When selling an accounting practice, one of the most important things to get right is the retention sum.
During my time with Accounting Practices, I have learned a thing or two about how the sales of accounting practices work and the types of issues that come up.
One of the curliest is recourse; particularly when, or if it is due to be paid.
Most firms hold back anywhere between 10 - 20 per cent of the purchase price over a 1-2 year period or at least until the revenue from the practice is justified. So this withheld payment is paid to the vendor as final payment.
This is usually adjusted, if the income has not reached what is agreed from the signing of the sale and purchase agreement,
This may seem it is the fault of the vendor, however the question here is…why did it not reach the level of income it has been accustomed to?!
A few common reasons are:
- Purchasers need to understand they are buying the ‘relationships’ and not the fees!
- Purchasers try and make drastic changes from the outset, not buying on a going concern or understanding the culture.
- The purchaser try’s to cost cut, by reducing staff numbers and not leaving the vendor on board for the transition
On the market front:
We have been inundated with high end accountants looking at succession planning; we are also inundated with potential vendors looking at genuine purchasers.
Just before Christmas we sold a practice valued at just under $3million, it was a good result for all parties involved.
It is still a buyers’ market; however with the introduction of cloud based software, an increase in your “kitchen” or non-regulated Accounting firms, the competition for compliance based customers is heating up!
If you’re looking to buy/sell/merge or needing a high end Accountant - Talk to the experts and the only agency that works exclusively in the Accounting market.