One of my students asked me this question in my Facebook group the other day:
‘I’m thinking of selling my practice in 5 years. What should I do to build it up for then?’
I came up with 5 thoughts on that. You can watch the video here:
First let me share with you a piece of advice…
Go and read the book ‘Built to Sell’. It’s by a good friend of mine, John Warrillow. He specialises in helping businesses to become more sellable.
It’s a really interesting story that illustrates a lot of powerful points that will help you to build a more sellable business – whether it’s your own you are intending to sell, or you are helping your clients with the same issue.
I highly recommend you follow John for more of his great material on this subject as well.
Now, here are my 5 thoughts on how to make your business more sellable…
If you want to sell your business, it needs to be profitable.
When I had my own accounting practice back in the late 90s, I had this idea that I would build it up into a big business so I could sell it later on. I focused on winning lots of clients and getting more GRF (gross recurring fees) or top-line sales.
In the UK, and many other countries, accounting firms are typically valued at a multiple of 1 to 1.2 times the top-line fees.
I was obsessed with winning new clients, but ultimately this just made more problems for me.
3 years into my business my life was a mess. I had 200 clients and over £200,000 in fees – my top-line was great, but the bottom-line profit was terrible. I was constantly going back to the bank and asking for more money. I was in serious debt.
We all want to grow our firms, but the key is to grow profitably.
There are so many accounting firms struggling to get by because they are focusing on the wrong things.
Your focus should be on profitability, not simply top-line sales.
You will get a much higher price for a growing business than one that is declining.
You will need to have some systems in place for marketing, so that your business is always growing in the right way.
This is probably the most important factor in making your business sellable.
Fortunately, the nature of the profession means that a lot of our work is typically recurring – tax returns, annual financial statements, payroll, bookkeeping – many compliance services are recurring.
To ensure recurring revenue, you can make use of monthly recurring payments. This tends to be common with services like payroll that is completed on a monthly basis.
But with services that are usually annually recurring, like tax returns and annual financial statements, the payment has typically been an annual recurring fee. But, you can shift this to a monthly payment process.
You should change all of your payment processes so that all services are using a monthly recurring payment approach.
Monthly payments are easier for the client to manage, you get paid earlier and you also make your cashflow much more predictable.
With a steady, predictable inflow of cash, your business will be more appealing. It will be easier to sell and you will get a better price.
These steps are difficult for many business owners.
The more involved you are in your business, the more reliant it is on your input, the harder it is to sell.
The biggest problem I found when I tried to sell my business was that I was a sole practitioner and dealt with almost every single client myself. If you took me out of that business, you would need someone else to step in and fulfil that role.
That’s a big issue for someone buying an accounting firm. They are probably already very busy themselves – they don’t want to take on a second job of having to manage your clients.
Your practice needs to be self-sufficient and rely less on you – this will make it more appealing to buyers.
You can do it in 2 ways:
You can implement systems in your business to make it run more efficiently. With systems in place, all team members can follow the same established processes and a new buyer won’t have to start implementing new procedures.
I recommend the book ‘The E-Myth Revisited’ by Michael Gerber to help you with systemising your business.
The more your business runs on systems, the less dependent it is on your direct input, and the easier it will be to sell.
Replace yourself with a great team. If you can hire people to take on your role such that the business runs independent of you, it will be much easier to sell that business.
If you would like to learn more about value pricing, business growth and marketing strategy, I run a free live training session once a month with a different topic chosen by you. If you attend live you can ask me questions as well. Click here to register and I will send you an invitation to the next session.
And if you would like to join a community of like-minded accounting professionals learning to value pricing more confidently and effectively, you can join my Facebook Support Group here.
Wishing you every success on your pricing journey.
Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller, “Effective Pricing for Accountants”
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