The 8 Essential Rules When Selling Your Practice

Co-owners and Directors of DMY, Mark Emney and Daniel Jones have helped dozens of practice owners all across Australia sell their accounting practices to the right buyers at the right price. Here they share their advice for prospective sellers on how to approach the sale with confidence and come out the other side with their legacy and peace of mind intact.

1: Know your "Why"

The starting point is always: what is your “why”? ie why do you want to sell or merge, and what are you going to be doing next with your life?

For many owners, selling is a logical culmination of a lifetime’s work building their practice: they have reached an age where they are ready to wind down and enjoy the fruits of their labour.

For some owners it can be more complicated. Health reasons can be a factor, either for them or a family member.

For others it may be that they have achieved what they set out to do and are ready to take on a new challenge. At DMY, we regularly see this with practice owners aged in their fifties, their forties, and even their thirties.

There is also a growing group of entrepreneurial practice owners who are looking to merge with a firm with greater resources to fuel their next wave of growth. Often these owners are skilled at business development and managing client relationships but find themselves pulled in too many directions as their practice gets bigger. A strategic merger with a like-minded firm is a great way to tap into more support and free yourself up to focus on what gives you energy and plays to your strengths.

2: Be Clear What Success Looks Like

There are a number of elements to a successful sale. These obviously include the commercial outcome including sale price and retention terms but also:

• How the clients are looked after
• What happens to the team
• The seller’s role and remuneration in transition
• When the seller wants to stop working
• The length of time to sell

We always encourage prospective sellers to think through what is most important to them and visualise what a highly successful outcome looks like. It’s much easier to achieve if you are clear on the end goal!

3: Clear Your Mind

It is critical to go into a sale process with a clear mind. Most practice owners haven’t sold before and it can feel like a big step into the unknown. Selling your practice can often go smoothly, but it can also be stressful and an emotional rollercoaster.

Meeting with potential buyers, evaluating who will be the best fit, negotiating the commercial terms, and finalising contracts of sale are all important elements of the sale process that require clear thinking. A good broker will support their client as a trusted advisor through all of these steps but the buck still stops with the seller. If there are a lot of other things going on in your life, is now the best time to be selling?

4. Understand current market values

If you were selling your home, or car, no doubt you would undertake research to see what the market was doing. Selling your accounting practice is no different. Whenever we meet with prospective sellers we always provide them with lots and insights on the current market including:

• How many buyers are out there
• What are firms selling for
• What are typical retentions
• How long is it likely to take

Demand for accounting practices is at an all-time high, and the better a prospective seller understands the market the more likely they will be equipped to navigate the sale process and achieve their desired outcome.

For those that missed it we recently shared their latest Market Data on Practice Sales in Accounting Times here: Demand for Accounting Practices is at an All-time High

5. Make first impressions count

You only get one chance to make a first impression! At the first meeting with prospective buyers make sure you’re prepared and ready to go:

• You've done your research on the buyer and their firm, and have some good questions to ask;
• You are ready to talk about yourself and your practice and what’s important to you.

Be relaxed but professional. Be yourself.

6. Assess cultural fit early

If the cultural fit isn't strong then it doesn't matter about the commercials and other aspects of the deal. Don't try and force it, it won't work.

Our litmus test for cultural fit when we are talking with our clients (the seller) is always:

• Can you see yourself working well with the purchaser?
• Can you see your team working well with them?
• Can you see your clients working well with them?

If the cultural fit is strong, then put your best foot forward to secure the deal. This is the one you have been waiting for!

Remember also that assessment of cultural fit can change over time through the course of the sale process. How the other party deals with negotiating the Heads of Agreement or the due diligence phase can give indicators to either validate the cultural fit or raise a flag to be considered.

7: Have empathy

We’ve seen some terrible examples of buyers showing no regard for the feelings of the seller by highlighting all the things they see wrong about their practice and treating the sale in a very transactional manner.

This can also happen in reverse where sellers want to sell their practice while retaining control and not being told what to do because "their way is the right way". We encourage sellers to walk in the shoes of the buyer (and vice versa) to build trust and show that they are good people to work with and will help the transition go smoothly.

8: Avoid moving the goalposts

We recommend that our clients (the seller) execute a non-binding Heads of Agreement covering the key commercial terms. This ensures the seller and buyer are aligned and saves time and money when it comes to lawyers preparing binding sale documents.

While the Heads of Agreement is non-binding it's not helpful to an efficient sale process when either the seller or the buyer tries to change the commercial terms in the Contract of Sale without reason. It damages the trust that has been established and can be a significant red flag to the other party. It can even result in deals falling over at the 11th hour as a result.

Lawyers are an important and valued part of a sale process and will act in the best interest of their client. It’s important to ensure that lawyers on both sides are fully briefed on what has been already agreed commercially and not up for further negotiation. This will save time and money, and help avoid goalposts being moved inadvertently.

The Wrap

In summary, if you are looking to sell or merge your practice, these 8 Essential Rules When Selling Your Practice will help you navigate through the process and achieve a successful outcome.

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. Visit us to find out more and to get in touch.