7 questions that make or break a business transaction
Accounting transaction advisor Kev Ryan shares the most insightful questions he has been asked about buying and selling an accounting firm.
It’s simply not possible to make a successful business sale, merger or acquisition without asking numerous questions to the right person.
In my 15 years as an accounting firm transaction advisor, and over the last six weeks as Accounting Times readers have shared their thoughts, I have been asked some spectacularly insightful questions, and one or two clangers.
Here are seven of the best, all of which contain powerful information for business owners considering selling, merging or buying.
Q1: If I’m bringing an expert in to manage a sale/acquisition, what are the questions I should ask them?
Kev Ryan: Firstly, you need to ask about their experience and success rates. Do they have longevity in the space, and an excellent track record?
Then, are they licensed? Are they therefore covered for insurance, etc.?
Specialisation in this space is critical. If you’re dealing with a business broker who usually sells fish-and-chip shops, you’re not going to achieve an optimal outcome. The same goes for if they dabble in transactions but are also accounting coaches, consultants, recruiters, etc.
How do they plan to attract engaged, quality buyers? Are they putting your business on a website and spamming you out to the world, or are they off-market, taking their time to understand you, your business and your actual requirements? If they need to advertise your business, you probably should stay away from them.
Finally, of course, you need to know their fees and charges. They should have a set fee.
Q2: I want to sell my business, but I fear it’s for the wrong reasons – I’m burnt out and bored. Is this unusual? And what should I do?
Kev Ryan: This is a great question. Over the last two years, in the post-COVID hangover, many sole practitioners have confessed to feeling the same way. It’s far from unusual.
Does this mean you should sell up? No. It means you should have a conversation about your options. Is there a one-plus-one-equals-three solution? For example, could you sell part of your business to create a joint venture, and in doing so, get rid of the tasks that make you miserable?
A successful business transaction is all about the why. That’s the starting point, and we look at options from there. Sometimes, the best option is to keep your business and fix it.
Q3: I’m preparing my business for a sale, but I’m having a hard time imagining what I do once it’s sold. Does this matter?
Kev Ryan: This is a very important discussion. Actually, there are transition planning specialists out there who I’d recommend people in this position talk to.
For most accountants, their work is very rewarding and fulfilling. They often become friends with their clients, or at least trusted and valued advisors. That brings a sense of self worth.
So, you sell your business on a Friday. What happens next Monday when that sense of self worth is no longer there? You do need to ask that question, and your family should be involved in the discussion.
And, once again, you don’t have to sell and give up working. Many people now merge to retire, meaning they sell their business, or part of it, then take up a mentoring role a few days a week, to ease into retirement. We often manage that process for clients.
Q4: I’m a one-man band with a niche group of clients in aviation. Is there any value in my business, or is it best that I simply shut it down when I retire?
Kev Ryan: I’ve never been unable to sell an accounting business. And niches are typically scalable. Even if your niche is not scalable, it will be attractive to a business looking to diversify.
To one particular group, I have sold accounting firms specialising in: startups, legal businesses, pubs and strata titles. That firm made the acquisitions to diversify its risks.
Every business has value.
Q5: One of my staff members is resistant to change and might cause trouble during an acquisition or merger. What can I do?
Kev Ryan: This is a problem that I have to look for when I work with a client, and it can be a very serious one.
You need to get ahead of it, because this person can blow deals up, particularly if they own any goodwill.
The identification of problem team members at the start is critical. You have to manage them out of the business, from an HR perspective, before we come close to doing a deal.
This is not uncommon. Key stakeholders in small firms can be deal breakers. At the same time, they can be great assets. They can be deal makers. But you do need to identify the bad ones and exit them from the business before they spook buyers.
Q6: I heard people are getting $1.30 per dollar of revenue for their practice. Can I expect the same sale price?
Kev Ryan: There are a few brokers out there trying to spruik these sorts of prices, and it’s mostly rubbish. Also, comparison in any form is a dangerous thing when you don’t know the circumstances leading to someone else’s outcome.
Every deal is extremely specific. That’s why we go to market, nine times out of 10, with no price. We bring the market to our client and drag out offers. Our job is to bring the best buyers and therefore encourage the best price.
Q7: I want to acquire a small parcel, but only if it’s business clients and if it comes with an experienced manager. I'm willing to pay 80c in the dollar.
Kev Ryan: I mentioned that I sometimes receive some clangers. This is one of them.
This is a question from a person who has very little knowledge of the market. Sometimes, owners of smaller businesses come to me and say they want to add $300,000 or $500,000 to their book, but it has to be all platinum clients.
That acquisition doesn’t exist. And if it did, you’ll find yourself in a fierce bidding war. Smaller fee parcels of all Utopia clients just don’t exist.
Someone asked me this the other morning. Not only did he want a unicorn, it had to be within a couple of kilometres of his current office! I said it was too early in the day to be that drunk.
Any sale or acquisition can be successful, but only if people come into it with the right attitude, with willingness to create a win/win for everybody involved, and having been well advised.
