Buying Pack – register interest
Buying Pack – general interest
Buying Process – overview
Funding Sources – lenders
Do You Believe in the Good Luck Fairy?
If you do, you need read no further as someone is going to offer to sell you a practice or block of fees. If you are more of a realist, you will already have done some research and will know that it’s a seller’s market. You and your requirement will either languish on a number of databases ‘waiting for something to come along’, or you will resign yourself to putting your hand in your pocket.
The Market for Buying Fees
It has been a sellers market for the past 40+ years. Currently, for every £1.00 of fee income which comes onto the market APMA estimates that there are 8 ready, willing and able buyers, but 4 times that number will initially respond to an opportunity.
Will I Be Able To Fund an Acquisition?
If you are already running your own practice, it should be fairly easy to raise the necessary finance as there are specialist lenders in the market who will lend unsecured. If you have no trading track record, with no collateral, you are probably best advised to go to your local bank.
The ‘Passive Role’
If you don’t have a network which is likely to bring results, this is the easy option. Register with an agent or an M & A broker, such as APMA by downloading & completing our free Buying pack or via our new Buying App, and wait until ‘something comes along’. However, you should be aware that, in our case, at any one time many hundreds of firms will be languishing on our database, often for many years.
The ‘Active Role’
This is a buyer’s only realistic alternative, one in which APMA strongly believes, whereby we are retained to approach the market on the purchaser’s behalf. We undertake a market development exercise of controlled proportions. Having defined your target market place, and while retaining your firm’s anonymity and giving the same protection to the other parties, we write to them giving an overview of your requirements and invite them to contact us with a view to discussing their interest. Our success rate is very high and, if you are prepared to be flexible in the ways we will recommend, the prospect of success, although not guaranteed, is well worth the modest investment.
You will know the limit of your exposure at the outset, and the reward for the proactive purchaser can be significant. For a variety of psychological reasons firms will be happier replying to us as an independent third party, complete with the confidentiality and advice we give them. The cost for this marketing exercise, which includes the production of the database, the letters themselves and the handling of ALL telephone, emailed and written responses including any visits which may be necessary, is just £1.30 per firm. You only pay our fees when you have successfully purchased or merged with our practice or block of fees. In other words, we act on a contingency basis, i.e. No success, No fee.
How is Goodwill Valued?
The accounting treatment of goodwill has been the subject of very considerable discussion over many years. You can purchase our Practice Valuation thesis from our website, or retain APMA to carry out a valuation by downloading our free Valuing pack. Unlike general commercial valuations for buying, selling or merging corporate entities, which tend to be valued on the basis of their underlying profitability, it has become a widely accepted convention that the value of smaller accounting practices is determined by applying a multiple to sustainable turnover. Sustainable turnover comprises gross recurring fees from annual compliance type work and non recurring special fees, to the extent that these can be demonstrated to be normal.
What Level of Profitability Can Realistically Be Achieved?
With £200,000 fees per partner (or principal, if he is a sole trader) with a gross payroll cost of no more than a third of turnover, the practice should make 50% net profit before tax.
How Can I Grow my Fee Base To £200,000?
To obtain optimum profitability the practitioner can either grow his client base organically, or he can buy fees. The organic approach is normally painfully slow and can put great stress on a family during the early years, whereas locating and buying a practice or block of fees requires courage, flexibility of attitude and a certain amount of luck.
If I Want to Buy Fees, What Are my Options?
There are two approaches open to a would-be purchaser. The first option is to register your interest with as many agents and brokers as you can, then wait until ‘something comes along’. You can download our free Buying pack from APMA’s website. However, you should be aware that, in APMA’s case, at any one time many hundreds of firms who have chosen this passive role will be languishing on our databases with limited prospect of ‘a result’.The second, and more realistic approach, is to commission an ‘active’ role and retain APMA to undertake a marketing development with a view to establishing not only if there is a suitable firm already seeking to sell, but also with a view to acting as a catalyst for action by Principals who haven’t got around to selling or, more usually, simply do not know how to go about it. For over 40 years APMA has specialised in accountancy practice broking and our success rate for finding ‘hidden’ fees is good and, although not guaranteed, we believe it is well worth your modest investment in covering the direct marketing costs.
We will write to the firms in your agreed target area with an overview of your requirements. They will normally be happier replying to us than directly to purchasers. But, as APMA acts on a contingency basis, i.e. no success, no fee, you only pay us after successfully purchasing or merging following our introduction.