Selling your accountancy business can be a difficult and daunting process: how much should it sell it for? How flexible should you be? Should you hold out for a higher offer?
We look at one broker’s experiences selling an accountancy business online through BusinessForSale.com to help give you an idea of the potential challenges.
The broker told us that in this case the business seller initially refused an offer for R880,000, only to later accept R700,000 from the same buyer. But it wasn't a case of a weary seller begrudgingly giving up after an exhausting, protracted process. The deal was done within two months of placing an advert on BusinessesForSale.com, whereas the sales process usually takes at least six months, and can sometimes take a year or more. In fact, the eventual buyer was the first to enquire. Although the price was lowered the business sold fast and it still sold for more than the seller’s initial expectations.
The vendor, who was emigrating to Australia, was pleasantly surprised at the speed and volume of the responses to her advert. In fact, within a week of advertising the business she had met with an interested party.
Perhaps this immediate interest heightened her expectations of what she could achieve price-wise. When that first meeting quickly led to a hard offer, she rejected it, hoping for further interest and bigger offers. However, after receiving a further four written offers, all much lower than the original offer, she eventually went back to the original interested party and accepted a reduced offer of R700,000.
Although R700,000 was lower than the original offer, it did actually exceed the seller’s initial expectations. The broker told us "I had warned her initially that her business would sell very quickly. Initially she only wanted R660,000 but I assured her she would get more and she did eventually".
When asked if they would have done anything differently, the broker replied "she would take the first initial offer”. Clearly commissioning an accurate, independent valuation of the business, and trusting the expertise of an experienced valuation expert, is imperative.
It's a game of stick or twist; you cannot decline an offer in the assumption that if you later fail to receive a higher offer, then you can return to the original high offer.
By that point the buyer who made the offer may have moved on to another opportunity and you may not find another willing to pay as much.
In regards to having a rough idea of the value of your own accountancy business, buyers normally offer 50% of the annual turnover, with half paid initially and the balance over a year.
And our broker had some good news for those looking to sell; "small accounting practices are very sought after, mainly by bigger firms wanting to buy a (block) of fees and bolt it onto an existing client base". So, do get good advice about how to sell and value your business, and be optimistic about your business’ selling potential.