Selling an accounting practice is a once-in-a-lifetime experience for most practice owners. Due to the fact it is such a rare event, sellers need to be aware of some key misconceptions about the process.
Misconception No. 1:
The seller needs to stay around for years to assist the buyer in the transition.
Despite what most think when they enter into the idea of selling their practice, extensive experience with countless practice sales has shown us that a shorter transition is much more effective for both parties. A reason for this is that the seller is not needed nearly as much to help as initial intuition tells us. In fact, the seller can even be a hindrance to the transition if he or she is around for long after the buyer takes over the practice. It is also a common belief that the best scenario is for the seller to engage in extended and/or repeated meetings between the buyer and the clients. However, experienced buyers know that the tendency in such meetings is for the former owner and client to do all of the talking and for the buyer to be an outsider. Similarly, if the seller stays around the office, clients will want to talk to the seller rather than to the new buyer. However, if the buyer meets the clients without the seller, there will be a better chance for the buyer to get to know the clients and to establish good relationships. The only way to avoid the issues of a long transition completely is to get the seller out of the office and preferably out of town.
Misconception No. 2:
The best buyer for an accounting practice is another accounting firm.
It is true that many accounting firms see themselves as willing to purchase another practice and often seek such acquisitions. However, in many instances, an existing firm is not the ideal buyer of a practice. Oftentimes, an existing firm does not have the time to take on another practice. In a typical sale situation, the seller is ready to retire. The buyer must be willing to assume the workload of an experienced owner as well as do all the extra things involved in a transition. A typical buying firm does not have such an individual available who can fill the shoes of the seller. This lack of time ties into the second reason why firms are sometimes not the best buyers for practices. Firms are often only marginally motivated to buy a practice. Of course, all firms are motivated if a seller offers generous terms and agrees to continue working at a reduced rate of pay. Compare this to a potential buyer who is an individual with several years of experience who has dreamed of owning a practice. That buyer brings to the table the willingness to devote much time and energy to taking over the workload and making the practice work. Such an individual is much more motivated than the typical firm buyer.
Misconception No. 3:
Accounting practices have some intrinsic value that all potential buyers recognize, and with which all agree.
If one is selling a gallon of gasoline this might be true. But most people need gasoline, purchase it regularly, and have a good idea of what it costs. This is not true of accounting practices. Many people in the world would not purchase a practice if it were offered to them for a dollar. In a metropolitan area of millions, there might only be a couple of hundred potential buyers for a particular practice. In other areas, there might be considerably less.
If a practice is offered at a certain price, all potential buyers might step up to the plate with check in hand. On the other hand, it could be priced where only one or two would agree to purchase. This is because buyers have quite different ideas as to value and possess different degrees of motivation and interest. Sometimes a seller turns away a very motivated and capable buyer because, for one reason or another, the seller decides the buyer is not quite perfect. His or her misconception is that there are a large number of buyers and that all buyers are equally motivated and equally willing to pay some known price. That misconception could be costly.
This same misconception comes into play when sellers think the only trick is finding a buyer. Practice owners routinely say, “Oh, I have a buyer” or “I have someone interested in buying my practice.” The implication is that finding a buyer is the hard part. The object in selling a practice (unlike in selling gasoline) is to first locate all potential buyers for the practice and from that group determine the top 5% or 10% in terms of motivation and ability. It is from this group one must find the buyer, if one is interested in finding the true value of the firm.
