Hi all,
Is anyone able to tell me how to find out how much a client is worth?

I have been ofered the chance to buy a few clients from a fellow bookkeeper who is retiring. They are all small business annual accounts for sole traders or partnerships. 

I have no idea where to start calculating a reasonable figure so if can point me in the right direction I would be really grateful.

Hi Alis

Bookkeeping and Accounting practices are normally valued at 1 - 1.2 x turnover although this figure can sometimes be slightly less.

Hope this helps.

Kind regards

Zöe

Hi Alison,

be careful though as something is being sold here to which the retiring bookkeeper has no physical rights. Therefore you may be sold a client but the client may decide that they do not wish to use your services.

In such instances the price paid should reflect the clients that are still with you after a period of one full year.

This sounds as though you're being offered a few clients rather than the entire practice so I would assume minimal referral fee then a negotiated fee payable 12 months hence based on the number of retained clients.

Shaun.

Hi Zoe
Thanks for your quick reply!
That is really helpful. I will have to sit and work out some sums.

best wishes

Alis 

Hi Shaun
Yes, I was thinking along those lines myself.
How do you calculate the worth of something when you have no guarantees.
I suppose all you can do is work on keeping most of the clients for the first 12 months , then anything above that would be a bonus.

As the starting figure I have been offered is less than an average 1 x turnover I hope it would be fairly safe if I decide to go ahead.

Thanks for the advice.

best wishes

Alis

Hi Alis

There is normally a lot of negotiation involved. Usually, an arrangement is worked out whereby there are three payments (eg 50%, 25% & 25% or 40%, 30% & 30%). The first is a downpayment, the second after one year and the third after two years. The second and third are based on the retained clients after that time. This way there is an emphasis on the seller to help the buyer to retain clients and not to sell clients that are likely to leave.

You can pay a one off fee but this is usually reflected in the reduced price of the practice.

Kind regards

Zöe

Just had one more thought as well.

The bookkeeper is genuinely retiring aren't they?

Just thinking about your line that they are selling you a few of their clients rather than their entire portfolio and it's rang some warning bells in the back of my head.

Be careful this isn't just someone trying to cut their losses on a few clients that they've had difficulty getting money out of.

Regardless of the fact that you are buying the clients you still need to do your own due diligence procedures for your MLR.

By the way Zoe, excellent info as always. thanks.

talk later,

Shaun.

Hi Shaun and Zoe

Thanks everso for some really useful advice.
You have given me plenty to think about and I will make sure I have my eyes wide open if I decide to go ahead.

best wishes

Alis