We will be assisting and guiding you through the process from preparing your practice for sale all the way through to introductions, negotiations, heads of agreement and final completion. For those that do not wish to employ a solicitor to arrange a purchase or sale contract for your practice, we do have available a DIY contract prepared by a legal practice. This is supplied through Goldsmith Practice Services Ltd and the cost is additional to normal sale or purchase fees. It has been used on numerous occasions and has proved to be fit for purpose.
If you are considering what is going to happen within the next five years with you and your practice then it is probably good to look at options now. The sale of a practice in particular for a multi partner practice takes some time. We have to take into account the requirements of individual partners to try and satisfy as near as possible all needs. Some partners may wish to go immediately. Others within a five year time frame. Others may well need to continue for a long period of time and will be prepared to look at a swap of equity in the existing practice for something in the new and enlarged buyer. Lots to consider to achieve the best quality result for all concerned.
One of the most important features about practice sale or merger is finding the right firm to work with. Whilst we always have the responsibility to tell you of all the enquiries we receive for a practice for sale we do have our own recommendations. We have been making personal visits to practices for over 25 years and there are very few that are not aware of us and we know them well enough to make introductions on a personal basis.
The benefits of this service include:
- Full personal visits to your practice.
- Intimate knowledge of potential buyers and regular conversations with them to ensure the compatibility.
- Full advisory service from the Goldsmith’s team who understand intimately the requirements of your practice.
- Discreet and confidential searches for appropriate opportunities for you.
- A complete service where required from searches through to heads of agreement, negotiations and final completion.
- Additional finance available for acquirers of other practices to fund the acquisition.
Frequently asked questions about this service.
How much is my accountancy practice worth?
The current going rate for sole practitioner and small practices is between 1 and 1.25 times the annual recurring fees. If however you are a larger firm then it is largely based on profitability as opposed to a multiple of fees. This is a specialist area and we need to discuss with you individually a valuation for your practice.
Will I be required to work in the practice after the sale?
This is in the interests of both the buyer and seller, and will need to be taken into account when negotiating a sale. The length of time required to stay on in a practice once it has been sold can vary considerably. We have seen a successful handover completed in 2-3 months. It is however advisable to keep the name of the original owner of the fees on letterheads for as long as is possible, and suitable for the particular purchase/sale as this gives comfort to clients. The process has often been likened to a relay race. Both sides need to hold the baton for sufficiently long enough so that when one lets go, it doesn’t land on the floor!
How long does it take to sell an accountancy practice?
To say how long is a piece of string is unhelpful. It is however fairly normal to find a prospective buyer within 3-6 months with a practice that will fit the bill. Completion may be an extended matter simply and purely because of external factors such as leases on premises, tax years etc.
What is the best time of year to sell an accountancy practice?
December and January are generally a no no. There are normally firms continuously on the look out for acquisitions, so apart from very definitely avoiding the January Tax Return season, it is wise to put the practice on the market as soon as is appropriate.
What is “Claw back” and how does it affect me?
Clawback often depends on the size of the practice, and is usually between a period of 18 months and 3 years subsequent to the actual sale of the practice. Should any clients not transfer you will generally speaking not receive payment for those that have left. In some circumstances we have arranged for the buyers and sellers to have an arrangement in place whereby the retiring practitioner can replace lost clients with new ones. There has occasionally been limits placed on the amount of turnover lost before clawback operates, this is between 5% and 10%. It is however absolutely vital that you find a buyer that has a similar ethos of working in order to ensure your clients comfortably hand over at the time of completion and you stay around long enough to ensure the clients have settled.
What happens about my work-in-progress and debtors?
Work in progress is a more complicated issue. The most usual practice for work in progress is for a note to be put on a file as to how much has been done on the day of sale, or even a bill issued but only placed on the file for work done to date. Once the buyer has completed the work and it has been paid for, an evaluation should then be made of the proportion of the bill to be paid back to the vendor of the practice for work carried out prior to completion. It is not been unknown for a buyer to pay for the work in progress on completion on an agreed valuation less a discount to the buyer.
After what period of time can I expect full payment?
For sole practitioners payment periods are normally between 1 and 3 years with a good average being 2 years for a buy out period. Two years being the average during which time normally clawback operates and therefore the vendor must stay clearly in touch with the buyers and help where appropriate as it’s in both sides interest. Where a major practice is buying another regional practice, probably in excess of £1 million individual partners in the firm being acquired are normally dealt with separately. There are those that wish to stay. Those that wish to go immediately. There are those that want to go in a relatively short period of time. Each partner needs to be dealt with differently and buyouts arranged for each partner on an agreed basis. Generally speaking the turnover in the practice providing it’s maintained is the indicative factor for future clawback as opposed to individual clients. It can however be either and each case has to be looked at on its merits for both buyer and seller.