The Answer is almost never. I understand there have been cases where practices have been sold for the estate of suddenly deceased practitioners. Yes, it is difficult to get top dollar and a purchaser needs to be willing to act quickly, but it can be done.
A lot depends on the client list, are there solid clients, appropriate work papers, experienced staff secured by an employment contract? Do the clients span a wide age bracket, do they have successful businesses, money to invest, etc? Where is the location of the practice, if in a small regional area, it may be more difficult to sell and require an understanding local firm to take over the practice and pay it off over time.
Perhaps the better question is, what stops a practice from selling? Often this is the owner/s. The owner may say they want to sell, but are lost, not understanding what to do. Also, in some small firms, one partner may want to sell but the other not so, makes it difficult.
Some practices gradually run down, no new clients are taken on, those that stay do so for special services, often away from normal accounting work. Some senior accountants provide significant family counselling services. For some elderly people, often the very rich, the only person they trust at the end of their life is their accountant. How can that trust be sold? This requires a careful selection and introduction of the purchasers. The vendor/s need to stay around to ease the transfer.
Though the practice may have dropped fees, there is usually still some ongoing compliance work, it can be sold. Also, if the practitioner is willing to stay on, with an invigorated team behind him or her, new clients can be introduced. This therefore requires a payment option whereby the vendor receives extra money, for new clients introduced.
Some practitioners are just too busy to face the process of selling. They don’t know what to do and how to do it. The project therefore just keeps getting deferred.
For those practitioners who want to sell, they have the option to use a practice broker. Most brokers are very careful and won’t promote a sale to someone who will destroy the old firm. Yes, brokers charge a significant fee, but act for vendors to help promote and ease the sale along. Also, they know buyers, especially those who have previously successfully bought fees, they know buyers with borrowing capacity and the ethics to honour the deal.
I do hear stories of the most awful unethical and dishonest accountants, both from the selling and purchasing side. Vendors do need to be careful.
Another option is to speak with colleagues and practice consultants.
The process is to analyse your client base, update your data base, ensure your IT system is properly backed up, if possible make sure staff have signed employment contracts, then identify possible purchasers and go through the vetting process. Next handle the sales process. Confidentiality is important, another reason for using a practice broker.
If this is not something where you have experience, using a consultant/practice broker makes sense. They will also keep you focussing on the sale, so you do not get lost in all the day to day issues of client work. That way it will not become too late to sell.
Thea Foster, Added Value Corporation. Email thea@addedvalue.com.au
- If “Negotiating Price with Clients” Is a Challenge: What are you doing about it? - 16 June 2016
- When Is It Too Late To Sell? - 19 April 2016
- 3 More Misconceptions on Accounting Practice Ownership Changes - 17 March 2016
