At the beginning of this year we were asked to market a practice with GRF of £250,000. We went to market in the normal way and the vendor had three firm offers, chose one and the deal has since completed.
Most offers on a practice of this size would involve three payments. One on completion, one at the end of 12 months and one at the end of 24 months. Industry average is a third, a third and a third, though many vendors like the first payment to be front end loaded.
One of the buyers in this instance put forward an interesting offer that I would like to share with you. Perhaps you can see straight away why the vendor did not choose this offer.
There is an Initial Payment (IP) to be made on the completion of the deal of £25,000.
On the 12th month anniversary of the completion of the deal 50% of all recurring fees received from the original client base will be paid over less 50% of the IP.
On the 24th month anniversary of the completion of the deal 50% of all recurring fees received from the original client base will be paid over less 50% of the IP.
The above staggered payment method will mean that there will not be the need for any claw back for lost clients.
Fees will be classed as being received once the invoice is raised.
The above offer was put forward to the vendor. The vendor declined this offer. He was looking for, and got, 50% up front, 25% at the end of 12 months and 25% at the end of 24 months.
As you can imagine, we get offers coming into us in all shapes and sizes. We put all offers to the vendor because it is their call as to whether or not the offer is accepted or declined. In this instance I did take time out to explain to the buyer why the offer was not attractive to the seller.
If you want to discuss the possibility of selling your accountancy practice, then please get in touch. Remember everything we discuss is confidential. It is the buyer that pays our brokerage fee. You can contact me, Nicola Draper, on 01788 816440 or email me at firstname.lastname@example.org