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Thinking about growing your practice?

There are several approaches to increasing the critical mass of your fee base which you may wish to consider. Please browse through the articles on the ARTICLES page to explore this topic further.

How can I grow my fee base to £200,000?

To obtain optimum profitability the practitioner can either grow the client base organically, or fees can be bought. 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. But beware – it is a seller’s market. This is significant because it’s important that you are realistic before you take the next steps, and you’d be surprised that not everyone is.

If I want to buy fees, what are my options?

There are two approaches open to a would-be purchaser.

The ‘Passive Role’

If you don’t have access to a network from which to grow your client base which is likely to bring results – simply register your interest in fees acquisition in as many places as you can with reputable brokers like A.P.MA., and with the various agencies, and then wait until ‘something comes along’.

We will simply add you to our email newsletters list. We ask you to check it through for suitable opportunities each time you receive it. We don’t charge for this service. You may also like to connect with us on LinkedIn and to keep a regular eye on our Current Opportunities page.

The ‘Active Role’

This is a buyer’s only realistic alternative to the passive approach. It is one in which A.P.M.A. believes strongly because it is more likely to yield the results you seek.

It is to commission an ‘active’ role, retaining A.P.M.A. to undertake a market development exercise with a view to establishing, not only if there is a suitable firm already looking 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.

If you are prepared to be flexible in the ways which we will recommend, we can increase the likelihood of a successful outcome to the search for you.

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.

For 50 years A.P.M.A. 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 the modest investment in covering the direct marketing costs.

Please email us to request more details on how this works in practice.

The market for buying fees

Buying fees is not like going to the supermarket where you can choose what you’d like to buy off the shelf. Instead, you may be competing with other would-be purchasers who are also keen to expand through acquisition. If there is significant interest in a given buying opportunity, which there usually is, you, the buyer, could find yourself competing against the other would-be purchasers out there who are just as keen. This has implications for you, the buyer, which ought to be considered carefully.

Will I be able to fund an acquisition?

If you are already running your own practice, it should be fairly straightforward to raise the necessary finance as there are specialist lenders in the market who will lend unsecured. These lenders understand the mechanics of accountancy practices (possibly better than most banks) and may give preferential rates.

Please contact us if you would like to be directed to any of these specialist lenders.

How is goodwill valued?

The accounting treatment of goodwill has been the subject of considerable discussion over many years. Please read our article entitled The Valuation of the Goodwill of Commercial Businesses on the ARTICLES page for an analysis of this.

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 where these can be demonstrated to be normal.

What level of profitability can be achieved, realistically?
With £200,000 fees per partner / principal, with a gross payroll cost of no more than a third of turnover, the practice should be able to make 50% net profit before tax.

Has it always been a seller’s market?

Although a sellers’ market for the past 40+ years, that was not always the case…

Prior to that, in 1973 a firm which, at that time, was called Hacker Young, retained our Jeremy Kitchin to help them to identify a fee base of general practice clients. They were hoping to bolt them on to their Nottingham office where they had only audit clients. Jeremy carried out the first search in the marketplace inviting all East Midlands-based accountants to sell their goodwill. Jeremy received 72 replies to his mail out, Hacker Young bought two of those practices, and Jeremy was left with a business that has been through a number of evolutions including JobTel, but which we trade today as A.P.M.A. (Accountancy Practice Mergers & Acquisitions).

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