Covisory Deskside Chat - NZ Chartered Accountant Market Update for Practice + Fee Blocks
Covisory Partners Director Nigel Smith provides a quick update on what is happening in the CA market around practice and fee block sales.
Firstly there remains strong demand for purchasers to buy either fee blocks or smaller practices to bolt on to their existing practices. We are not seeing a lot of new people coming into practice but we are certainly seeing other practices being inquisitive. Who is leaving the industry well it is typically two groups its practitioners past their retirement age who probably ended up working through COVID when they may have otherwise retired. However more interestingly we are seeing a number of practitioners in their early to mid 50s getting out ahead of time wanting to do something different or to repurpose their life. Some of these practices are good in the terms of fee quality as well.
Prices around fees are still at least $1 for a $1 of fees based on what transfers to the purchaser. That risk is one that the purchaser is not prepared to take unless there is a significant discount to the purchase price so generally it is only based on what fees transfer.
We have sold practice fee blocks from $300,000 to $600,000 and entire practices from $600,000 to $3m. So there is plenty of demand out there but if you have got a larger practice allow more time. If you are trying to sell your practice there is a few things that you can do to maximise the value. Obviously if someone is going to pay you $1 in the $1 to buy your fee base they don’t then want to find they are going to invest another 50c or 60c on top of that because the clients aren’t managed well and the lock up that your clients are used to is horrendous. So you need to make sure you get your debtors down and tidy up your work in progress well ahead of a sale. A purchaser won’t see value in your clients if they are very slow to pay you. The next thing is to make sure you are increasing your charge out rates particularly in these inflationary times. That means pushing up the bill value that you are sending out, make sure you regularly review your pricing and push your fees up and your rates.
Xero buyers are the typical buyers in the market the younger practitioners looking at buying fees typically are on Xero. So if you are not on Xero remember that a buyer is going to want a discount for the fact that they are going to have to convert your MYOB or other system clients across to Xero. However just because you are on Xero don’t think its all great and easy money because obviously your chart of accounts and accounts formats are going to be different to what they are using. So the consequence of that is that you need to make sure that if you are on Xero you have got reasonably clean set of accounts and chart of accounts.
The demand does remain strong so if you are considering selling now is a good time to go so as always if you are interested in selling or want an idea of what your practice might be worth have a chat to us. There are a lot of factors that buyers take into account and every sale is different but there is certainly good opportunity to get out and if you are looking to buy there have been some good fee blocks and practices around.
Contact our team today to discuss how we can assist you with your CA Practice or Fee Block Sale.