Composition of client base and fees

Demand for accounting practices is only increasing as firms seek to expand by acquiring new client lists and earning more fees. Older firms that are reluctant to sell have increased the prices for accounting practices; however sellers can take several steps to make their business more attractive to potential buyers.

When buyers consider whether to acquire a firm, the structure of your client base and main fee payers is essential in their judgement. Acquirers are wary of firms that are over-reliant on older clients as the practice will expect declining fees in the future. This issue is exacerbated for practices that receive a significant amount of fees from a few large clients.

Practices that are planning to sell can avert this by diversifying their client base and reaching out to younger clients with newly established businesses. Younger clients in the earlier stages of their business lifecycle have the greatest potential for fees in the future and this is the main priority of buyers. Practices that present themselves as forward-looking with increasing fees rather than fading earnings and a reliance on older clients, will benefit in negotiations with acquirers.

Staffing arrangements and IT adoption

Valuable staff members are integral to the smooth operation of a practice and staffing arrangements influence a buyer’s opinion of a business’ worth. For example, a practice staffed with employees in their 60’s is less attractive to buyers, as their skills and knowledge of the practice are likely to be lost as they exit the business.  Practices looking to sell can benefit from training their staff and improving their skill set as acquirers will also be interested in the staff’s productivity and whether they are likely to stay.

A practice’s adoption of Information technology affects its value to buyers as they are eager to acquire a more active and forward-looking firm. IT adoption in the workplace will make employees more productive and improve the overall profitability of the practice. Buyers will also be more reluctant to acquire a practice reliant on paper as it is much easier to integrate digital records of a company.

The vendor’s future plans

Buyers will be wary of practices that intend on taking some close friends’ accounts home after the sale as it gives mixed messages about the owner’s future intentions in the industry. Sellers that provide all clients to future buyers will be in the best position for negotiations as it is clear that you intend to leave the accounting business.

Next Steps

Quinn M&A has an expert team of business sales advisors, with specific experience advising on the sale and acquisition of accounting firms. Contact Quinn M&A on 02 9223 9166 or submit an online enquiry form.

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