Unfortunately, many Practice owners leave their exit plans until it is too late to make real ‘plans’. When they keep putting it off, they eventually make a rushed decision to sell, without comparing alternatives. Exiting doesn’t mean ‘Let’s just sell my accounting practice’, there are other options if you plan early enough.
While a sale may be quick, it may not be painless (particularly to clients and staff), and while it will give you an attractive lump sum to walk away with, there may be more valuable things left on the table.
Here we look at why Succession Planning may be a better option if you are looking to sell your Accounting Practice…
1. Exit your Practice on your terms.
The number one benefit of succession planning is that it allows Principals to control their exit.
A well-planned succession arrangement means you can sell down the Practice over a longer period of time, share in the rewards of continuing to own equity, have some say in changes that are made and slowly step away from the business.
It also means there is the flexibility to maintain some ongoing support to transition long-standing or sensitive clients. Some sale situations will insist on the incumbent stepping away from the practice in as little as 6 months, meaning a sharper transition for clients, no upside in any profits made and going from full-time to no time in an abrupt space of time.
2. A Chance to Expand your practice.
Someone who is looking to step up to Director internally, or coming in externally, will enable the practice to grow.
More client-facing individuals in a Practice is a good thing. It means that there is scope to expand organically and provide clients with more in-depth service & support, which means higher fees per client.
This situation also means more capacity for new clients. Often individuals coming in externally at a senior level have an existing fee base that can be bolted straight on to the practice.
3. Scared to lose Clients?
The biggest risk when looking to sell your Accounting Practice is the disruption to clients.
Transitioning clients in a succession plan environment can take place over a much longer time. It means that the risks of clients leaving due to a change in management is much lower than in a sale.
It is important to note that in a sale scenario, there are claw-backs on the price paid based on client retention during the transition period meaning that if clients leave during this time it actually comes out of your pocket and not the Buyer’s pocket!
The more drastic the changes after a sale, the more unhappy clients. It may be the level of service, changes is fees, different styles or frequency of communication, delays or simply poor quality work, all of which you have no control over.
4. What will happen to your Staff?
Apart from losing clients, the other great fear of a Principal looking to exit their Practice is what will happen to their loyal staff.
The thought of a sale may strike fear into the minds of staff, concerned about losing their jobs. Generally, Buyers of firms will want to create a more efficient business, often this means folding the back-office into their existing operations and loss of staff in the newly acquired firm.
While a changing of the guard through succession will likely result in a review of the staff as well, any changes are more likely to take place over a longer period of time so as not to disrupt the operations of the Practice. KPIs or additional standards can also be introduced in a staged format.
5. How much time do you have before your exit?
Don’t leave yourself short on time, prepare your exit strategy well in advance.
You don’t have to have someone in mind to form a succession plan. If you do not have anyone inhouse to take the reigns then you can always look for someone externally. This process involves a thorough search, negotiation & recommended six month trial period whereupon the transfer of the equity will begin.
Sometimes the internal or external person doesn’t live up to expectations of your plan, so the transition never takes place. You can always consider it plan B to sell your Accounting Practice.
Considering your Exit Strategy or want to sell your Accounting Practice?
At Abacus we are passionate about helping you exit on your terms AND to get the best value from your practice and your team.
We can assist in developing your exit strategy, be it a sale or succession, and put you in the best position for the future.
Talk to us today.