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How Long to Sell My Practice?

aka... How Long is a Piece of String? 

We often get asked for would-be sellers how long it will take. And we always answer: "It all depends..."  Here are the typical scenarios that we see:

 

The Standard

The most common timeframe we see is around six to eight months from listing to settlement. At DMY we have access to Australia's largest pool of active buyers, and we execute an efficient and effective sale process for our clients. When it all goes smoothly -  which it often does  - this is what the six to eight months looks like (give or take):

Month 1 - We prepare your Information Memorandum and get set to market your practice

Month 2 - We take the practice to market. 80% of the buyers who are going to express interest do so in the first couple of weeks. On average 76 will register interest for metropolitan-based practices. The initial shortlist of buyers is identified and meetings organised

Month 3-4  - Vendor meets buyers. Additional shortlisted buyers are identified and further meetings held. One or two preferred buyers identified

Month 5 - Heads of Agreement finalised. Due diligence completed

Month 6 - Contract of Sale executed

Month 7-8 - Settlement takes place

 

Life of course always throws up surprises and curve balls so here are a few other types of sale process that can be quicker or slower...

The Quick and Easy 

We regularly hear from our clients (the seller) that speed of sale isn't the primary goal. Finding the right buyer with a strong cultural fit who will look after their clients and people, and pay a healthy price for the practice, is. Sometimes however sellers can be lucky. They go to market, 70+ buyers quickly register interest, they meet a shortlist and straightaway there is a meeting of the minds with a buyer who is prepared to move quickly so they don't miss out. 

We have seen this happen with less than thirty days between going to market and executing a Heads of Agreement. Don't bank on it though. This sort of timeframe is possible but very unusual.

 

The False Start

Occasionally a seller will go through the process of meeting buyers, thinks they have found the right one...and then something unforeseen happens to derail the process. Back to square one. This can be very frustrating for the seller and typically adds at least three months, or more, to the sales process depending on time of year.

We have seen this happen several times this year. On one occasion, the buyer was keen but unable to come up with a modest refundable deposit when executing a Heads of Agreement. This is a big red flag to us and the seller.

On another occasion, a partner of a multi-partner firm, negotiated and signed a Heads of Agreement, but didn't take the rest of his partners on the journey. They weren't aligned on the acquisition and the seller sensed trouble, and rightly pulled the pin.

False starts can happen. Fortunately with DMY clients, this only happens in a small number of cases but we always say it is never over until the Contract is signed and settlement has taken place.

 

Slow and Steady Wins the Race

Some sales can take up to 18 months for a number of reasons. Location can be one factor. We have an average of 76 buyers for every metropolitan listing but this can vary significantly in regional locations. Resilience and patients are key traits for a seller in these cases. Starting the sale process early enough in recognition of when you want to ultimately exit is also key to avoid the stress of having to sell before an imminent deadline. 

Sale price can also be a factor. We have sold several practices at prices well above what buyers consider to be "market". In each case the characteristics of the business justified it, but sometimes the market of buyers doesn't see it the same way and there can be a lot of knock backs along the way.  In both cases our clients were very confident of the value and prepared to wait for the right buyer who could appreciate that value, rather than discount to force the sale. And in both cases their patience paid off.

 

The Wrap

In summary, when finding a buyer with the right cultural fit, it takes as long as it takes to sell an accounting practice, whether that is 30 days or 18 months. To guide our clients though, we always recommend they allow 12 months for a sale process and a minimum 12 months for transition. So, if you want to exit by a particular date,  start the process two years earlier.

To discuss this article in more detail and what it may mean for your situation, contract on of DMY's Directors below:

 

Mark Emney

Mobile: 0434 079 530
Email: 
mark@dmyassoc.com.au

 

Daniel Jones

Mobile: 0401 493 773
Email: 
Daniel@dmyassoc.com.au