Frequently Asked Questions

An agent acts for either the buyer or the seller, not both. A broker acts for both parties. Draper Hinks are brokers and we specialise solely in the sale and purchase of accountancy practices of all sizes.

It is our job to find you high quality buyers or sellers and facilitate introductions. We go much further than just acting as a ‘dating agency’, as we guide both parties through the whole buying and selling process from start to finish, and often beyond.

We offer impartial expert advice and ‘hand-hold’ both parties through the negotiation process, ensuring both parties are happy with the agreement reached. We are able to clarify all issues on your behalf, whether you are the buyer or seller, and iron out any potential problems along the way. Only if the sale goes through does the buyer pay us.

We find buyers and sellers alike appreciate our comprehensive service and can supply testimonials to support this.

We arrange initial meetings off site in a location mutually convenient for both parties and, unlike most brokers, we are present at these meetings. We act as a sounding board for both parties in a way that agents cannot.

If you are an accountancy practice looking to sell in the near future, just call us and we will come and meet you. We will ask you about your practice, clients, staff, turnover, premises, potential value and timescale – determining what you want to achieve and by when.

Armed with the facts, we will then contact appropriate potential buyers. We already know of many firms looking to buy accountancy practices. We will not reveal your identity as this stage. This personalised approach from us, followed by telephone calls, pays enormous dividends.

If you are a buyer, just contact us and we will ask you what you are looking for, the type of practice, in what area of work, location and expected fee income.

Whether you are a seller or buyer, we ensure our highly targeted marketing letters attract the attention of the right people. This method means you are much more likely to meet with success than through a scattergun approach

Yes, we are a phone call away and can come and see you at your office or meet you in a convenient place. We will listen to what you want to achieve, either soon or in the future and help you clarify your options. We make no charge for this service. Even if you are just exploring your options, do talk to us first.
No, we deal with buyers and sellers all over the country. Often, a buyer will want better geographical coverage – their main office may be in Cornwall and they want to extend their reach to Carlisle. A seller can be in the north of England and we find a buyer based in the south.

Sometimes, a local seller may attract more local interest but in this age of larger practices wanting to cover every part of England, our buyers and sellers come from all the country. Your location makes no difference at all to us (apart from the hours it means we spend on the motorway).

At Draper Hinks, we believe that both parties must be the right fit. We are proactive in our search, going to great lengths to find the practices that have the right ethos and would make a good fit with yours. The type of work done, the profile of your client base, your location, staff and fee income are all important criteria in deciding who to approach. Using our specialist knowledge of the market for accountancy firms, we will find the best possible practices to approach. Our expertise in target marketing is highly successful.

By understanding your business, we can take all the factors into account and find you the right solution to achieve the outcome you want.

It is important for us that both parties are happy to proceed to a final agreement. There is no point in introducing you to the wrong type of buyer. If we couldn’t be impartial, very few of the agreements we broker would go through, Draper Hinks wouldn’t come so highly recommended, nor would we have so many satisfied clients on both sides.
The buyer pays the broker a percentage of the sale price. If there is no final agreement, there is no fee.
Unlike most commercial valuations, it has become convention to value accountancy practices, especially smaller practices, by applying a multiple of sustainable turnover. This is on gross recurring fees, usually from annual compliance type of work. Non-recurring special fees can also be taken into account.
It varies but £1 per £1 of fee income is probably the average. As it is a sellers’ market, the value of your accountancy firm may be worth more. At Draper Hinks, we recently negotiated a sale at £1.25 per pound of fee income. The selling price will depend on a variety of factors, such as your size, turnover, client base, staff and location

Even in these times of recession, there are still seven or eight buyers to every seller.

If you are a seller, we will do everything we can to maximise a good income multiple for your GRF, while ensuring it is fair to the buyer (and therefore more likely to be agreed).

Yes, you can sell a block of fees. This might be a group of individuals, clients in a particular business sector or those with more complex demands. You must ensure your systems show they are profitable, will not leave or return to you immediately (this will be specified in the contract) – but there is no reason at all why you cannot sell a block of fees. In fact, blocks of fees are in high demand by buyers.

Selling a block of fees ensures you still have some income, while benefiting from a sale. You should then be able to sell your remaining goodwill in the future.

Payment is usually made in two tranches for smaller accountancy practices, with 50% up front and 50% usually made on the first anniversary of the sale.

For larger practices, of £150,0000 or more, you can usually expect to be paid in three tranches: an upfront fee on completion and the balance divided in two equal trances on the first and second anniversaries.

Clawback is a clause in the sale agreement. If the buyer loses fees in an agreed period of time, normally one year, this clause entitles them to deduct a percentage of the remaining balance to be paid to sellers.

If the buyer claims under the clawback clause, the seller usually has the right of discovery to see the appropriate files and even to speak to the client, to ensure the loss is genuine.

The clawback clause is one of the more complex areas of the agreement and requires deep understanding and expertise to ensure it is fair to both parties and that both the buyer and seller understand what the implications are for them. Your solicitor can advise on an appropriate clawback clause for your needs.

Yes, even the smallest practice is worth something, so don’t just close the office and retire. Even if your turnover is below £50,000, you can still find a buyer. There are more buyers than sellers, even in today’s climate. In fact, by far the greatest demand is for small practices and blocks of fees.

Recently, we arranged the sale of one firm that was a one-man set up with a turnover of below £25,000. Other brokers had turned him away, saying he was too small to sell and no-one would be interested. We found him six potential buyers within weeks and he then had two offers on the table. He chose the one that was the better fit with his business, which was not the higher offer.

If you are thinking of retiring or just giving up, talk to Draper Hinks first.

The quickest sale we have dealt with was agreed within a week. However, on average, it takes six to nine months.
For obvious reasons, December and January are not good times, nor are July and August, because of holidays. We suggest the best times of year to sell or buy are mid February to the end of June and September to early November.
It is a seller’s market so, to some extent, you can dictate the terms. You can state that it is a condition of the contract that fees are not increased, or increased only by a modest amount (e.g., by inflation) in, say, the first year. It is in your own interests to do this to ensure clients stay with the buyer if you have the usual clawback clause in the contract.
We do recommend a capital sum, and this is far more usual. Earn out, where the profits of your firm are used by the purchaser to buy it, is far less common.
Anonymity is vitally important during negotiations. If you advertise your accountancy practice for sale or a broker does so on your behalf, it doesn’t take a genius to work out who you are. It is one reason why we do not advertise.

It can also be detrimental to the sale and your selling price, as once the rumour mill has started, it is hard to stop. Clients and staff may hear it and start to look elsewhere.

It is one of the many advantages of using an experienced broker like Draper Hinks. We will keep your identity a secret until you authorise disclosure. We also ensure the buyers are serious and financially able to make a purchase. We will arrange for you to meet a number of potential purchasers and wait for your instruction to allow us to reveal your identity to them. This is usually done a week before your meeting with the buyers.

You can add value by offering a wider range of services, for example, by meeting client needs for investments, insurance, pensions, payroll services or even business advice. You might also form alliances, or more alliances, with solicitors, banks, IFAs and estate agents. You could also instigate a marketing plan to attract new clients.

If you are thinking of relocating, an urban premises demands a higher price than a rural one. You might also consider areas of potential such as a redevelopment area, a new business park, an affluent area or an area with a lot of businesses. You should, of course, take account of how much competition is already in these locations. However, you should not overburden yourself with leasehold obligations.

Appointments are always arranged for sellers and potential buyers to meet in a hotel meeting room at somewhere mutually convenient. Unlike most brokers, we always attend the first meetings between seller and buyer, so they both have access to our impartial, expert advise.
It might but it depends on many factors, such as your turnover, client base (including client age, spread of clients etc) and sectors you deal with.

It is certainly the case that urban practices have a higher value but while an urban location can drive prices to the higher end of the norm, a rural practice can still be worth a good price. Indeed, we have seen an increase in people looking for a rural practice that could give them a better lifestyle than they might have in a town.

It depends. In some smaller, uncomplicated sales it is often unnecessary. As your brokers, Draper Hinks will have helped iron out any potential problems during discussions and at the Heads of Agreement stage. Larger sales may be more complex and we advise using a solicitor to ensure the contract is legally binding and fair.
The answer is yes but your executors do need to move quickly. You should leave them written instructions stating that they should contact Draper Hinks immediately, before your clients and staff find themselves new accountants or work. You should also make your wishes known to your family, if they are not the executors.

Do ensure you already have in place agreements with any partners in the firm as to what will happen should you die.

Yes, there are regulations called TUPE, The Transfer of Undertakings regulations (Protection of Employment Act 2006, revised 2008) which govern the employment of staff following the sale of a business.

Basically, the regulations state that the seller may not dismiss his staff to make the sale more attractive to a buyer.

A buyer must not make your staff redundant above his own staff or offer your staff a new employment contract that is worse than the one he or she had before.

It is normal for sellers to work for a few weeks after the sale to ensure a smooth hand-over. It is possible that the buyer may well want to keep you on for longer, full time, part-time or as a consultant. It is all open to discussion.
You could insist that the buyer also buys the freehold and/or lease but this is likely to detract from interest shown in your practice by potential buyers. While a buyer may well want the premises, it is advisable to market your practice with the freehold and/or leasehold as options rather than conditional.

Try and ensure you do not have a heavy liability concerning any leasehold. A buyer may want to service your clients from his own premises or will need a bigger office for future plans. If he doesn’t want your leasehold, you may be able to sell or sublet (but check your contract). Remember, if you have the head lease and then sublet, the landlord has the right to chase you for any unpaid rent if the tenant defaults.

In the case of freehold, it is a buyer’s market at the moment and is subject to the vagaries of the property market. You should seek advice and valuations from three local estate agents and investigate whether a change of use would be allowed and therefore affect its value.

The seller would usually collect his own debts. If the seller asks the purchaser to collect the debts, there is often a handling charge made for this, in the region of 10%. As for work in progress, there will be a cut off point where all the work done prior to the sale will be charged by the seller and any work done post sale will be charged by the purchaser. How this works in practice depends on the agreement between buyer and seller.
Yes, you should have PI Run Off Insurance. It is required by members of most accountancy practice institutes, usually for a period of seven years. This covers you in the event of any client claiming against you after you have sold your practice. Quite a few unqualified firms do not have PI Insurance, something that should be taken into account by all potential purchasers.
It is often one of quickest ways. Firms can grow and extend their geographical coverage, client base and fee income through the acquisition of other practices or blocks of fees.

Smaller practices wanting to buy as a way to grow may not have spare management resources or financial resources to acquire bigger practices. The acquisition of another small practice or block of fees can provide the solution.

Accountancy practices can also grow their client base by good marketing and PR. These days, you need a good website, with the right SEO words to achieve higher rankings on search engines.

A regular short blog and listings on local business sites will also raise your profile and therefore attract more clients. You could also network (at business networks, social clubs, charities, churches, etc) and form alliances with local solicitors, banks, IFAs and estate agents.

Where we have brokered the sale, both the buyer and seller will often nominate us as the appointed expert in the sale agreement. Since we have been involved from the beginning, we will have a very good awareness of the spirit of the agreement. Sellers or buyers can ask us to help solve any dispute at any stage.
No, not if we already have interested parties on our books.

If a seller asks us to do a mail shot for them, we charge a small fee to cover it, but no other fees.

If a buyer asks us to do a mail shot for them, we charge a small fee for this and a brokerage fee if the purchase goes through.

In our experience, the targeted letters invariably achieve enough interest to lead to more than one offer to consider. It is very rare indeed for our approaches to fall by the way. In fact, it has never happened. However, if it ever did we would immediately send out letters to our reserve list and continue to pursue every avenue for you. We promise to be proactive, doing all we can to help you achieve what you want.
You do not have to register or sign exclusive contracts with us, although if you contact several brokers, it can lead to a confusing, detrimental situation. If you want to sell or buy an accountancy practice, just express your interest by telephoning us on 01788 816440 or emailing info@draperhinks.co.uk, or by writing to Draper Hinks, 256 Alwyn Road, Bilton, Rugby, CV22 7RR.

As we are constantly dealing with the sale and acquisition of accountancy practices (the only profession we deal with), we may well have some firms on our books which would be suitable. We will also actively look on your behalf, approaching appropriate firms nationwide that may be on interest.

If you want to sell or buy, do contact us now, even if you only considering a sale or purchase in the future.