Protect your Confidentiality
The prospective buyer should never know who the seller is until they are pre-qualified. Requiring a personal financial statement and a confidentiality agreement is a must.
Speak with industry experts and do your homework to see what recent practices in your area has sold for. There are many elements that go into valuing a practice. They include: Location, Profit Margin, Client Mix, Transition Assistance, Employees, Web Site, Equipment, and Specialty or Niche Markets.
Expert guidance is very helpful in this area. Only an expert can identify strong selling points for your practice. You must be aware of what makes a practice attractive to a prospective buyer. Having a nationally recognized name and trusted organization is a big plus for the firm representing you in this transaction.
This is very difficult to do on your own. An all out effort is needed including advertising in national trade journals, state society publications and websites, direct mail, phone calls, web listing, etc.
You must have a network of prospects ready to talk with. Keep in mind you do not want to give out to many details up initially until you have had a chance to qualify the buyers.
You should obtain a personal financial statement and in some cases a credit report if they are financing the transaction. Also, an in depth interview should be conducted to see if the buyer is a good fit for the clients.
Price is important but so are the terms! A third party is helpful here so that you never have to argue price or terms with a potential buyer. You do not want to get the relationship off on the wrong foot with a buyer by having disagreements on various issues.
Having access to financing sources is very important. Most buyers will need to secure financing if you are looking for a mostly cash deal. Local banks can work but more often than not lenders specializing in the funding of accounting practice sales are needed.
Closing and Transition
Experience here is important to maximize client retention. You must make the transaction look more like a merger than an acquisition. Client transition concerns and a variety of other issues will come up here. Make sure you have professional Agreement of Sale and form letters to be sent out to the client base to introduce the new owners.
What to Avoid When Selling Your Practice - Top Ten Mistakes Made By Sellers
1- Not Knowing What the Practice Should Sell For:
Although the marketplace ultimately determines the final price, an owner needs to know what the approximate price his or her business is prior to placing the business on the market. Before making the decision to sell, owners should work with someone qualified to place a price on their company.
2- Not Preparing the Practice for Sale:
Prior to exposing a business to the marketplace, preparation is necessary. Anything that a potential purchaser might want to see should be up-to-date, accurate and available for review. Likewise, financial and legal affairs should be current. Being prepared helps to maintain the momentum of the deal, places the business in a favorable light, and brings confidence in the business.
3- Not Being Able to See The Practice Through The Eyes of the Buyer:
Although it is tempting to look at one's own business in only the most favorable light, it is very important to recognize the deficiencies of the business, and address them, in order to alleviate any buyer concerns. In fact, it is suggested that problem areas should be brought up in the very beginning of the selling process, along with possible solutions.
4- Not Really Knowing the Buyer:
The better you know the buyer, the smoother the transaction. By knowing the buyers, their motives, their interests, and their backgrounds, the better equipped a seller is to make informed decisions about whether they are the right people to operate the business.
5- Trying to Sell the Practice to a Buyer Who Doesn't Want to Buy:
There are usually many more potential buyers than there are businesses for sale. The question is--how serious are they? Wasting time on those who aren't serious about purchasing a practice takes away valuable time from those buyers who really want to buy.
6- Being Your Own Worst Enemy:
Many firm owners feel that no one knows their practice like they do. They think they can do a deal themselves, without any help. As the old saying goes: "The attorney who represents himself has a fool for a client." The same could be said for the business owner who thinks he can sell his or her own business. Not using outside advisors, such as a professional business broker, is a serious mistake that could cost you hundreds of thousands of dollars.
7- Not Understanding the Structure of the Deal:
The real crux of the deal is how it is structured. Consider the negotiating axiom "You can name the price if I can name the terms." The terms and conditions are important. A seller may be ecstatic about price only to find that the devil is in the details.
8- Not Being Able to Walk Away From the Deal:
Too many sellers get so involved in putting the deal together that they don't see the big picture. Since they have invested a lot of time and effort, and probably expenses, it's often difficult for them to see if the deal isn't a good one. If the deal isn't right, and can't be fixed, there is no other choice than to walk away. It's much better not to do a deal than to do a bad one.
9- Waiting Too Long to Sell:
Too many practioners wait until the last minute to decide to sell their practices. They wait until business is down, or they are completely burned out, or their partnership has soured completely. The time to sell is BEFORE emergencies happen-when the business is still good. The old adage is: a business owner should think about and plan the eventual sale after it is purchased.
10- Changing Your Mind:
If there is even a speck of doubt about selling the practice, don't begin the process. Seller's remorse can arise from many things- realizing that you will now have nothing to do every day, an acquaintance saying the price is too low, etc. If it is a good deal from the beginning, don't let outsiders or self-doubt influence the sale.
Knowing the ins and outs of practice sales is very crucial to putting together a successful transaction. The bottom line is a professional is the only one who can help you avoid all of the pitfalls along the way. Rely on the experts and contact us here at New Clients Inc. for more information at 1-800-338-0778 ext. 15.
Todd Steinberg, Executive Vice President of Sales and Marketing
Todd Steinberg offers more than 20 years of experience emphasizing sales, marketing and business development in the industry of marketing accounting services. The scope of Todd’s experience has spanned virtually all aspects of the accounting practice marketing industry. A respected leader in the industry, his experience includes developing new marketing strategies, NCI program sales, integrating financial planning and payroll services into accounting practices, providing sales and marketing support to NCI’s 4,500+ clients, hiring and training of marketing personnel for accounting firms nationwide and speaking at regional and national conferences as an authority on marketing accounting services. His career includes leadership roles such as serving as the National Seminar Director at NCI’s Practice Development Seminar, Director of NCI’s Practice Development Coaching program and Director of Monitoring and Support. He is also responsible for leading NCI’s accounting practice sales division and has been personally involved in the sale of over 125 firms nationwide. Todd is Series 7, 66, Life, Accident & Health Licensed. In his spare time he enjoys working out and spending time with his wife Jessica and three young children Sydney, Ben & Brooklyn.