There are a number of advantages and disadvantages to consider when it comes to selling your own practice. I have listed some below and discussed the rationale behind it.
ADVANTAGES:
Commission: The largest single advantage of selling your own practice is that you do not have to pay any commission. Commissions generated from transaction intermediaries range between 10% and 12% on deals less than one million and are generally due at close.
Control: Total control is another advantage. Some sellers like to maintain total control over the deal and do not want intermediaries involved. It is difficult to find a seasoned intermediary that specializes in accounting firms and taking a risk on someone you do not know can be tricky.
Insider Sales: If the sale is to an insider (someone already in the firm) or to a family member, often times these can be negotiated without an intermediary. You may note the word “often” because even the sale to an insider can be negotiated successfully and usually intermediaries will discount their fee substantially if the buyer has already been located by the seller.
Buyer and Seller Rapport: Often times the rapport with the seller and buyer is better because they are discussing issues from day one. This increase in buyer/seller exposure is definitely an advantage.
DISADVANTAGES:
Sacrificing Exit Goals: If there is one thing that I want all accountants and CPA’s to know is that they do not have to sacrifice exit goals to sell their practice. What I see the most is that principals find someone “willing” to buy the practice. Soon, it becomes evident that it is not a perfect match and the seller begins to sacrifice goals. What intermediaries do best is maximize the buyer pool and find a buyer that is willing to purchase the practice the way the seller wants to sell it.
Confidentiality: Intermediaries should be operating in the strictest of confidentiality and marketing the firm confidentially. This protects the staff, the clients, and the practice. It is not good for the advent of a sale to become common knowledge. Clients may begin to leave and employees may get nervous as well and search for new employment. It is incredibly hard to market a firm confidentially if you are selling the firm yourself.
Valuation: An experienced “accounting practice” intermediary should be able to fairly value your firm. This independent valuation will give the seller confidence that real value and expected sale price are in line.
Time: Most principals are busy and do not have time to qualify buyers, weed out tire kickers, answer all the questions about the practice, prepare a prospectus, market the practice, and negotiate deal terms.
Each principal will need to weigh the advantages, disadvantages, and decide which way to move. Intermediaries will gladly agree to an interview process where principals can select the best one or none at all.
