This continues an article published in a last month’s ebulletin. Here are more misconceptions I hear accounting proprietors say about accounting practice sales, especially regarding prices for Goodwill.
Misconception Number 6
Young people want to be equity owners, but won’t work long hours like us:
What do you mean by long hours? Some new partners do work very hard to “buy in”. If you are working long hours, is that what you want for the long term? It may be off-putting for new proprietors who may be more focussed than you on families. I recall years ago a country practitioner saying, “we don’t work Saturdays, but I heard Sydney partners do, we make a good enough profit and have sporting commitments on Saturdays”. New younger partners sometimes do a lot of reading and networking outside normal business hours, in the evenings after children go to sleep.
Misconception Number 7
I don’t think the new owners will look after clients as well as I do:
I recall the late Rob Knights complaining to me about some accountants delivering “champagne service for beer prices”. If you think your service is of value, charge accordingly. New partners paying off big loans to buy in, are not going to want to under-bill. Also, it is an ego thing, maybe you are not as necessary as you think? Amazingly clients do stay when they have to work with a different person. Sometimes a new approach and a younger proprietor, can more successfully work with a client, especially the next generation. They may be more effective in getting clients to make changes.
Misconception Number 8
New proprietors won’t borrow to buy in:
Well they are going to have to for working capital aren’t they? Unless you have an extremely highly geared practice, of course. Agreed some accountants now say “my spouse does not want the house mortgaged for my buy in, he/she works in corporate, has great conditions and our house is not on the line for that. Fair enough, so you have to come up with an attractive deal. An accounting practice is quite secure, little retrenchment of proprietors, potential for capital gain, etc. Practices that are run along corporate lines, require a buy in based on the profitability of the practice, just like buying any other asset. This is paid off over time out of super profits. Houses don’t have to provided as security.
Misconception Number 9
Young people often don’t dress well and their table manners are sometimes awful:
OK develop a corporate dress policy. Accept for some professional men, ties are seen as unnecessary, depends on what you consider your clients expect. Arrange staff training in professional manners and courtesy, include table manners, meeting people, introductions, paying for drinks, thank you letters, behaviour at meetings, appropriate language, etc.
If you want more information on what happens with sales and purchases of practices and fees, “Jadeja Partners are always available for a discreet conversation” they advise, call 1300 523 352.
I am sure I will come up with more misconceptions for next month’s ebulletin.
- If “Negotiating Price with Clients” Is a Challenge: What are you doing about it? - 16 June 2016
- When Is It Too Late To Sell? - 19 April 2016
- 3 More Misconceptions on Accounting Practice Ownership Changes - 17 March 2016