Buying an Accounting Practice

They do this to dramatically speed up growth and have an established client base as opposed to building up over a longer period of time through advertising and referrals. It is a way of fast-tracking business growth and tax agent status.

This depends on the availability in the market. Accounting and tax practices come up for sale based on practice owners retiring or perhaps choosing to change occupation. Sometimes they may choose to sell off only part of their client base (a parcel). Parcels and practices for sale are either listed for private sale or with business brokers such as GMO and Zircom.

Internally within Success Tax Professionals parcels or practices also become available from time to time due to franchisees choosing to leave the industry or retire. We publish these on our Fees for sale page.

In summary:

• If joining and waiting for a client parcel or practice to become available (i.e. it is on your wish list) you buy the franchise at the normal grant fee. While waiting you should commence normal business development activities and marketing to gain clients. It is unknown as to when fees may become available.
• If joining and also buying (or bringing into the group) a fee parcel of at least $100,000 at the same time the franchise is purchased, the franchise grant may be reduced as an incentive.

Practices or parcels of fees vary in size. In broad terms a practice can be valued at dollar for dollar for all clients (depending on the practice composition and break-up - for example, predominantly quality business clients). Or with mixed parcels individual tax returns valued at 70-85 cents in the dollar and business clients at 100 cents in the dollar.

Manageable parcels are often $150,000 or less for a lone franchisee or up to $400,000 for two franchisees purchasing together. If the franchisee/s are tax agents they are able to employ staff to assist with the full range of duties. If the franchisee/s are not tax agents then they are only able to employ administrative staff.

It is important not to add staff to the practice before they are genuinely needed as this affects profitability. We provide benchmarking data to help franchisees stay on track.

Generally, 60% – 90% of the value of the practice up front and the balance based on client retention at the end of the first year following settlement. This is what makes practice and client fee acquisitions so beneficial and low risk. Part is paid on settlement and the balance 12 months (or later), based on the actual physical retention and transfer rate of the clients.

The vendor will usually help to move the clients across successfully (allowing for normal attrition), as the second part of their payment is affected by the transfer rate. It is beneficial for both parties to have a high transfer rate.

We have a number of recommended terms and conditions to include in contracts to add elements of protection and fairness. Ultimately all contracts can be reviewed by legal professionals the relevant parties may choose to use.

This depends on the terms of sale. In some cases the accountant selling their practice will require the purchaser to move into the office and service the clients from that location. They can however be moved at a later date to a new office location, for example after one or two years or later.

Yes, they do. This is one of the benefits of our franchise structure. This means that like-minded franchisees who are financial can purchase client fees together, and there are various ways of setting this up operationally for fairness and equity.

The compelling factor here is being able to finance a parcel of fees or practice that would otherwise be unaffordable by a franchisee on their own. It is a great head start.

The arrangement could be long term or may only last until the seller has received payment and no further payments are due. Then one of the franchisees might choose to relocate their share of the clients to a new location and work independently.

Yes, we do. We talk to brokers and vendors and assist in the process. We also provide franchisees with advice and information which is paramount to successful and careful negotiation. We have a vested interest in these transactions being successful. We also help to introduce franchisees to one another who are interested in co-purchasing.

We have a management system which caters for practice acquisitions. We do not however finance the arrangements.

Yes, it does and is an important part of the purchase process and should appear in the purchase contracts. (Some practices are 100% up front and walk in/take-over with no due diligence and we would not recommend these as a safe option). Risk needs to be balanced.

There is no fee payable for our assistance in the purchase process – it’s one of our franchise services.

Depending on the size of the parcel or practice the fees payable to the franchisor for client work processed by that practice will be relevant to the parcel size and the agent status of the franchisee. Fees payable are typically reduced significantly which forms a great incentive to get ahead with a well-established practice and benefit from lower fees payable.

Fees and rate explanations are in our Information Package which you can download below.