Growing pains when growing your practice

I had a call this week from a sole practitioner in the North of England asking me what the ideal size would be for selling a tranche of fees. Selling a tranche of fees is quite a common request that we get at Draper Hinks. I asked him to explain why he was asking me that question.

It turns out that he has a turnover in the region of £350,000 and wants to concentrate on his high end clients and release some time from dealing with the lower end fees. He had been told by another broker that £60,000 was the ideal size and then asked me for my opinion. I told him that I did not agree.

There is no ideal size. It depends on what a buyer is looking for. For ease of purchase and speed of sale, we can find buyers for tranches of fees from £20,000 to £100,000. If the fees are unencumbered ie if there is no office and no staff with them, then they are portable and buyers like this a lot. You do not have the added complication of what to do with the office and taking over a practice with staff in situ can add all sorts of complications with redundancies, changes of contract, TUPE regulations etc. A clean tranche of fees with none of these complications is welcomed by many buyers.

If you are looking to segment your client base into A, B, C and D clients where A clients are given more attention and pay you a higher fee, then it makes good sense to reduce the amount of time spent on the D clients. Some firms have Platinum, Gold, Silver, Tin and Bin clients. Never bin clients – sell them. If you think someone will not want to take them on then ask for advice – never assume what someone will want to buy or not buy.

Getting back to the sole practitioner: I was able to tell him that selling a block of fees up to £30,000 would probably mean that the purchaser would not have to borrow money from a lender in order to buy them. Some firms will have money set aside to be able to buy fees as and when they come up. But, in my experience most firms/individuals do not have the ready cash to buy fees above £30,000, especially sole practitioners that are starting out in practice. They are the ones that could most benefit from this size of fee portfolio but are the ones with little or no financial reserves. Often a sole practitioner will start off with a handful of clients, working from home and will barely be managing to make ends meet. They will need to apply for the funding to buy the fees. Banks, as you are no doubt aware, say they are in the market to lend money but they put so many things in the way before they will agree to lend, that at worst they take months to decide not to give you any money and at best they take months to say they will give you the money. It can be very frustrating for all parties concerned when having to rely on outside borrowing.

Our sole practitioner said that he was going through a process of identifying clients that he no longer wanted to keep.

His criteria for choosing which ones to sell were:-

  • Did he like them – if he didn’t – they were on the list to sell.
  • How big was the fee – below a certain amount – they were on the list to sell.
  • What work did the clients do – certain trades caused him to spend too much time on each client – so they were on the list to sell.
  • By doing this he was able to identify over £40,000 of fees that he wanted to “lose”. I was able to say to him that we had buyers on our books that would love to take them off his hands and offer him a good price for them. His practice is in a large town with plenty of other accountancy firms within a short distance from his office. Had his practice been in a rural area we may have found it more difficult (but not impossible) to find buyers for him. Typically the closer a seller is to a large number of other accountants the more offers will be made for the fees for sale.

    If you sell a tranche of fees and continue to be in business, a buyer will be nervous that you will approach the clients post sale. The sole practitioner said he would be happy to sign an agreement that stated – for a set number of years (usually three) – he would not have any contact with the clients he was selling and should any contact him in the meantime he would let the buyer know who they were and why they had contacted him.

    It has been known that some unscrupulous accountants will sell a tranche of fees – sign an agreement that says for three years they will not have contact with the client and then on the third anniversary they mail shot all the old clients to get them back again. This is not a good way to do business and does not enhance your reputation in the market place. But some accountants are not worried about reputation and are only interested in money in the bank.

    Our sole practitioner will get back to Draper Hinks in the New Year and we will be looking to sell his fees. He is growing his practice year on year and understands that when you are successfully attracting new clients of the right calibre then you can experience growing pains. Instead of taking on more staff he is going to sell the fees he does not want and in that way he will have more time to spend on his important clients that give him the highest return on his time.

    Never ask clients to leave – build up a bank of them and then sell them. You will be surprised who will buy what.

    Article written by Nicola Draper from Draper Hinks.

    To contact Nicola Draper please email her on