Transfer trust to ensure retention.
When selling your accounting business, you really have only one job to do... get your clients to simply keep doing what they've always done, trust you!
It will be of no surprise to you that on a daily basis I get asked this question, “what do you think my accounting firm is worth?”
My answer however could be a surprise to you, and it is always, “how well do you think you can transfer trust?"
Having worked with accountants buying, selling & merging for well over a decade now you may think I’d have a fancy spiel, a silver bullet valuation suggestion or a firm answer for these enquirers and their question. I don’t.
Truth is that until we do the work, nobody will know what your accounting business is worth and importantly, to whom. Which is why we have a transaction readiness process that helps establish the likely market perception on valuation and price of your firm.
But the one thing I know for sure right off the bat is that if you don’t successfully transfer trust (and I’ll explain what I mean) the upfront valuation or agreed sale price will not be fully obtained as you’ll blow up your retention clause.
So, what am I talking about?
Well, what I have come to believe over my journey is the actual asset being sold, the goodwill of an accounting business is trust and by this I mean the trust your team and clients have in you (the Partner(s)).
Principles (Partners / owners) of accounting firms overestimate their assumed "trusted advisor" status as being personally tied to themselves. It's not. It's tied to your clients' naivety around what you actually do - I’m talking at the core. Clients don’t really know what tax compliance actually means, entails and its statutory requirement - the one thing that makes the industry so lucrative and recession proof (and as we've now seen, pandemic proof).
The client doesn't think you're the guru their repeat custom (loyalty) has led you to falsely believe.
The client does however, and deeply, trusts what you do for them, the peace of mind you sell them being that they’ll be all square with the ATO. They believe, trust in, what you do for them in and around paying the right taxes at the right time. They don't know or care how you do this, they just trust that it's being done and correctly. You are the one that is delivering a service (a process) to offer this trust to them, and it's the result of this service that they are looking for. They don't care how or who got them there, they just want to arrive at a tax compliant destination.
So when it comes time to sell your accounting business it's my belief that what really matters is your ability to transfer this trust, this peace of mind outcome, the compliant destination. And this is achieved by effectively communicating to your client base that they should continue to trust you and believe you when you say that you’ve found a transaction party that you trust and all the client needs to do is to continue to trust you as they have during their life as a client of yours.
Put simply, your message to clients during your transition is, “you’ve trusted me for all these years, trust me now and know that I’ve made the right decision, have taken the time to do so and believe I’ve got the right transaction party that will continue to deliver services as I have.”
Of course, if your business is a crap business then we have other things to do in the 'ready for sale' process, but assuming you're in good shape and indeed have a saleable business the only goal that matters is "retention".
You’re selling the transfer of trust and retention is your measure of how well you've done so.
And although the transition process is not always easy, there is one simple requirement - convince your clients they can trust the new owner, as they trusted you, to get the job done... to deliver that peace of mind, to arrive at that destination where they are comfortable that their work will get done and it will be correct, that they are square with the ATO.
That's it. Simple.
This I believe is the task when selling and where your business value sits and ultimately what your firm will be worth in the end.
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