How to Sell an Accountancy Practice

As a seller, that means you need to understand every aspect of the sales process, from attracting buyers to negotiating the agreement and even post-sale considerations such as how your employees will move into the buyer’s business. 

At Rangewell, we’re not only experts in terms of arranging finance for accountancy firms, but we’re also able to help you with your selling opportunity by utilising our network of buyers. If you’d like to get advice on your sale, we’ll act as your helping hand. 

Planning the sale

If you’re going to sell your practice, you need to understand what value it offers. That means identifying a number of different things: 

• How big is your practice? Smaller firms tend to be easier to sell, whereas larger firms will have more employees and complexities for the buyer to navigate. 
• What physical assets are you selling? Do you own your office building? What about equipment? If you don’t, what kind of lease is left on them? 
• What clients do you have? Do they require certain specialisms? Will the buyer have the specialisms needed to serve the client? Is your relationship good enough with them to be able to arrange ongoing good relationships once the sale goes through? 
• What technologies do you use? Will it be easy for a new buyer to transition your systems to their own? If you’re still using manual spreadsheets etc, it’ll be harder to attract interest. 
• What employees do you have? What qualifications do they possess and what sort of contract arrangements are in place? 

Once you have all of this information, you’ll be able to better outline your opportunity and take it to a selling agent, or directly to the buyer’s market. Either way, you need to understand who may potentially buy the practice and what their considerations will be. 

Who buys accountancy firms? 

There are a few common approaches to an accountancy practice sale. The first is the most obvious – can you sell your practice to a local competitor? If you’re on good terms with their owners, you can simply approach and outline the opportunity to them. However, with this and all of the options, we’re about to list, you need to consider anonymity and how it might impact your business. If you approach a competitor directly, you risk exposing your clients and employees to uncertainty. 

Lots of retiring accountants choose this route because it generally means you know who the buyer is, what their business is like and how well they treat their own employees. You have some guarantee that the buyer is going to honour your employee’s contracts and will continue to grow your business once it’s sold. 

Another route is selling to a partner within your own business, but this is treated as a separate scenario in the context of this article. Unlike a normal sale where you’ll advertise the opportunity, approach agents etc, selling to a partner requires a unique approach and a specific finance application known as a partner equity loan. 

Selling agents are another option. There are also other roles that fall into the ‘selling agent’ bracket, such as business advisors, Merger and Acquisition consultants etc. All of these are titles that describe professionals who act on your behalf to sell your firm, taking a fee from the overall sale. They will work with you to decide on your pricing strategy and also help you work out the value of your business. 

Even in the first or second scenario, you’re likely better off working with a professional when negotiating the practice sale. The ‘goodwill’ purchase is a significant financial investment and risk for the buyer, and a complex challenge for the seller too – so having an expert on your side is beneficial. Recalling our earlier point about anonymity, a selling agent can act for you to approach any potential buyer without revealing your identity. 

Your sales pitch

To create your sales pitch, you need to come up with a rough valuation for your business. If you’re working with a sales agent or similar consultant, they’ll help you do this by assessing various factors including the physical assets of the business, your client base and your fee structure. Some key points to consider when valuing are: 

• If you don’t own the physical location you operate from, selling when your lease is due for renewal is a good way to give your buyer more flexibility in terms of relocating it. 
• If your client base is smaller, the risk to your buyer is high as a single client leaving could be disastrous. If you’ve got a more evenly-spread client list, risk is lowered as it is spread across clients. 
• What growth potential does your business have? Do you have an existing business plan that can outline opportunities for future growth if the buyer follows it? 
• What kind of credit and fee structure does the business operate on? Do you have any financial liabilities the buyer should be aware of?
• What are your rates? If they’re lower than standard, the buyer may need to increase them and risk losing the clients they’re trying to acquire. 

As a guideline, many accountancy-specific websites estimate your practice's going rate should be around 1-1.2 times the annual recurring fee income for your business. 

Selling & TUPE 

TUPE, the abbreviation for The Transfer of Undertakings (Protection of Employment) Regulations, are a set of legal rulings that protect employees when a business transfers ownership. When you’re selling your firm, you’ll need to consider how TUPE impacts your sale and the buyer’s interest: 

• TUPE means that buyers have to ensure your employees and their contracts move into their business in as seamless a manner as possible. 
• If you’ve got lots of employees, that may make a buyer hesitate as it means having to pay lots of new salaries and deal with contracts that may be very different to those the firm offers. 

• For example, if all of your employees are used to a certain holiday allowance, the buyer may not be willing to accommodate and therefore be dissuaded from completing the purchase.

However, a buyer shouldn’t always be put off by TUPE – they will learn about it as they consider a purchase. As long as your employees have fairly standard arrangements that don’t require significant changes to implement, it should be a smooth transition. 

It may be worth having a closed-door meeting with your employees to discuss the potential sale and to give them the option to raise issues or disputes prior to actually selling. However, doing this could also risk the sale as some employees may be core to the business’ value. 

Again, having a selling agent working on your behalf can help you navigate TUPE and position your employees as valuable assets and not a perceived risks. 

Sales agreements

As with TUPE, there are a certain set of expectations placed upon business takeovers and changes of ownership. The buyer will want certain guarantees around your clients and business, and you as a seller may want certain conditions to be met. To help smooth this transition into something beneficial to both parties, a sales agreement is usually created with the help of a solicitor. 

This agreement will outline certain warranties on your behalf as a seller. These are usually written statements such as “I know of no outstanding liabilities that may be raised against the business.” The solicitor will work through these with you to ensure you don’t make a mistake. 

The buyer may push for more specific agreements or guarantees, so it’s important you have someone on your side to help you understand what they ask and how you can create a legally-binding agreement that satisfies both of you. 

Finance for the buyer

Most buyers, unless they’re enormous corporations, don’t have the capital required to purchase your business outright. Instead, they’ll turn to lenders for loans and other finance agreements that can help them buy your accountancy practice. 

However, the scope and complexity of the lending market can make some buyers hesitant and intimidated. In the worst cases, some may even pull out of the sale entirely if they can’t find the finance they need. 

Here at Rangewell, we help buyers find the perfect accountancy buying finance agreement by helping them navigate the lender’s market and negotiate on their behalf. If you’ve got an interested buyer, or perhaps a partner in the company who wants to buy, direct them to our team for no-obligation advice. 

Sale timing

Before the final agreement is made and the transfer begins, it’s worth considering if selling your accountancy at a certain time can make it a more appealing proposition for a buyer. For example, if you are selling ahead of your most profitable period, a buyer may be keen to purchase before it begins – especially if you’ve got consistent data to prove your success. 

You may also have to consider the post-sale impact of your accounts receivable. Monies owed before the transfer technically belong to you, but if you offer them as a loan to the buyer, it will help them stabilise cash flow and may make the sale more enticing. 

Selling your accountancy firm

If you’ve read through all of our advice you’ll see that selling may be more complex than you’d thought – or perhaps it is exactly as you thought. Either way, having someone to give you advice and lend a hand is always an asset. 

The team here at Rangewell primarily act as brokers for the finance side of agreements, so we’re well suited to helping connect buyers to sellers or helping your partners raise the cashflow to buy you out – but we also have selling agents at hand who can help you throughout the whole process.

Whichever route you choose for selling your firm, get in touch with our team first for some impartial advice with no obligation to take things further.