What is owner dependency in an accountancy practice?

Owner dependency is the share of the firm's value that exists only because the owner is there. It shows up in five places: who the client deals with day to day, who prices the work, who reviews and signs it, who brings in new business, and who can access and run the systems. The more of those that answer "the owner", the less of the firm transfers when the owner leaves.

How does owner dependency affect what my practice sells for?

A buyer is paying for fee income that will still be there in two years, and owner dependency is the risk that it will not be. In this tool a score of 80 or above adds 0.15 to the multiple of recurring fees, and a score below 20 takes 0.20 off it, a spread of 0.35× recurring fees between the two ends. Those weights are Practice Group's own assumptions and are not drawn from market data. They are shown so you can adjust them.

How long does it take to reduce owner dependency?

Access, documentation and moving enquiries to a firm inbox can be done in weeks. Shifting client relationships to a second person takes a full annual cycle, because each client needs to have had a proper meeting with that person, in person or on a call. Getting to a position where someone else can review and sign off the work is the longest job and can take years if it involves recruitment or a practising certificate.

Is low owner dependency always better?

For sale value, yes. For a firm you intend to keep running yourself, reducing dependency costs money and management effort before it pays back. The reason to start early is that it takes 12 to 24 months to make a real difference, so it cannot be started once a buyer is already involved.

Does staying on after the sale fix owner dependency?

Staying on reduces the risk while you are there, and the dependency remains. A phased handover reduces the buyer's retention risk and often supports a stronger total figure. It also ties you into the business for longer and usually pushes more of the consideration into deferred or retention-linked payments. Reducing dependency before you go to market gives you the option of a clean break.

Owner dependency check for accountancy practices

Contents

Your working
Why buyers look at owner dependency first
How the score converts into money
The order to fix things in
Questions

Your working

Ten statements, each worth up to 3 points, so 30 points in total. Your score is that total expressed out of 100. A higher score means less dependency, so more of the firm would carry on without you.

#	Statement	Your answer	Points

What to fix first

Anything you scored 0 or 1 on is listed here, lowest score first, with the first practical step for each.

Send me this result

We'll email your score and the fix list to you, with a note on the order we would tackle them in for a firm your size. We will sign an NDA if you want one.

Why buyers look at owner dependency first

A buyer pays for the fees your practice will earn next year and the year after. In due diligence, the buyer works out how much of that future income belongs to the firm and how much is attached to you personally. Owner dependency is the name for the second part, and it is a major reason two firms with identical fee income sell for different amounts.

Dependency on the owner sits in five separate places, and each one needs a different fix:

Relationships. This is about who the client calls. If every important conversation goes through you, the client is loyal to you personally and may leave when you do.
Pricing judgement. This is about who decides what a job is worth. If your pricing rules exist only in your head, a buyer who cannot price your work correctly will either lose margin or lose clients.
Technical review and sign-off. This is about who takes responsibility for the file. For a sole practitioner it can be the hardest to transfer, because it can require a hire, a licence, or both.
Business development. This is about whether new work comes to the firm or to you. Referrers who know only you may stop sending work when you leave.
Operational access. This covers logins, licences, bank mandates and any spreadsheet that only you use. It is quick and cheap to fix.

How the score converts into money

The score is mapped onto an adjustment to the multiple of recurring fees used in our practice valuation calculator. These weights are Practice Group's working assumptions about how much a buyer allows for the risk of clients leaving. They are our judgement and are not drawn from market data. The weights are:

Score	Band	Effect on the multiple
80–100	Low dependency — the firm runs without you	+0.15
60–79	Moderate — a phased handover covers the gaps	+0.07
40–59	Average — the firm depends on you in specific areas	0.00
20–39	High — a buyer will allow for clients leaving with you	−0.10
0–19	Critical — most of the firm depends on you	−0.20

The difference between the top and bottom bands is 0.35× recurring fees. On £300,000 of recurring fees that is £105,000, with the fee income unchanged and only the organisation of the firm different. This work also takes longest, so it should be started first.

Worked example

A sole practitioner with £300,000 of recurring fees scores 12 out of 30 — a score of 40. That sits in the "average" band, so the effect on the multiple is 0.00 and the valuation is unchanged.

Over eighteen months she does four things: a manager is introduced as second contact on every client file and leads half the year-end meetings; the top five job types get written down as checklists; enquiries move to a firm inbox; and every system gets a second named user. Three answers move from 1 to 3 (+6 points) and four move from 2 to 3 (+4 points), taking her to 22 out of 30 — a score of 73, the "moderate" band, worth +0.07.

On £300,000 of recurring fees that is £21,000 on the mid-point of the valuation, and the same work frees up most of a day a week for her. Reaching the top band would add another £24,000. That depends on someone else reviewing and signing off the work, which needs a hire.

The order to fix things in

The fixes cost different amounts. Operational access and documentation are cheap and quick, and take a few weekends of routine work. Moving relationships takes a full annual cycle, because a client transfers once they have had a proper meeting with someone else and it went well. Pricing judgement transfers when you stop setting prices and start reviewing them. Review and sign-off costs the most, and if it needs a qualified hire it should be started several years before an exit.

If you leave all of it until a sale is close, the buyer values the firm as it stands, and there is no time for the changes to take effect. If you are within a year of going to market, do the cheap items, be open with the buyer about the rest, and expect to agree a phased handover.

How much of your practice depends on you?