Planning for the Future of Your PracticeOct 19, 2022
I started my practice in 1999 and this year I would of celebrated 20 years in practice had an opportunity not have presented itself 6 years ago.
But before I tell you about that, let me tell you a little bit about my practice which I’m sure many of you will resonate with.
I decided to start my practice from my home in East Maitland (about 2 hours north of here) so that I could combine my career and motherhood because at that time, there was no formal maternity leave policy at the mid tier firm I was working in and I wasn’t that fussed on taking up their offer to in effect be their guinea pig in getting one started.
Going into practice myself was one of the best things I ever did in my career and it has been enormously successful and rewarding.
Within 9 months of starting my practice we welcomed our first son and then 14 months later a second. I was pretty much raising 3 babies all at once but I wouldn’t change a thing.
GST came in, the practice kept growing solely by word of mouth and I eventually moved out into an office and hired staff. At the peak we had around 1,500 clients and things were very hectic.
I was always a very organised person, loved systems, loved technology and loved automation so I was always looking at ways to improve the practice that was our family’s nest egg.
Unlike a lot of other assets that can be valued quite easily, a practice not so much.
We were curious as to what my practice was worth and what my succession plan might be as I had a few thoughts on that which led my husband and I to a presentation in Sydney on “How to Successfully Sell or Buy a Practice Without Using a Broker” presented by Michelle Knights of Rob Knights & Co.
At that stage it was on my radar to sell but it was more like a 5 – 10 year plan / wish! And If I think about it, I was probably thinking this year would be the year I would sell as my youngest son is about to sit the HSC.
The practice was pumping – running like a well oiled machine and was very profitable. I was making good money and we had a lovely lifestyle and a few years earlier had made a sea change to Port Stephens.
Michelle offered to give an appraisal for the first firm in each state to send their info in.
I knew my metrics so I collated my information ready to send off to her and on spec prepared a prospectus type document.
But before I did, I sent it to my youngest brother who is 13 years younger than me and was a partner of another firm. He actually said to me, “you know I would be interested in buying in”. At practically the same time, another local person approached me to see if I was interested in selling as I had talked to them months earlier about at area that I could see myself working in later in life.
At that stage, I prepared a sales prospectus and handed that over to my solicitor to distribute and to start handling negotiations to ensure both parties had access to the same information simultaneously.
I decided to bring my brother in as an equity partner as opposed to selling outright and I did this for a number of reasons.
- I liked the idea of keeping the business in the family
- My clients and my staff were like family to me and I also wanted the best thing for them
- the other party basically wanted to come in and acquire the clients and had no interest in keeping my staff which I wasn’t comfortable about
For the next 4 years my brother and I ran the business successfully together (I worked 3 days a week) so that I could pursue another project which was sharing my knowledge with others in the profession through accounting industry specific coaching.
In 2017 I sold my remaining shares to Ryan and he then merged the business with a friend’s practice and I remain an associate of that practice and continue to look after some long standing clients and mentor when needed.
The message from my story is to always be “sale ready”.
You never know when:
- you could get a knock on the door
- you could be faced with a health or financial crisis which could force your hand to sell
- you could have a calling to do something else and it may not even be related to accounting
Because my numbers were good, I was taking a good salary, I had a great client base and a great team, I had great processes and was utilising technology (I went paperless in 2008) my practice was attractive and I commanded a good price for it.
When I work with clients now, I get them to give succession some thought and plant the seed that getting out of their practice may not always happen when they expect it to.
I get them to live in the present and optimise their practice return now – from both a financial and satisfaction point of view.
Also, who knows what a practice will be worth in years to come?
More practices on the market could result in lower values being commanded?
Less progressive practice could result in lower values being commanded?
Starting an accounting practice and finding clients is a lot easier than say 20 years ago with the widespread use of social media, the ability to connect with ideal clients not geographically restricted and the barriers to entry less with subscription based software ?
My three top tips are:
- be clear on your vision for your practice and your life
- find your practice “sweet spot” which tick all those boxes – right clients, right team, right culture, right technology
- reward yourself appropriately now and find that crucial “balance” in your life
set your practice up so it does provide you and your family with a legacy that could be cashed in at any time
Enjoy designing or redesigning your accounting practice that will service you well now and in the future!