Many of us would like to explore the world of being self employed. The pros and cons of being your own boss should be considered and analysed to explore the potential and minimise the risks. This article is about what a potential sole practitioner should do when considering acquiring a practice by his/her own.
When exploring the opportunity in accountancy practice to buy over. Considerations should include:
Specialty of the practice
To find out what the practice is good at. Do they have a niche market such as dealing with taxi drivers accounts or dealing with small corner shops accounts or specialised in business start ups or have generic clients base a bit of everything.
If your areas of expertise and competencies can be matched with the practice then this is worth taking on the opportunity one step further as you know you will be able to provide the best service continuously and confidently to existing clients of the firm.
This also means that you have no problems bringing in your new clients to the firm as the staff already have the technical knowledge of the clients industries and be able to deal with the clients affairs competently.
Change of the firm name
Will you change the firm name to your desire trading name? How would this affect the staff and the clients? Consider the reputation and the goodwill already generated by the firm.
If it is a limited company then carry on practising with the firm name should maintained unless the firm name represent the selling practitioner’s name. In this case, you may want to add your surname to the existing practice name.
Consider the stationery of the firm with regards to changes to the firm name.
Clients base
Does the firm have good clients, or mixture of good and bad clients?
Good clients pay their fees on time and maintain proper records. Bad clients are very reluctant to pay their fees and maintain bad records (incomplete records) and the firm always making loss on these clients’ jobs.
Consider to filter the clients’ base and get rid of bad clients as they generate loss not revenue and waste of your time and effort. Alternatively you may attempt to make good of bad clients by communicating with them of ways to maintain proper records and the benefits of it to their management and to yourself as their accountant. Also inform them of their new credit terms and regularly follow up on outstanding fees.
Location
Is the location of the office good and in line with your practice future business plan? Will relocation of the office to better area lead to clients to choose the practice next door because the clients prefer face to face communication.
To build clients confidence on our high quality services regardless where we are, may be consider to introduce access your accountancy services online 24/7 via your website and provide technical support for initial implementation. This will bring convenient to clients as well as the firm.
Reputation
Is the practice well established in the community? Get some feedback from the community. Find out the percentage of existing clients were from referrals. This will give you indication of the service level and reputation of the firm.
How do the community business people rate the practice current service level?
Turnover (fees income) of the firm
It is important to review the firm fees income of previous years and current year to ascertain the firm future fees income after acquisition.
A percentage of loss of clients may be lost for whatever reasons. The new clients that you are going to bring in will compensate for these lost of revenue.
Work out whether the forecasted fees income be able to sustain the firm’s continuity or further capital required?
To find out basis of fees charge to clients, on fixed fees basis or rate per hour basis or combination of both. What your view on the current fee structure. How the current fee structure can be improved.
Firm current operations
Streamline the firm operations to achieve maximum efficiency and management effectiveness to improve the firm profitability.
Investing in high speed printers to improve printing quality, speed and reduce staff waiting time. Modern high speed printers come with the ink cartridges saving mode thus save printing cost.
Key staff
Will the existing staff stay with the practice? Do you need all the staff or just a few of them with the view to recruit your own staff?
It is important to keep a few of key staff to provide continuity services to existing clients and as a way to get to know the existing clients better through these staff.
What can you offer the key staff to stay with the firm after acquisition? Consider offering better remuneration including performance bonus and/or senior management position with partnership potential.
The costs of these options have to be carefully considered and analysed and weighed against the potential fees income and benefits to the firm.
The firm management style/structure
Is the firm having a flat structure or with hierarchy? Is management style of the firm similar to what you would culture? If no, consider what you would compromise for the initial years after acquisition in order not to upset the clients as well as key staff that you would like to keep.
Software used
What accounting and tax software the firm is using? Are they good software and licensing fees for these software are reasonable? Are the staff happy with using the current software?
If you are in the opinion that they are better software comparing to existing software and you are considering implementing it, you may need to consider the staff reactions to these changes.
How would you support the software changeover? Provide training on the new software is ideal, most importantly is to demonstrate the benefits of the new software and also how to deal with the downside of the software applications.
Billing/debt control
Does the firm have good debt monitoring control and effective billing system?
Is new client subject to credit check before acceptance? What are the credits terms offer to existing clients? Are all fees are received within reasonable time?
Your responsibility would be to ensure the existing debt and billing system be improved to ensure good cash flow.
Funding available
Consider how you would fund the acquisition? borrow from financial instituition may require some form of security against the loans. Private loans from family and friends are the cheapest form the loans normally interest free.
Consider private investors where they may interested to invest in your practice in return for a share of profit.
Please feel free to email us to share your experiences.
