If you’ve never sold a practice before (and let’s face it – most accounting and tax professional haven’t), you may be wondering if there are some easy mistakes that you’re likely to make.
The answer is yes, there is.
But luckily, I’ve rounded up 5 of the costliest so you can keep your eyes peeled for these boo-boos and get through a sale unscathed.
Check them out…
- Winging it for the hell of it
Selling without a strategy is like hiking a mountain without a map. You might get there eventually, but you’ll end up seeing lots of ugly terrain on the way, unnecessary side trips and routes that take you backwards.
You need a formal process. It should be easily digestible (broken into small chunks of actions you need to take) and clear to understand. In other words, it’s imperative to know where you’re going, how and why.
Many stages in the selling journey will be dependent on the success of other stages. At any given moment, you need to understand where you’re at, what you need to do next and the obstacle (if any) that’s standing in your way.
Skim over any of these stages without care and you’ll put the entire sale at risk.
- Failing to protect your anonymity
When you have a great business to sell, it’s understandable that you want to shout it from the rooftops. But tread with care.
You don’t want to give out sensitive information that could harm you, your business or your staff. Examples of worst-case scenarios include:
- Clients and associates become unsettled after they hear about the pending sale
- Existing staff see you’re selling and then worry or jump ship
- Competitors find out about your strategy and one-up you
Marketing a business during a sale process requires to toe a fine line between getting your business in the front of the right eyeballs and keeping information confidential in the broader sense.
Get this right and you’ll be able to publicise an attractive deal without compromising the health of your business.
- Having disorganised data
Just because a buyer works with numbers doesn’t mean they’ll be able to easily understand yours.
Untidy, jumbled data is really off-putting during a business acquisition and can turn a buyer off long before they sign the dotted line.
The one thing you need to create as you sell your business is buyer confidence – the easiest way to do this is to get your numbers clear, attractive and presentable.
You want your buyer to walk away knowing exactly how your business works, why it’s profitable and how seriously its previous owner has conducted operations and data management.
- Not being transparent with buyers
Omitting information can be just as lethal as lying in killing a sale.
The last thing you want is for a buyer to be just on the verge of a deal, only to then run for the hills after they find out something you never told them from the beginning.
In fact, a buyer is more likely to trust you and proceed with the sale if you’re upfront about any problems with the business. Whether those pertain to staff culture issues or client retention rates, they key to a great relationship with your buyer is to let them know.
And small details can be just as important as big facts about your business. After all, if you leave a trail of tiny omissions that get found out later, you buyer may think: “what else is this seller not telling me?”
Be upfront from the very start. That way, you won’t get any nasty surprises down the track – and neither will the buyer.
- Assuming buyers have finance
Just like a spruiker on the streets would feel if someone on the sidewalk slowed down, you may feel a deal is on the horizon if someone sidles up to your business with interest. But don’t get too excited.
Unless a buyer has their finances in order, it’s unlikely a sale will happen.
In fact, one of the most common problems practitioners deal with when selling a practice is poorly financed buyers. Banks often won’t commit to anything in writing and may even demand to see the contract before they consider your buyer’s proposal.
If financing capacity has been mistakenly qualified, the fate of the sale will lie in the hands of the bank – not the buyer.
More often than not, a bank will say no (leaving the buyer with no other options.)
In the case that the buyer has other sources of funding then you may be in the clear, but this is a rare occurrence.
Avoid timewasters; seek to understand a buyer’s funding capacity before progressing too far in an acquisition.
Mistakes can be disastrous, but they’re also part of life.
Don’t get too hung up if you get lost in the acquisition jungle. Simply go back to the drawing board and try to start the process again.
Remember: selling a practice is all about negotiation. What do you have to give someone and what do you deserve in return?
If you can have a genuine conversation with someone who has the financing to boot, then there’s no reason why you can’t be on to a winner.