Published: 10 November 2020
I thought I would write this morning about choosing professional advisors. Accountants are traditionally amongst the most trusted professional advisors, and that gives me much comfort as I am a director of CBSL Accountants. We are also Chartered Accountants, rather than some of the other ‘flavours’ of accountant… yes I know vanilla might be the flavour you attribute to all accountants – ha ha! But Chartered adds a further level of trust, given the very high standards expected of members and firms, by the ICAEW.
Some of the least trusted ‘professions’ according to a survey by CV library included politicians as the least trustworthy, journalists in second and car salesmen in third. The results of the survey went on to say “It also appears to be a common theme that sales-driven occupations, such as car sales, telesales, estate agents and recruiters are largely disliked. Unfortunately, it’s just the nature of the trade. Being proactive in making sales can be perceived as being pushy, or irritating.”
It is therefore frustrating for me that my particular specialism, is Corporate Finance, in which role it is my job to buy and sell companies, and so I am apparently in a sector that is less trusted.
Despite always acting with integrity and following the values that we have at CBSL Accountants, the profession does get tainted by other firms, that are, shall we say, a little pushy! Which brings me neatly to Keith.
Keith is not his actual name: rather Keith is the name of a fictitious very naughty boy that I ‘went’ to school with. When Ollie was younger Keith was the boy that ate cake and couldn’t manage his vegetables, came home after the agreed time, and generally was a little monkey. Ollie never wanted to be like Keith! (As an aside now I have Saffron, I have conveniently remembered that I also went to school with Kerry, who was just as naughty as Keith). If you are called Keith or Kerry, it genuinely wasn’t you that I went to school with.
So, with anonymity preserved, back to Daniel(*)… oops I mean Keith. Sorry Daniel – best laid plans and all that…
Keith has written to me a few times in the last year… 23 times in the last 12 months if we want to be precise, and as a Chartered Accountant, I do. Keith would like to know if I have plans to sell the firm. Keith is quite persistent. Keith hasn’t really stopped to think what we do, and whether his firm can really help as much as he proposes.
Do I trust Keith?... not really if I am honest.
I have come across Keith’s firm before.
Keith’s colleagues told the owners of a local professional firm that they could sell their company on their behalf for a princely sum. They didn’t mention that the expected structure of the deal would mean that probably at least 30% would not be paid on completion and that the sellers might have to wait two years for the balance; if indeed they received it all. Naughty Keith & Co.
As a very broad rule of thumb companies sell for between 3x and 5x ‘profit’ (I will leave for another day, what constitutes profit, lest this article becomes longer than it should). Technology companies may well be higher. Strong management teams help take the multiple, as do recurring incomes that can be relied upon. There are a whole host of other factors.
Recently we made an opening offer on behalf of a client to buy Typical Shropshire Company Limited at 4x profit. The look on their faces was priceless – Unfortunately Keith had met them before. Keith had confidently assured them that 12x profit could be achieved! To be fair the directors of TSC Limited knew that Keith had rather over-egged the pudding, but when another local firm, General Practice and Co, proposed, a still highly optimistic, 8x profit the sellers felt they were in good hands.
Having trousered their initial fee, GP & Co, unsurprisingly couldn’t find a buyer. Eventually, we acquired TSC Limited for 5x profit, but as you can imagine with expectations set so artificially high, it was not easy.
As a corporate finance advisor, I believe that honesty, integrity and ethics generally, are paramount.
I won’t ‘call your baby ugly’, but I will be honest when I value your company. I will not try to flatter you with an inflated value in an attempt to secure a mandate to sell your company.
I will help you understand the costs of selling your business and the tax liabilities that you will incur, so that you fully understand the value that you will be left with. I will help you receive as much as possible on completion of the deal, and to understand the risks of deferred proceeds as well as the other minutiae of the deal.
I will care about you receiving as much as possible for your business. I will though respect that you want your company to continue after you have gone and you might prefer to take a lower offer rather than a higher one, and I will advise you accordingly irrespective of that meaning a lower fee for me.
If that sounds like the sort of firm that you would like to work with, then please get in touch: please don’t ask for Keith though!
Finally, some thoughts on trusted professionals…
My go-to book when helping professional firms is “Managing the Professional Service Firm” by David H Maister. My copy is yellowed and more than 20 years old, with side notes scribbled and dozens of sticky labels for reminders. Maister also co-authored “The Trusted Advisor” with Charles Green and Robert Galford.
My top three tips when engaging a professional advisor are: -
(*)PS: Daniel isnt his real name either