All posts by Rick Harrison

I’ve been looking at the April 2011 Journal of Accountancy and the article “Survey Highlighs: Emerging Tools for Firms of All Sizes” interested the “broker in me”. Surveying a bit over 2,900 firms, the top three technology uses were: 1) Time and Billing Software, 76%, 2) Use multiple computer screens, 71%, and 3) Have an active/maintained website, 66%.

Here’s where the Perception part comes in. If you’re selling your firm (or just promoting it to potential clients), how do you think you’ll be perceived if you don’t have these in place?  Let me set aside the geek in me for a moment, and not address how many monitors litter your desktop. Let’s just concentrate on items 1 and 3.

The last, an active/maintained website is probably more important to potential clients. Remember too, the key word here is maintained. If you haven’t updated your website it will show…and not favorably. Potential buyers will also get a “sense of you” by looking at your website. Wouldn’t you rather they perceive you as on top of the technology issues? That’s the sort of thing that helps support any type of premium you might be asking for your practice.

I’ve saved the best for last, Time and Billing Software. You may be surprised how many practitioners we come across who expect to sell their practice for a premium, yet are unable to extract the most rudimentary data about their practice. In short, they aren’t very good at running a business…just telling others how to run theirs, I suppose.  It’s not necessary to be on the bleeding edge of technology. However, a well run, efficient practice that employs and uses technology will be able to command more of a premium when it comes time to sell.

Comments (0) • Posted May 11th, 2011 at 8:06am

It’s not always easy to tell if what a person says is accurate. To a point, we have to accept what we’re told…take that “leap of faith”.  Once upon on a time, when I had a CPA practice, I knew that the clients really couldn’t judge whether or not I was a “good” CPA. All they knew was that I had the certificate and, if they went with me as a client, they would soon enough find out if what I told them was true, both about me and about my practice.  We’ve had a couple of blog posts about Brokers, but here’s a little parable which I thought you might enjoy…a Devil of a Time.

A man died and went to heaven. After a length of time in utter tranquility, he expressed out loud that he was a little bored. Immediately, the devil appeared and offered to show him around his place, no strings attached, of course. The man said, “OK, I’ll take a look”.

So, they took the express elevator down below where the man was absolutely amazed. There was singing, dancing and absolute merriment. Everywhere there were tables of fine food and exotic (but tasteful) entertainment. His response, “Wow, I didn’t think it would be like this. Sign me up!  This is where I want to be.  The devil said, “In all fairness, I want you to think this over. So, we have a three day waiting period.  If you still want to join us, just give an out loud expression of your interest and I’ll come and personally pick you up, have you sign a little paperwork and bring you back. How does that sound?”

Well, three days later, the man made his decision. He’d had enough of the quiet, the peace, and the tranquility. He wanted a little merriment. As promised, the devil appeared, had him sign on and took him down below.

Once there, the man found nothing but wailing and weeping, large fires making everything very hot and a gray overcast that looked as though it would never go away. In short, the whole scene was a real downer.

“What happened?” he asked. “Where’s the happy place you showed me three days ago?” The devil replied, “three days ago you were a prospect, today you’re a customer.”

The moral: Be careful of what you think is being promised to you.

Comments (0) • Posted April 26th, 2011 at 8:30am

Probably our biggest competitor is the DIY FSBO…that’s Do it Yourself, For Sale by Owner. Hey, if that rocks your boat, I understand. But first, let me tell you my story…you knew that was coming.

I had a CPA practice in San Jose for about seventeen years and, quite simply, got burned out. I didn’t want to do it anymore. I was sure I could find a buyer. It really didn’t have anything to do with saving a broker’s commission. I thought I would contact a few of my CPA buddies and give them a pretty good deal.  Oh yes, this was the truly old school approach: Here’s my practice, pay me 20% of collections a year for five years, and we’ll do it on a handshake. I was okay with that approach.

Unfortunately, the three separate buddies I approached didn’t really have an interest in my practice. By the way, it was pretty much a tax practice with a bit of bookkeeping and write-up. My rates were decent and, well, it was an okay practice. Why didn’t they buy? I don’t know. Maybe they thought my clients would be reflective of my personality. That could scare some people. Maybe I saw the practice through rose colored glasses. I don’t know.

Anyway, my office mate had just sold her practice through John Ezell at ProHorizons in a fairly short amount of time. So, I called John and three weeks later I had the practice sold. This was in July of 1999. It was an earn out over three years with about a 25% down payment. Now remember, I had no allusions about what I would ultimately receive, but I got what I was looking for: The sale of my practice at a fair price.  John actually had buyers who were looking for practices to buy, and he knew they would be interested in my practice.

Long story short (which means it’s already too long), I went off and did some other things for about five years and then joined ProHorizons as a broker in 2006.  I like what I do, and, more importantly to me, enjoy and respect the people and company I work with and for.

Comments (0) • Posted October 18th, 2010 at 10:26am

Whether it’s after next tax season, or five years from now, there are some simple steps you can take to make your practice more valuable to potential buyers…and you.  Over the years, I’ve looked at a lot of practices and there are common threads through most of them that keep the eventual price paid less than spectacular. The rules are simple, and, despite what you think current market conditions are, will help you to take away more money in a sale or merger.

First, raise your fees. I know: “The economy sucks.” “My clients are suffering.” “I’m already at the peak of the local billing scale.” Except for that last one, I’ve heard the others before. At the end of the day, you’re in business to make money, not to support your clients through reduced fees.  Let’s say you’re doing $200,000 per year and you raise your fees 10%. That immediately drops $20,000 to your bottom line. I know, I know, you’ll lose some clients. Let’s say you lose $20,000 in fees. Doesn’t that put you in exactly the same position you were before, except that now you have more time to do other things? At a hundred bucks an hour, you now have 200 more hours to play golf, smell the roses, or whatever. Long story short, increase your fees to current market rates and you’ll demand more of a higher price for your practice. You’ll also make more money in your practice.

Second, get rid of the dead weight. That means “D” clients. You know who they are. The ones that will probably go away if you do raise your rates (see above) and the ones that are more trouble than they’re worth.  You’ll be left with the more loyal and premium clients. You’ll have a practice that is a lot easier to sell and get a higher price for. That dead weight can also apply to personnel. I’ve also seen the practitioner that just can’t bring herself to let Good Old Joe go, even though Joe hasn’t pulled his weight around the firm in a long time. Do yourself a favor and let Joe go (probably after tax season, though).  Both of these “triages” will garner you more money for your practice when you sell.

Third, it’s the 21^st century. That means bringing your practice up to date. Don’t be “pennywise and pound foolish”. You may not be totally paperless, but you should be working toward that goal. If you’re still doing your write-up work in 13-column ledger books, there’s probably no hope for you. You should be scanning documents and utilizing the newer software suites that are out there. If you’re upgrading on a regular basis, then the learning curve won’t be so steep.

So, these are the three simple fixes over which you have control (location, probably the biggest single factor, you can’t control).  These are the areas where can you implement short term changes that will maximize the value of your practice.

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Comments (0) • Posted September 10th, 2010 at 6:10am