Do you have an exit plan?
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.
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.