What to ask when selling your business
In part one of a new series, Lucinda Kitchin divulges the key questions that sellers should be asking
Is my practice too large/too small? Owing to the fact that up to 75% of all accounting firms are either sole-practitioners or two-partner firms, by far the greatest demand in the marketplace is for smaller practices and blocks of fees. Small firms rarely have the spare management or financial resources to acquire bigger blocks of fees. A £50k practice, therefore, is much sought after, whereas a £500k practice outside the major conurbations may attract substantially less interest. There is no such thing as a practice or block of fees being too small, however!
How long does it take to sell a practice? The quickest APMA has achieved a sale from authorisation to proceed is 48 hours! In that case, however, the vendor had to take a considerable reduction in the sale price in order to achieve that time frame. Over the years we have been retained by Executors of Estates to assist with practice disposals swiftly before clients and staff ‘walk’. Under those circumstances, by expediting the sale, we can usually get the parties to Heads of Agreement within three weeks from authorisation. Under normal circumstances four months would be the usual timeframe to reach Heads of Agreement; thereafter, it depends very much on the respective solicitors! In the event that the sale period covers the months of July and August or December and January, the selling period can normally be expected to lengthen.
Can I sell my goodwill and still earn an income stream? Yes. Fees are in such demand that within reason the vendor can make demands of the market. A broker should ensure that any respondents to the marketing of your opportunity are aware that it is your wish to retain a small block of clients. Understandably, the successful purchaser will require certain warranties in the sale agreement to protect their position.
Can I keep a small block of clients and sell the rest? Yes. As it is a seller’s market, within reason buyers must be prepared to fall in line with the seller’s demands. Therefore if the seller can satisfy the purchaser that the clients he/she is buying will not be taken back by the seller and that the seller will not represent competition in the future, there is no reason why the seller should not be able to retain a small block of fees. The safeguards which the purchaser will require under these circumstances will normally be incorporated in the warranties section in the sale agreement.
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