Selling a practice Part two: Preparing the firm and staff
Della Hudson explains the preparatory work necessary to make the practice as attractive as possible to buyers, which will also help maximise the selling price.
Like any business you will achieve a higher price if all the systems are thoroughly documented, all essential paperwork in place, and you can demonstrate that the business will run independently of you.
Smarten up your offices to create a good first impression, even if this is only your home office it will make yours look like a professional set up.
Ensure that all engagement letters and money laundering checks have been completed.
Ensure that you have contracts in place for all staff, and the regular subcontractors, as well as anything else essential to the running of your business.
Your buyer may be interested in taking on your premises so they will want a copy of your lease or contract, as well as details of running costs and break clauses.
As part of the buying process, and after signing a non-disclosure agreement (NDA) your buyer will want to see the following:
- A detailed list of clients showing recurring fee (excluding any on-off work), work done, age profile of principals, industry and trading format. At the initial stage this will just be summarised, but you will soon be asked to provide the detail. You will not show client names until the sale is agreed.
- A list of staff showing job role, salary/benefits and hours.
- If you have premises they will need to know the size, rent and remaining contract.
- A sample of your working papers.
- Details of what software you use for which tasks.
- Three years of your own business accounts and, perhaps, management accounts.
You will need to delegate more and encourage your team to manage without you as much as possible by putting procedures into place and training your team to follow them. If you haven’t read Michael Gerber’s E-Myth then I recommend it.
Even if you are a sole practitioner it helps if you have systems or checklists written down. Document all decisions and keep good meeting notes, preferably on a proper CRM system.
As far as possible you should create a buyer’s manual, or at least a list of suppliers and support contacts. As a one-man band, a lot of information may be in your head, which will make any handover harder.
Tell your staff
You may choose to tell your team when you start looking for a buyer or wait until the deal is done. As I was always very open with my team I found it uncomfortable not to tell them that I was thinking of selling up. I was pleased to find the right buyer very quickly so that everything could be out in the open.
Immediately after reaching a verbal agreement with my buyer I chose a day when most of the team were working in the office, to have a lunch and learn session over pizza. I did not want to delay until it was possible to call in all our part-timers on the same day.
I told the team that I was selling the business and that all their jobs were secure. I explained who the buyer was, and who would be the new managing director, and also why I thought it would be a good fit for them. I then let the staff ask me as many questions as I could answer.
My buyer then joined us and, after initial introductions, I left him to talk to the team. I also called the team members who were unable to attend in person. Our buyer gave everybody his card so that they could ask any additional questions and, over a short period, managed a one to one session with each of them. We did our best to keep the doors open for easy communication. The team appeared to be cautiously optimistic about the change of ownership which I think was partly down to our openness.
We arranged a lunch at a nice restaurant in between the two locations of my practice and the buyer firm, to introduce my team to their new expanded team. As both firms were set up for remote working we also arranged for members of both teams to work from the other office, as an opportunity to get to know each other better and to make the most of additional expertise in the enlarged business.
The overriding message was business as usual for the team and for our clients. There would be changes in back office systems in time to implement whichever system was thought best of the two practices. But this was exactly what I would have done if I was buying the other practice.
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Della Hudson was part of the class of 2009. She built up Hudson Business Accountants and Advisers from her kitchen table to a small team of flexible workers with independent premises in Nailsea, near Bristol. The firm ran regular Money Matters seminars and other training and webinars. Della sold the firm in 2017 in order to focus on the...