use your services, then it’s unlikely that any evaluator will consider your chances at future profitability very high.
And so your valuation is reduced.
The other problem with valuations is that they don’t take into account all the many specialist services that a lot of accountants offer in order to pad their month-ends.
Whether you offer in-depth tax advice, financial advisory functions, or even business consultation on services which are not entirely accounting, these services will not necessarily be considered “fee income” if they are too specialised.
And so your valuation is further reduced.
And then there are the priceless aspects
Whenever an accountancy owner hits the point of wondering, “Should I sell my accountancy practice?”, you know that the decision was not arrived at lightly.
There are all those intangible aspects to the business which no evaluator could ever begin to put a price on:
- One’s dreams of being successful.
- The relationships one has built with one’s staff.
- How those staff will survive (it would be great to give everyone an excellent severance package, but if the practice is already failing, that’s unlikely).
And what will you do once the practice has been sold? In times of such deep recession, sometimes the best option might be to stick with the sinking ship in the hopes of spotting land, not to dive headfirst into a frothing sea.
But every practice and set of circumstances is different.
How to sell your accountancy practice?
Beware the sharks!
There are numerous steps to selling your practice, or possibly merging it with another.
The ICAEW has quite some guidance on it, but none of that guidance discusses the shark in the water.
It’s a fact of life. And as much as we’d all like to believe the modern world doesn’t contain an undue amount of unscrupulous individuals in professional business circles, it is an unfortunate fact that such people do exist.
The act of buying your accountancy practice is a business transaction. Profits and losses are involved, and if you were the other party, would you try to maximise your profits or minimise them?
Whatever steps you take to get your accountancy practice ready for acquisition or merger, keep your eye sharp because you are in treacherous waters during this recession.
A better solution to selling your practice?
What if I told you there’s a better solution to your difficulties than outright selling?
Well, there is.
We came up with the business model for We Run Your Practice after a decade serving as professional accountants in our own successful accounting firms.
We had always been somewhat tech-savvy. We implemented numerous digital strategies in our own practices and thereby reduced our workload while increasing our efficiency.
We honestly thought this was the way all other accountancy practices did it, only to discover that, sadly, it was not.
Whereas our own practices were doing well, marketing intelligently on the internet, using email marketing, working efficiently, we saw that a shocking number of our competitors weren’t doing this.
It is in fact so easy to get an accountancy practice up and running in high roar if you know how to do it that we saw a business opportunity: Making other accountancy practices successful, and then taking only a small percentage of their profits as our monthly fee.
It’s a win-win situation because those practices’ profits would not be high, were it not for our intervention.
Just recently, our highly innovative and unique approach and implementations won us a position as a finalist in the Accounting Excellence Digital and Innovative Firm of the Year Award. It has taken years of testing and trying what worked and what didn’t to come up with the specific formula to turn any accountancy firm into a going concern.
Now is not the time to sell your accountancy practice.
When is the time? Well, whatever the time, do it when your practice is earning a much higher fee income, and you’re selling from the point of success, not the point of struggle.