We have been busy in 2025. There has been a steady number of vendors talking to us about not wanting to have to deal with MTD. We predicted this would happen but were half expecting the implementation date to be moved back again. There is still time for this to happen…
More people are working from home. Practices below around £150k turnover have typically given up their office and asked their staff to work from home. This has the obvious advantage of cost savings but longer term it can lead to staff losing their loyalty to their employer, looking to move for more money and thereby to a higher turnover of staff. With no office to have to deal with, a buyer may be more interested in buying these fees.
Having no office does not mean the vendor does not carry out face to face meetings. Some vendors will go to see clients at their places of work. However, there is a strong trend towards all meetings being carried out remotely, on Teams or Zoom.
If a vendor works 100% remotely then there is no restriction as to where the buyer can be located. Where the vendor has an office then, typically, we are restricted to finding a buyer within a tight geographical area, so the trend to remote work opens up a far greater area for us to find a buyer in, resulting in there being more buyers for the vendor to meet.
A lot of buyers like to put their clients on monthly payments either standing order or direct debit. It can help greatly with cash flow. But when it comes to buying a practice with monthly fees then due diligence can be a bit tricky. The buyer will need to know where in the accounting cycle each client is. At the point of completion, has the client paid in advance of the work being done or is the client in arrears? This will make a difference to what and how a vendor gets paid. Vendors must keep very good records as to when all clients started paying monthly.
It is becoming more and more common for buyers to outsource their work abroad, primarily to India. In theory this gives the buyer the opportunity to have unlimited ability to expand. Not all vendors like this. This year we have experienced a number of vendors that have turned down good offers due to the outsourcing of work. Something for a buyer to be aware of.
We have had a couple of offers received that stated – if retention was below 80% after 12 months no further payments would be made. When a practice is sold, the vendor has no say in what happens post sale. The vendor is totally reliant on the buyer to look after both clients and staff. Where we have had these offers put forward, they have always been rejected. So, as a buyer don’t do it!
Valuing an accountancy practice is a very subjective exercise. This year we sold a practice where we had three firm offers. Offer No 1, a one off payment, with no clawback, at 0.3 x fees. Offer No 2, a one off payment, with no clawback, at 0.85 x fees. Offer No 3, 1.1 x fees paid in 2 tranches over 12 months. The vendor accepted Offer No 3. But it shows how different the offers can be for the same fees, in the same place with the same vendor. Go figure!
Nicola Draper – Managing Director