Working out book values of an accountant's books

[Nadz]

Hi all, I have a strange question.

My mother passed away a few weeks ago and she was an accountant. Now someone mentioned to me that I can work out a book value for her clients and if another accountant wants to take over the books they must pay me a portion of the book value for the set of books, like insurance I think. Now I have no idea what it is about or how that works. Can someone please tel me if it is legal and how it works or if I've got the wrong idea and misunderstood completely.

Thank you in advance.

[CLIVE-TRIANGLE]

Very sorry to hear about your Mom, Nadz. Losing a mother is a terrible thing..

I think you have misunderstood.

What the person was saying was you need to work out a price for the client "book". That will comprise of two components; the existing amounts owed by clients if any, plus the value of the repeat business. This could be the recurring fee income for a period, or.....

The period could be a year's fees or more or less. It is a negotiated thing.

The problem I have with your friend's suggestion is that it's not really yours to sell, and the value will have plummeted somewhat because your Mom passed away. As it stands, all the clients will in any event contract someone else.

Again, sorry for your loss.

[Dave A]

Effectively it seems what was suggested was selling the business (or should that be "practice") while there's still some value there.

Changing accountants is not as simple as just appointing someone else. So if someone steps in promptly and takes over the practice in a virtually seamless transition (particularly from the clients' point of view), a fair number of clients are likely to stay. If client needs start arising and they're not being addressed, the clients will have little choice but to start looking elsewhere.

One would hope that some sort of succession plan was in place though...
And certainly something the executor of the estate should attend to with some haste if your mother was practicing on her own and there is no-one tending to the client base at the moment.

[flaker]

One would hope that some sort of succession plan was in place though...
And certainly something the executor of the estate should attend to with some haste if your mother was practicing on her own and there is no-one tending to the client base at the moment.

I agree with Dave 100%. I was recently involved in the sale of my late brother's accounting practice. He had some 4-5 staff but "he was the practice". Somebody needs to move in quite quickly to maintain that client base, so that you also gain from a reasonable price for the practice

[KimH]

I am really sorry for your loss Nadz.

I would like to share a story with you.
Last year my friend and mentor passed away. He owned a small but successful SAIPA practice and at the time of passing had 3 employees. His death was unexpected and as such there was no contingency in place at all. The majority of his clients had been with him for over 10 years and one of the staff members started with him when he opened his practice. The family not knowing how to handle this contacted a few local practices in the hopes of arranging a sale as quickly as possible so that the clients would not be affected.
One practice made an offer, before making any firm offer or payment they swooped in took all the client files, computers and everything else deemed to be of value. After gaining as much knowledge as they could from the employees, the staff were 'let go'. Within days the all the clients were contacted stating that they were now taking over and inviting the clients to come and see them.
Once they had established contact with the clients, they then released another mail to the client base stating that due to some irregularities they were no longer buying the practice, the clients were however welcome to stay if they liked. I worked for the man for many years and we retained our friendship after I left, and I can tell you that he was the most honest accountant I knew - so this accounting firm not only stole his base, they added insult to injury by besmirching his good name too!
Moral of the story - if you do decide to sell to another firm, manage the process as much and as quickly as possible, meet with your mom's clients and don't just hand out pertinent client information without first having signed agreement in place.

Please let us know what happens.

[Justloadit]

That is where an NDA may prove to be a successful trump card. If a number of clients are contacted, it will be evident from where the information was derived.