One strategy of some of the most successful business owners is to build a business from nothing, grow it, and sell it or have someone else run it. So how does it work and why would someone want to do it in the first place?
Why "Flip" Businesses
The process of starting, growing, and selling a business is called"flipping" it. Start with a business that is in demand, such as Accounting and Bookkeeping services that has a wide client base. You then find clients to build up the business into a profitable venture. Finally, sell the service to investors and cash out. Let’s see why this can work.
How Much Is an Accounting Service Worth?
To understand whether this strategy is appealing to you, you need to know first of all what an investor will pay for an Accounting service. On average, you should be able to sell your Accounting and Bookkeeping service for the amount of client billings you would have in a 12-18 month period. An average small-business client will pay you $300/month to service their Accounting and Bookkeeping needs. So, if you get up to 20 clients, you are billing $6,000/month. This means that you could sell your business at the 20 client level for between $72,000 and $108,000.
Try our Client Income Calculator.
The "Flip" Process
Let’s compute how much money you can make using the flip strategy. The graph below illustrates money collected each month as you build the business then sell it.
1. Start the Business
You will start the business from scratch. Make sure that you have a firm understanding of small-business Accounting and Bookkeeping, the kind of bookkeeping that the Professional Bookkeeper™ (PB) program teaches. Beyond the basics of Accounting and Bookkeeping, the PB program teaches you to run your Accounting and Bookkeeping service smoothly and how to take your skills to market.
The PB program teaches you how to find profitable clients quickly! You will use the marketing techniques taught in Module 4 of the Professional Bookkeeper™ program to find 2 new clients each month. This requires little effort on your part. Module 4 teaches you how to find potential clients and the techniques to make them paying clients. Just follow the step-by-step procedures and it comes easy.
The most incredible thing is that once you establish your client base, you will continue to get referrals from the clients you already have. It is a very common problem that our graduates often experience that they have to cut back on clients. But clients are worth money to investors, so why throw them away?
2. Reach the Maximum Clients that One Full-Time Person Can Handle
20 clients is typically what is considered to be full-time (40 hours/week) for one person. You want to continue to grow your business, so you have one of a few options:
- Have your spouse do data entry and basic Accounting and Bookkeeping work
- Have a teenage child do basic data entry
- Use an independent contractor at $10/hour to help. Your clients will pay you between $30 and $60 per hour, so you still net $20 to $50 per hour for the work that THEY do!
With someone to help with the data entry, you can continue to prospect for clients at the rate of 2 per month.
3. Plateau at 40 Clients
Because you and one other person can only service around 40 clients, you cannot service more clients than that without additional help. You can certainly use another contract accountant and continue to grow beyond 40 clients. For purposes of this example, we will just peak at 40 clients, though you are not limited to that number if you get help.
4. Cherry Pick the Best Clients and Cash Out the Rest
When you reach a point where you are beginning to have more clients than you can handle, it may be an ideal time to sell off a portion of your business, rather than turning clients away as most accountants do. Look over your list of clientele and pick out the clients that are most desirable. These include those that require the least amount of time to service, those that are easiest to get along with, or those in a targeted industry that you have special knowledge of. The rest you begin to service under a new company name, even a close alternate to the one that you use now. Preferably have a contractor bookkeeper service these less desirable accounts. That way, they continue to service them for your buyer. You can now sell the secondary company to an investor for 12-18 months worth of billings from those clients that you would likely have just dropped.
You get to keep the most profitable and enjoyable clients while selling off the excess. You will probably want to keep some of your clients, rather than selling the entire company. This way, you get cash now and continue to enjoy a revenue stream to support yourself.
Sell the new company with its 20 clients to an investor at this point. Many accountants want to purchase a functioning practice rather than start from scratch because they don’t know just how easy the process is. These are ideal to purchase the less desirable portion of your business.
When you sell an Accounting and Bookkeeping service, you will get paid for 12-18 months of client billings (what they paid you during that time). 20 clients generate on average $6,000 per month, so you will sell the service for between $72,000 and $108,000! Cha-ching! You cash in and still keep the 20 most desirable clients. You keep a $4,400/month income as well!
With $72,000 to $108,000 cash, you can pay off your debts and be able to live on much less than you do now. Maybe you can even pay off the balance of your house and never have a mortgage payment again! If retirement is in your not too distant future, invest this in a money market and reap the benefits.
5. Repeat the Process
You can repeat the build and flip cycle about every 18 months or so. Each time, you cash in $72,000 to $108,000! This is a very comfortable living that eliminates debt and gives an incredible income to play or invest with. What it buys you most is OPTIONS! If you have ever felt like a slave to your creditors, there is a real way to break out of the cycle and find true financial freedom for yourself and your family.
Management Alternate Strategy
Rather than cashing out some of your business, you may also choose to continue to grow your service, using cheap Bookkeeping contractors and just managing and growing your business. With as little as 2 contractor bookkeepers, you could be bringing in as much as $8,800/month, even AFTER paying your contractor Bookkeepers.
So where do we come up with that number? An average client will pay you $300/month. It takes 6-8 hours/month to service a typical client. If you pay a $10/hour bookkeeper to do the work for you, it costs at most $80/month (8 hours * $10/hour) to service that account. After you pay your $10/hour bookkeeper $80, you are left with $220 ($300 – $80) net profit. If your bookkeeper can service 20 clients, you make $4,400 per month ($220 * 20) net profit. If you have two bookkeepers working for you, double it to get $8,800 Per Month!
Month-By-Month Breakdown of Income Using This Strategy
Consult the chart below to see month-by-month how much you will make:
|Number of Months Into Your Business||Number of Clients |
(gain 2 clients/month)
|Monthly Income||Total Earned So Far|
$72,000 to $108,000 for Flip =
$84,000 to $120,000
+ Flip =
$389,800 to $437,800
36 months after starting your business, only gaining 2 clients per month, you will take in up to $437,800! That is the kind of life-changing income that most of can only dream of. The numbers are all there so that you can see for yourself. We at Universal Accounting® hate empty hype, and put none of it into this analysis. If you are ready to take control of your life and really make the kind of income that puts your financial goals within reach, today is when you need to get started to make your dreams your reality.
You Can Do This!
So what are you waiting for? Your financial future is in your own hands. When you start your own successful Accounting service, your success is your own. If you can find the courage to take the first step, we will give you the tools, support, and training you need to start your own profitable accounting and bookkeeping service.
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