Accountants aspiring to run their own business might see buying an existing practice as a convenient fast track. For Eleanor Shakeshaft FCCA, it was her ticket to Australia.
‘Back in 2007 I had applied for a permanent residency visa in Australia and was trying to decide whether to come over or acquire a practice in the UK,’ she explains. ‘I had already built a practice and was contemplating growing through acquisition.’ A broker had convinced her that this was a good way to go for growth.
‘Buying a practice gave me a good starting point and the opportunity to hit the ground running’
Ready to move
Browsing the internet, Shakeshaft saw an opportunity to buy a practice in Western Australia that seemed too good to miss. ‘We were coming over for a holiday anyway, so I organised to meet the vendors and it progressed from there,’ she says. However, the process wasn’t as straightforward as she’d hoped.
Despite her qualifications and experience, Australian law required Shakeshaft to work under an existing tax agent before obtaining her own licence. The solution – to leave the former owner temporarily at the helm – gave Shakeshaft time to sell her practice in the UK and prepare for the move.
However, being so far away from the firm she was purchasing left Shakeshaft exposed and reliant on the integrity of the vendors. ‘Upon relocating several months later [in October 2008], I found the work was not being done as thoroughly as I would have liked,’ she explains. ‘To ensure proper procedures, I knew I had to charge more, which changed the structure of the business.’
Under her leadership the practice did grow, and in 2013 she purchased a second practice in Western Australia, merging the firms and eventually rebranding them as Your Business Accountants.
A way in
‘Buying a practice worked for me as it was my entry ticket into Australia,’ Shakeshaft reflects. ‘It gave me a good starting point and the opportunity to hit the ground running.’ She’s more mindful now, though, of the potential risk of taking on someone else’s history.
‘Having strong human capital can help the organisation to achieve business success’
So would she do it again? ‘If a business presented itself which was close in culture to mine, then perhaps I would talk to the vendor,’ she says. ‘I would spend a lot more time and effort looking into the full database and assessing which clients are there and would come over, and who I would enjoy working with.’
Regardless, there is no easy way to start, purchase or grow a practice. Each route requires dedication, knowledge, training and commitment to make it successful, Shakeshaft adds.
Her advice for those considering an acquisition is to ensure the practice is a cultural fit for your own professional ethics and standards, and also to ‘run the numbers, and be aware of the importance of really evaluating the potential of each and every client. Doing this will be the key to a successful acquisition.’
Talent, clients, brand
To assist other entrepreneurs considering buying an existing firm, Lawrence Chai FCCA, founder of Singapore-based 3E Accounting Group, founded online platform www.easybuysellbusiness.com in 2018.
‘I was determined to help others in Singapore to sell and buy businesses quickly, effectively and efficiently in a safe, one-stop portal for all,’ he says.
His top tip for buying a practice is to focus on talent. ‘Having strong human capital can help the organisation to achieve business success and create value through service delivery and client retention,’ he explains.
Chai recommends evaluating the talent within a prospective acquisition by speaking directly with individual staff. A workforce of employees with strong mental aptitude, good behavioural traits and innovative thinking abilities is a great starting point, he says.
Other important elements for a buyer to look for are a well-established client base and a strong brand reputation, which is key to the firm being seen as more credible and responsible by its stakeholders. ‘Reputation is of utmost importance because accountancy firms play a vital role in ensuring statutory compliance and high-quality corporate reporting. In today’s technological era, the easiest way to check a company’s business reputation is to check online customer reviews.’
Accountancy firms with an established online presence can also be good businesses to take over, he adds. ‘Having a website and social media accounts enables a firm’s digital marketing to become visible and reach a wider audience more effectively. This is a source of competitive advantage against traditional accounting firms and industry peers.’
Acquisition is an excellent way to grow, according to Steven Fine, managing director of Growth Focus, an accounting and financial planning, business brokering and M&A consultancy with offices across Australia and in the UK. ‘Organic growth is getting harder due to competition and the real costs of finding new clients,’ he says. ‘If you’ve got good systems and resources, there is certainly the opportunity to scale up and make the business more profitable.’
‘Don’t be afraid to walk away if a deal doesn’t meet your specifications’
Before starting your search, Fine recommends having your financing in order.
‘Be clear that the financing is going to come through – there is no point going through all the due diligence if the bank says no,’ he says. As there is currently a strong demand to acquire practices, he continues, many vendors will want to know financing is not a condition for completion.
Then, look for a practice or client list that fits your vision. ‘The type of advice being given, the services they provide – if these are not in sync with your business, then it’s unlikely to be a good match for you.’ Tools are available to assist with this, Fine says. ‘Growth Focus, for example, has a buyer specification form which helps articulate what type of acquisition will suit and, as importantly, what type of acquisition will not work for a purchaser.’
Price isn’t all
In Fine’s experience, most sellers are motivated by factors other than price, and will rate those in different order of importance.
‘It’s not always about the numbers,’ he says, ‘Considerations for vendors could be their clients, staff, transition, terms, and whether or not the business location will be moved. Therefore, initial questions should always be about the vendor and what they are seeking, rather than going straight into the finer details of the business.’
As an acquirer, if you have any non-negotiables, state them early, as this can save all parties a lot of time and helps qualify or disqualify your interest as an opportunity that will progress.
To gauge the fair value of a business, market data is important. Comparing, for instance, sales results over the previous five years, based on indicators such as practice size and location, is a reasonable way to proceed.
Finally, while it’s exciting to see your future prospering though acquisition, don’t let fear of missing out cloud your judgment. ‘Following a formal process and doing correct due diligence is paramount,’ Fine says. ‘And don’t be afraid to walk away if a deal doesn’t meet your specifications.’