Buying an accountancy practice
Discussion
Has anyone on here done that?
It’s something that i’m thinking of, having worked for 15 years in banking and now looking for a change.
It wouldn’t be totally alien to me as I spent 5-6 years at the start of my career at a medium sized and 3 partner firm (and my dad had his own firm although now retired).
How has your experience been? Anything to look out for? Any regrets?
I know the current environment is not a great time to look given that clients are likely to be suffering.
It’s something that i’m thinking of, having worked for 15 years in banking and now looking for a change.
It wouldn’t be totally alien to me as I spent 5-6 years at the start of my career at a medium sized and 3 partner firm (and my dad had his own firm although now retired).
How has your experience been? Anything to look out for? Any regrets?
I know the current environment is not a great time to look given that clients are likely to be suffering.
I suppose the obvious first question is - are you a Qualified Accountant and do you have a practising certificate? If not then IIRC you'll need to work at least three years in a Approved Practise before you can get one..
Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
Countdown said:
I suppose the obvious first question is - are you a Qualified Accountant and do you have a practising certificate? If not then IIRC you'll need to work at least three years in a Approved Practise before you can get one..
Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
I am qualified and I have recently obtained my practicing certificate. Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
I have decided to embark on the CIOT exams to assist with my tax knowledge
Countdown said:
I suppose the obvious first question is - are you a Qualified Accountant and do you have a practising certificate? If not then IIRC you'll need to work at least three years in a Approved Practise before you can get one..
Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
I am qualified and I have recently obtained my practicing certificate. Rather than buying one outright you might be better buying Equity share in a Practice where one of the Partners wants to sell up.
I have decided to embark on the CIOT exams to assist with my tax knowledge
Having the technical qualifications is only a tiny part of what is needed to run an accountancy practice. The most important skill, in my experience, is handling your clients at a personal level, managing their expectations and providing them with constant reassurance.
Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
Eric Mc said:
Having the technical qualifications is only a tiny part of what is needed to run an accountancy practice. The most important skill, in my experience, is handling your clients at a personal level, managing their expectations and providing them with constant reassurance.
Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
Thanks Eric. The loss rate is what I was concerned about. Agreed it is all about client relationships.Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
Eric Mc said:
Having the technical qualifications is only a tiny part of what is needed to run an accountancy practice. The most important skill, in my experience, is handling your clients at a personal level, managing their expectations and providing them with constant reassurance.
Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
That's strange in itself - you leave your existing accountant due to a new unknown owner to join a new firm with a new unknown owner!Regarding buying a practice, that is one way of getting started. The problem is ensuring you hold on to your newly acquired client base. You could be the best accountant in the world but the mere fact that the practice has a new owner will be enough to make some of the clients look for a different accountant. If you are good with them, you will hopefully hang on to about 2/3 of them. A 50% loss rate is not unusual. So you need to factor that into your thinking, especially if basing the purchase price for the practice on historic turnover.
I bought a practice from a sole practitioner 11 years ago. I was 43, qualified as a CA in a big 6 firm but had spent 20 years in industry as an FC/FD.
I'd started doing some sub con for the sole practitioner to get the hang of the job and he announced he wanted to retire and did I want to buy the business.
It was a massive gamble as a had a big mortgage and school fees to pay. However it's been the best years of my working life.
I held on to 95% of the clients. In my experience you have to be pretty bad to lose a client to another firm. I never lost a client I wasn't pleased to see go.
However in the last couple of years I have become disillusioned with it. The typical role of an SME accountant is now filled with boring compliance and is set to get worse. HMRC don't value your role and the penalty regime makes life quite scary.
I've just sold my practice and it feels great. It's been a good money maker and the lifestyle (own boss) suited me but I don't feel the need to work anymore.
If I was starting now, I'd aim to build up a practice with a few corporate clients that wanted significant accountancy or tax support. The effort to manage many clients that just want simple compliance work done is becoming very difficult with MTD, RTI, Auto enrolment, CIS, MOSS, Brexit, IR35, GDPR, MLR and ICAEW etc making life really tedious.
The entrepreneurial side of the job and talking to the clents is great, just make sure the type of work you end up doing is the sort of thing you enjoy.
I'd started doing some sub con for the sole practitioner to get the hang of the job and he announced he wanted to retire and did I want to buy the business.
It was a massive gamble as a had a big mortgage and school fees to pay. However it's been the best years of my working life.
I held on to 95% of the clients. In my experience you have to be pretty bad to lose a client to another firm. I never lost a client I wasn't pleased to see go.
However in the last couple of years I have become disillusioned with it. The typical role of an SME accountant is now filled with boring compliance and is set to get worse. HMRC don't value your role and the penalty regime makes life quite scary.
I've just sold my practice and it feels great. It's been a good money maker and the lifestyle (own boss) suited me but I don't feel the need to work anymore.
If I was starting now, I'd aim to build up a practice with a few corporate clients that wanted significant accountancy or tax support. The effort to manage many clients that just want simple compliance work done is becoming very difficult with MTD, RTI, Auto enrolment, CIS, MOSS, Brexit, IR35, GDPR, MLR and ICAEW etc making life really tedious.
The entrepreneurial side of the job and talking to the clents is great, just make sure the type of work you end up doing is the sort of thing you enjoy.
You did very well compared to some. I have had a pretty good client retention rate although I have never "bought" a client (or a client list) ever. All my clients came to me voluntarilly.
You are 100% correct about teh increased burden of compliance being lumped on traders, especially burdonsome on smaller clients who don't have the knowledge, time or interest to set up all the systems that HM Government are now insisting all traders must implement. As a result, that burden gets passed on to their accountants who find it difficult to monitor and maintain these systems with their related deadlines, fines and penalties spread over hundreds of clients.
You are 100% correct about teh increased burden of compliance being lumped on traders, especially burdonsome on smaller clients who don't have the knowledge, time or interest to set up all the systems that HM Government are now insisting all traders must implement. As a result, that burden gets passed on to their accountants who find it difficult to monitor and maintain these systems with their related deadlines, fines and penalties spread over hundreds of clients.
SpeedBash said:
That's strange in itself - you leave your existing accountant due to a new unknown owner to join a new firm with a new unknown owner!
It might be down to the fact that since you're going to end up with a new Accountant anyway you might as well use the opportunity to shop around and get other quotes.Countdown said:
SpeedBash said:
That's strange in itself - you leave your existing accountant due to a new unknown owner to join a new firm with a new unknown owner!
It might be down to the fact that since you're going to end up with a new Accountant anyway you might as well use the opportunity to shop around and get other quotes.Watch the age of the clients, if they are all older there will be a natural fall off.
Check the profits, don’t just pay a multiple of turnover. Deals are typically paid over three years with an adjustment for client losses.
My view, lots of firms will come to market later this year:early next year as impact on Covid starts to hit and older firms decide enough is enough. The fallout with clients will take longer to come through, not sure accountancy world has suffered the effects yet.
Watch staff that come across, they might struggle with new working practices.
Workloads at the end of this year and are going to be a problem for some firms. Staff might be holding back on taking leave, which could impact on the busiest time of year.
Tie up with others to get second opinions, refer work as you cannot know everything even with CIOT and chartered.
Check the profits, don’t just pay a multiple of turnover. Deals are typically paid over three years with an adjustment for client losses.
My view, lots of firms will come to market later this year:early next year as impact on Covid starts to hit and older firms decide enough is enough. The fallout with clients will take longer to come through, not sure accountancy world has suffered the effects yet.
Watch staff that come across, they might struggle with new working practices.
Workloads at the end of this year and are going to be a problem for some firms. Staff might be holding back on taking leave, which could impact on the busiest time of year.
Tie up with others to get second opinions, refer work as you cannot know everything even with CIOT and chartered.
wattsm666 said:
Watch the age of the clients, if they are all older there will be a natural fall off.
Check the profits, don’t just pay a multiple of turnover. Deals are typically paid over three years with an adjustment for client losses.
My view, lots of firms will come to market later this year:early next year as impact on Covid starts to hit and older firms decide enough is enough. The fallout with clients will take longer to come through, not sure accountancy world has suffered the effects yet.
Watch staff that come across, they might struggle with new working practices.
Workloads at the end of this year and are going to be a problem for some firms. Staff might be holding back on taking leave, which could impact on the busiest time of year.
Tie up with others to get second opinions, refer work as you cannot know everything even with CIOT and chartered.
The retention rates that are being mentioned are broadly in line with what I had heard and is a risk.Check the profits, don’t just pay a multiple of turnover. Deals are typically paid over three years with an adjustment for client losses.
My view, lots of firms will come to market later this year:early next year as impact on Covid starts to hit and older firms decide enough is enough. The fallout with clients will take longer to come through, not sure accountancy world has suffered the effects yet.
Watch staff that come across, they might struggle with new working practices.
Workloads at the end of this year and are going to be a problem for some firms. Staff might be holding back on taking leave, which could impact on the busiest time of year.
Tie up with others to get second opinions, refer work as you cannot know everything even with CIOT and chartered.
I understand that a clawback clause would be required.
I agree that the current climate is not ideal for buying a practice and that the effects of covid could take a year or two to really kick in as clients have an uncertain future.
In the absence of covid, there is also the nature of the practice. I can imagine a number of small sole practioner practices having manual processes that won’t sit well with MTD.
I see that your practice is in Loughton. I did a 3 year stint at a firm local to you earlier in my career - Davis Grant as well as BDO before that.
I actually think now is a great time to look to buy a practice. Just focusing purely on audit for a second, the increasingly costly and onerous compliance regime is creating significant churn because the established medium sized firms are having to jack up audit fees to make a sensible margin. Fee quotes are sometimes increasing by 100% and more, and as a result they are losing some clients to smaller firms as that work goes out to tender. Just at the time when many companies are needing to belt tighten due to COVID-19 they are faced with much higher compliance costs which they simply cannot afford. Therefore this is a great opportunity to step in and build a wider relationship with a new client off the back of the contract for the audit.
Second thing is the SaaS environment means a much more technology enabled service is possible than ever before. I think the whole sector is ripe for better automation, frankly. Even the Big 4 are barely scratching the surface, let alone the mid-tier.
Smaller more agile practices have potentially many new niches to operate in as corporates are increasingly swamped by complex compliance. Many companies need simple and straightforward advice but lack the budget to pay £3k or £5k for every single piece of work. Often I spend more time discussing engagement letters and KYC than the advisors spend on completing the work!
Also the Institute is getting its act together, is very well funded, and I think there is more support available to practioners than ever before (and opportunities to engage with the Institute as a way of connecting with potential future clients)
Good luck!
Second thing is the SaaS environment means a much more technology enabled service is possible than ever before. I think the whole sector is ripe for better automation, frankly. Even the Big 4 are barely scratching the surface, let alone the mid-tier.
Smaller more agile practices have potentially many new niches to operate in as corporates are increasingly swamped by complex compliance. Many companies need simple and straightforward advice but lack the budget to pay £3k or £5k for every single piece of work. Often I spend more time discussing engagement letters and KYC than the advisors spend on completing the work!
Also the Institute is getting its act together, is very well funded, and I think there is more support available to practioners than ever before (and opportunities to engage with the Institute as a way of connecting with potential future clients)
Good luck!
Just to add on the commercials, I would make (a) physically/virtually meeting certain clients and (b) retention of x% of clients for y months a condition of sale (or at least include a deferred element to the consideration or an adjustment mechanism to reduce your exposure). That way interests are aligned and the seller is motivated to try to retain the clients and at the same time you can reduce the risk that you overpay for any acquisition.
Gassing Station | Business | Top of Page | What's New | My Stuff