Welcome to Query Of The Week
A client recently contacted us with the question “I’m thinking of selling my firm. How long does it take for you to sell an accountancy firm and how long should we be preparing for the process if we’re going to get maximum value?”.
Des deals with queries like this all the time and has been involved in the sale and purchase of hundreds of accountancy firms so had this answer:
Building Your Firm For Sale
If this Query Of The Week was of interest to you, you will also be interested in our Building Your Firm For Sale online course.
Full details for this online course can be found here.
|CPD Allocation||1 Hour|
|Fee||€28 (or 1 CPD Club point)|
|Presenter||Des O’Neill – OmniPro|
Query Of The Week – Video Transcript
(Please note that this is a direct unedited transcript of the spoken word as recorded on the video)
So this week’s query arose when I was working with a client in relation to selling her accountancy firm. In the last year, we’ve been asked this question many, many times. And the query is this, “I’m thinking of selling my firm. How long does it take for you to sell an accountancy firm and how long should we be preparing for the process if we’re going to get maximum value?”
When people ask the question, most people are asking us, “Well Des, if I say to you now I want to sell my accountancy practice, how long before we actually get a sale?” But the real underlying question that people are asking and should be asking is, when we’re setting up a practice let’s start moving through. We’ve got a million step process for selling accountancy practice, it’s not about that million step process, it’s about you preparing.
It’s about you optimizing your price. You see, the reality for me is, that this concept of, “I’m going to sell my accountancy practice, and I want to get pound for pound or euro for euro, based on the turnover of my accountancy practice”. Well, that still holds up currently into the future and even now I can see that concept being undermined. You see, if I’m going to buy your accountancy practice, I’m not just interested in buying turnover. What I’m really interested in, is buying an asset that generates cash for me.
So what if you were 27 and just starting out on your journey? Whether you’re 37 and you’ve got a few years under your belt? Maybe you’re 47 and at 47 now you had some good years and now you’ve got one eye on the horizon of retirement. Or maybe you’re 57 and retirement is a real thing for you now, it’s a real consideration on exiting. Or maybe you’re 67 and perhaps you’ve left it a little bit late.
The answer to anybody who asks me when should they start preparing to exit their firm, the answer is always now. It is now, it is today. For me, you have to have an exit strategy. There’s no point of being in business unless you have an exit strategy. So if you’re not building your accountancy firm as an income generating asset, it means really, you’re just chasing revenue. And the difficulty with revenue generated businesses is they’re often dependent on personalities. And the true business is one, do you know, it creates a result without being dependent on you, on unique personalities.
Some of the younger accountants will say to me, “But Des, I don’t want to necessarily sell my firm in the short-term.” But you see, even if you don’t want to sell your firm in the short-term, let me ask you this question. Do you want to be a business owner, or do you want to be self-employed? The difficultly with being self-employed is, the business depends on you. I appreciate that you are central and you’re fundamental. But no matter what size your firm is, you can build a cash generative leverage business. And we can look at optimizing profit.
if you build a cash generative leverage business that generates profits, you may never want to sell until the time actually comes and it’s the time for you to do. Basically develop a six-step process in terms of building a business for sale, building an accountancy practice for sale. And we started off on the first things that we look at is, we look about the truth of the value of your firm. And why the pound for pound turnover, euro for euro turnover, why it doesn’t always stack up. And why really, it’s about building a business that generates positive cash flows and consistently generates profit. And you see you’ll say to me now, “Well Des I want to sell my business,” and so many accountancy firms are getting so focused on profitability and reducing stress, how do you get focused on profitability reducing stress? Well, you look at the real driver of your accountancy firm and that’s your customer list.
Now, if you at some point in time in the future want to sell your firm, essentially what we’re selling is the customer list, because that’s what’s generates the revenue. So in the very same way, as you only want ideal customers in your customer list and in the very same way as practices who are struggling have too many non-ideal customers, but when should we start working on that?
We should start working on it today. If you’re going to sell in two years time, if you’re going to sell in 10 years time, if you’re going to sell in 25 years time, if you don’t even know when you’re going to sell but you just know that you want to build a business, well we’ve got to look and work on our customers.
But you see it’s not just about selling the customers, it’s about selling a cash generative system so that the type of work that we do, the method that we do the work and it’s almost like a form of a franchise business. That the business just works, the business just works. Yes, there’s elements of the business that’s going to require certain levels of expertise. And you see, how do you change direction if you’re going to build a saleable business?
Well, it’s all about pricing and creating a positive cash flow cycle. The day of building up, projecting all the time onto the time sheets, building up all the work in progress and retrospectively building your customers, who then take time to pay you, that day has gone. We need to look at modern pricing methodologies and we need to look at creating a positive cash flow cycle. And even if you want to sell your firm in two, three years time, there are things that we can do. I call it getting quick win. And all of this is underpinned by creating a saleable sound strategy. I think that nearly every accountancy firm in the country should have a saleable sound strategy.
Definitely, if you’re going to sell we need to start working on that now to optimize the value, to make your business more saleable. You see, everybody has ideas in relation to selling their firm and what they should do, but very few people actually deliver. And you need to watch here, because the times are changing. You need to start looking, right now, today, whenever you’re planning on selling, whenever you’re planning on exiting, you need to ask yourself, well am I self-employed or am I working towards being a business owner?
That’s our query of the week this week “if I want to sell my accountancy firm, when should I start working on the plan and the process?” And my answer is today.
Now, we are running an hour long webinar on this topic on the 13th of February, so if you are interested in selling a firm now or in the future, or even if you just want to build a business, a more profitable business, check in on this seminar. You can book your place by clicking on the link below, or if you visit cpdstore.com you can see our Building your Practice to Sell webinar on the 13th of February along with all of our other upcoming webinars.