After all the acquisition of another practice not only increases your gross fees, but you should also get the added bonus of inheriting some qualified and competent staff. Growing organically in todays market with Generation Y and the millennials in proving to be more and more challenging. Attracting staff and keeping them engaged in the business is becoming increasingly difficult. The days of joining as a graduate and staying with one firm until Partnership are few and far between.
Key aspects to consider when acquiring another Practice:
- Do you have funding in place? Most Practices are not asset rich (which are traditionally used in an acquisition) to help funding so make sure you have the funding in place prior to starting the search.
- Is there a cultural alignment in the ethos of the practices and the client base? You don’t want to be buying an older client base as when they retire you may lose the business of the new owners. Is the client base “old school” or “new school?” What are your clients wanting from you and where and how are they wanting to communicate?
- What are the charge out rates of the staff and the salaries of the staff at the practice you are looking to acquire? Are they aligned with yours? It is best not to acquire and then hike up fees immediately. This is business suicide. Also people talk and it wont be long before any gaps in salaries come to your attention.
- Who will look after debtors and the work in progress (WIP). It is very unusual to buy debtors and these are usually the responsibility of the seller.
- Are there non-compete clauses with the existing staff? How stringent are they? Are they client facing, and would they see this as an opportunity to start out on their own?
- Are your software and practice management systems compatible – if not how easy or difficult is it to do this. Taking a manual system onto a cloud system can be labour intensive. Too many systems complicate life. A cloud-based software/platform is a must moving forward.
- Who will make contact with the new client base? Will it be the old owner or the new one or both? Accountant tend to be extremely busy but neglecting or not contacting the new client base is one of the main reasons’ clients will leave you. Ensure that the clients are contacted and engaged with otherwise they will find a new accountant.
- What is the retention or claw back fees and timeframes? Is there a clause for payment of any additional fees that are generated over and above the full of amount of gross fee acquired?
- Have you got an internal plan for integrating staff and culture? People do not like change – they usually feel threatened and can leave if this is not carefully planned.
- Do you have a post acquisition plan? How will you advise your client base of the changes and the benefits of the acquisition? Are you able to offer additional services and specialities? Do you have your marketing material ready to go – this can be neglected by accounting owners and is of paramount importance.
A careful thought out acquisition can quickly help you grow but it does not come without some risk. Ensure you do your homework and plan for tomorrow. Take the time to understand what you need to do with staff, technology and clients and make sure this is all backed up with a strong internal and external marketing message.
Ian Innerd is the Founder of Identify Executive who specialise in mergers and acquisitions for accounting practices. Originally from the UK Ian founded the business in Australia before launching the business into the UK. Ian holds an ACCA in Business Valuation and is also a private investor. He has helped transact over £50M in fees and has a great understanding of the practical and emotions factors involved having bought and sold a number of businesses himself over the years.
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