We were reviewing a practice that was up for sale. There were a tremendous amount of positives associated with the firm such as the number of clients, the initial location and movability of the base.
But, the average tax return fees were at a commodity levels, less than H&R Block or Jackson Hewitt for individuals and businesses. So I struggled with a letter of intent. The owner was looking for a premium and I was thinking discount.
The owner had stressed that there was no pricing elasticity with the base. They were all seemingly at the edge which is why the billings were so low.
So we ultimately passed. Then almost immediately we found pout the practice was under contract. Surprised I re-examined my notes and computations. What had I missed or over looked.
While having lunch with a friend and getting caught up I explained the situation to them. First off they agreed with my initial assessment. That this firm was a compliance shop and not a “most trusted advisor” shop. The clients were looking for a deal and only a deal. This did not fit in with my client base or how I run my business. The fact that someone else saw value means that is fit better within their view point than mine.
So it always helps to get an outside opinion, even for one who is typically giving the opinion.