How to Choose The Right Broker For Selling Your Accounting Practice

When it’s time to sell your practice it may seem tempting to go it alone and sell to a buyer who has approached you directly. However, you wouldn’t just sell your home to someone who knocked at your door so why do the same with your accounting practice?

The Benefits of Using an Expert Broker

If you are thinking of selling direct without the support of an expert, you could be risking not receiving a fair reward for all your years of hard work, and your clients moving to a firm that doesn’t value them like you do. As you start to plan your sale, consider the following:

1. Do I have the time and headspace to manage a sale process while running my practice?
2. What information should I provide the purchaser, and when?
3. Do I know the fair market price for my practice?
4. Am I comfortable negotiating important commercial terms including retention and my transition role?
5. How do I know there aren’t other buyers who could be a better fit and offer better terms?

The right broker can help you with all of this.

There is a much lower likelihood of achieving a good cultural fit, strong commercial outcome and well managed transition if you sell direct than through a well run broker-led process. And that’s before the additional stress and emotional rollercoaster if the sale doesn’t run smoothly.

How to Choose the Right Expert

Once you have decided to engage an expert to help sell your practice, who you choose can make or break your sale and exit.

There are a small pool of specialist business brokers across Australia servicing the accounting industry. Here are five key questions to ask a business broker before you decide whether to engage them.

1. Do You Only Represent Sellers?

Some brokers only represent sellers only, some only buyers. And a few represent both. Representing buyers can include receiving a fee from them to secure an acquisition or to advertise their desire to purchase on a broker's website. Practice owners should take care working with brokers who have both sellers and buyers as clients. It creates potential conflicts of interest and can create an uneven playing field whereby other buyers who haven't paid the broker may not have an equal opportunity.

2. How Do You Find Buyers ?

Practices typically sell in one of two ways: open market or off market. Open market sales increase the likelihood of securing a buyer with a strong cultural fit and a good commercial outcome. Off market sales can work well for large ($5m + fees) or highly specialised practices where the pool of suitable buyers is much smaller. In both scenarios it’s important to understand how the broker is finding potential buyers. Are they running a transparent and effective marketing campaign to attract a large number of interested parties? Or are they taking short cuts whereby 2-3 buyers, who the broker has an existing relationship with, are introduced to the seller in the hope that one of them can strike a deal?

3. How Do You Value My Practice?

The old market paradigm of practices selling for 100 cents in the dollar in the cities and less in the country is long dead. The range that practices sell for is very broad and practice owners should request that their broker undertake a robust appraisal of their practice, before they are formally engaged, using a transparent and logical methodology that is clearly explained. This gives the practice owner the opportunity to see what the broker is like to work with and ensures alignment on a realistic selling price if moving to formal engagement.

4. What Is Included In Your Service?

Not every broker offers the same scope of service and it is important to understand how they will work with you.

• Introducers will tell you how quick and easy the sale process will be, introduce you to a couple of buyers they know, ask for summary financials which they pass across to the buyer, then leave you to try and negotiate the deal with the other parties. It's virtually sink or swim.
• Passive Brokers will list your practice then...not much happens. Weeks, or even months, can go past without much contact with the seller left wondering: Are we making progress? How many buyers are enquiring? Why aren't I meeting anyone? What is the Plan B to start getting some traction?
• Trusted Advisors believe the key to a successful sale outcome is a well managed and supported sale process, where they do the heavy lifting and run an efficient, effective and transparent process. They prepare a high quality Information Memorandum on your practice, support you at meetings with shortlisted parties, help prepare Heads of Agreements to button down the key commercial terms, take on the final negotiations on your behalf and are always there for you with considered and candid advice.

5.What Are Your Fees and Commercial Terms?

The key question to consider is: Will I be getting value for money? (Clue: It's much easier to answer this if you already know the answers to the questions above). A focus on cost alone rather than value can lead to regret. Saving a few thousand dollars on your broker but then selling your practice for less than market value, on less favourable terms, or with more risk (or not selling it at all!) is a false economy.

Twelve month fixed term appointments are not uncommon but practice owners should negotiate the ability to terminate with no more than seven days notice if things are not working out. Brokers should back themselves that clients will want to work with them because they are receiving great value not because they are locked into a contract.

The Wrap

You only sell your practice once and getting the right expert support is critical to a successful outcome. Getting your proposed broker to answer these five key questions before you engage them will help ensure you receive the right level of service and support, value for money and advice that is truely independent and in your best interests.

At DMY, our goal is to help you sell your practice to the right buyer at the right price, while preserving your legacy and peace of mind. We’re with you every step of the way to ensure a strong commercial outcome. Visit us to find out more and to get in touch.