How to increase the value of your practice

Do you have an exit plan?

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Many practice owners get a nasty shock when they have their business valued. Despite working for years – decades even – to build up the practice, despite having long-standing clients and a loyal team, it may not have a high value for a potential buyer. The low valuation can mean that they are unable to exit at the time they originally planned.

Without actively working to increase the value of your practice, you could find yourself in the same position.

To raise the value of your practice, as with planting a tree, if the best time to do it was 20 years ago, the second best time is now. Then when you’re ready to sell, you’ll be in the best possible position.

Most practices sell for roughly 1 x GRF (gross recurring fees), but by the time the earn-out clause is complete it’s likely to be even less. Other factors influence the value too – your client base, the services you offer, how your clients pay you, the technology you use. And most importantly, whether your practice can survive without you.

The more you can do now to positively influence those factors, the higher the value will be when you come to sell.

Five ways to increase value 

  1. The biggest positive impact on the value comes from making yourself dispensable. The less your practice relies on you, the more value there is for the future. Start delegating to your team, training them, upskilling them. The benefit of this, of course, is that running your practice actually becomes more enjoyable because you aren’t doing everything yourself. And your team will be more engaged, more motivated and more capable, so they’ll benefit, too.
  2. Key to the above is putting great systems in place. A fully systemised practice makes it so much easier for the buyer to take over the business with minimal disruption – and they will pay a higher price for that.
  3. If you haven’t done it already, move your clients to paying by direct debit. An existing recurring income reassures the buyer that income streams will continue during and after the sale.
  4. Update your technology. The buyer will be looking for a practice that will move into the future with them, not one that’s stuck in the past.
  5. What added value services do you offer? A solely compliance-based practice has less value than one offering advisory for the simple reason that these types of services are more profitable. And who doesn’t want to run a high profit practice?

Depending on where you are now, making these changes might seem daunting. Start by being clear on what you want to achieve. Do you want to retire at 50? Are you planning to travel the world when you sell? Or start another business? Work out how much you need. Once you have a figure to work towards, you can put a plan in place to make it happen.

Shane will be sharing more strategies for building a high value accountancy practice at the AVN Practice Growth Masterclass.