Is your practice a saleable asset?
Probably yes.
All the accountants we meet are working towards an exit at some point hoping for enough capital to retire in comfort or move on to something different.
The classic valuation formulae are 0.8 – 1.6 x annual recurring revenue with much of the consideration retained for as a long as it takes to see client renewals happening, or not, and an adjustment made accordingly. And usually, the outgoing practice owner also must continue working throughout this period to ensure the revenue flows.
The final revenue multiple will be determined by this and by the inevitable due diligence exercise that looks closely at the quality of the clients, retained earnings, margins, renewals, trends, team, automation.
Many worry that the nature of accountancy work may have changed so much by the time they reach retirement that the business they have today will not be relevant tomorrow. So, they share these concerns with us, testing whether our experience is that the market is moving towards extinction or a different array of services.
“Can they continue as now or will change happen faster than my retirement date?” They wish to know.
Not uncommonly they also say…
“I know if I don’t change, I’ll be gone in five years. But how?”.
We all know that the ‘end of compliance’ warning is so well-rehearsed as to be not worth discussing here. But we can say for sure that things are changing as we speak with new software arriving that does more work that accountants used to do, whilst government keeps increasing its compulsory online connection with businesses.
Will these trends do away with accountants?
No.
Will they change what accountants do?
Yes.
How?
Accountants will become more diagnostic. Businesses will turn to them when the online advances either cause a problem or fail to solve one. So, accountants will be smarter, higher value, able to do what the software and the business owner can’t do, which is to…
Think.
The intricacies of the Finance Acts and HMRC rules are such that no software will ever be smarter than the trained accountant brain which will be deployed at a higher level of working than that which is needed for basic compliance.
The work will become more demanding, better paid and more fun.
But how does a practice get ready for it? How does the owner reorientate for what’s coming, before other practices see the light and start taking the new market?
It starts with pivoting from a past to future focus.
If the business owner’s accountant is already thinking about his / her future in all they do, the pivot has already begun. The trick is to be aware of the ambitions, the problems and the struggles along the way and that comes from the relationship.
And the relationship comes from taking a personal interest in the client, at the human level.
During Runagood® training sessions it emerges that at least half of accountants know nothing eg “all I get is a box of files once a year, or an access link to their online bookkeeping. I turn the work around, send it off for signature, submit it, render a bill, end of…”
That level of relationship is quite inadequate for the highly rewarded thinking accountant of the future, because that’s what the software is already doing at a fraction of the price.
So, we teach conversation skills: active listening; give and take; summarising; mind mapping, to build a complete picture of the client as a person and then as a business. The two are intertwined, the business being an expression of the individual who shapes it and vice versa.
This leads into discoveries about clients, which have included: shares in other businesses that need a better accountant, influential relatives, offspring that want to train for accountancy, impending business sale bringing juicy fees, business problems and ambitions that need help.
This is the springboard to diversified services because by establishing personal needs, pain points, ambitions through shared confidences, trust grows that the accountant understands and can help.
To do this needs a toolkit, so whatever the uncovered problem or ambition, there is a process that can be applied which will lead to a solution. And thus armed, the accountant of the future, emerges, billing twice as much per client and building a practice that services all the needs of all the local businesses, taking them into the future.
And who wouldn’t pay a handsome price for such a business?
But what are these additional services?
Well, it’s business consultancy added to accountancy. A unique blend of the abilities to find out where the business is now, where the owner wishes to take it, the obstacles, how to overcome them and the financial skills to keep the permanently rolling project on track. In other words, a full service from inception to exit that means clients never need to go elsewhere to build a great business.
And through automation keeping the pricing affordable yet profitable.
That will be the accountancy practice of the future.
By Duncan Collins
Founder of Runagood.com Ltd