Business Sales - Acquisition and Sale of Fee Blocks and Practices

In brief, we are finding in the market:

  • Overall low volume/supply.
  • High demand, especially for fee blocks to bulk up existing practices.
  • Quality has been at average to lower end of market.
  • Prices asked are overvalued relative to quality and profitability in our experience.
  • Split Market - Practice sales and Fee Block sales have different characteristics and should have different pricing.

 

READ MORE
Fee Block Sales
  • Sale of a list of clients.
  • Typically fee paid is retention based unless on death/health event of vendor.
  • Purely buying a future income stream potential.
  • No business goodwill or other assets.
  • Tend to be smaller blocks of excess fees, or on the retirement of an ageing practitioner.
  • Usually low-quality fees:
    • Ageing clients
    • Little opportunity to add value
    • Tend to be simple accounts and returns
  • Sought after as a bite-sized and easy to add onto an existing fee base or practice, and often enough to start out a new practitioner needing more fees to get started
  • Tend to suit younger generations who don't like partnerships and structures.
  • Note non-deductible for both cost of purchase and of any WIP purchased
READ MORE
Practice Sales
  • Can be profit, cost or equal profit-sharing practice. Need to understand how it works.
  • Buy into an existing structure, overheads and facilities
  • Turn-key
  • A very good option for someone starting out as a practitioner as provides mentoring and support
  • Need to determine:
    • Quality of other partners
    • Future partners for succession
    • Compatibility personally, professionally and for marketing/image
    • Cultural fit is critical to success
  • Buying business goodwill, name and systems, not just a list of customers
  • Due diligence needs to be extensive:
    • Insurance
    • Debtor collection
    • WIP/write-offs
    • Practice review
  • Further factors to focus due diligence on:
    • Nature and split of services
    • Age of Clients
    • Track record regarding ‘churn’ of clients
  • How are Practice Sales and Purchases transacted?
  • How does this differ from the Equity Value of Practices?
  • What is happening in the market place for ‘retention sums’ and payment of consideration structures?
  • Much harder to find buyers
  • An internal succession of staff or other partners is the norm
  • Often better alternative is to merge whole practice into/with another
  • Many practitioners do not have a high enough fee base to be able to generate decent profits, even if efficiently run
  • Quality of practice, systems and profits often a problem
READ MORE
Sale Staging

You need to stage the sale to get a better price

  • Takes 6-12 months of hard work
  • Tidy up WIP
    • Write off old
    • Improve billing frequency so WIP reduces
  • Aggressively collect debtors
    • Payment plans for troubled clients
    • Change to part up front, balance on delivery
    • Credit card payment
  • Look hard at whether you are charging enough
  • Tidy up staff
    • Get rid of underperformers
    • Outsourcing
    • Decent employment contracts
  • Review overheads
  • Upgrade IT systems and software
  • Tidy up the office
  • Understand your competitive advantage
  • Website and marketing profile
  • What does an acquirer look for?
  • Does the acquirer have the capability to absorb the acquiree?
  • What about the respective ‘cultures’?
  • ‘Relationships’ are key.