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Why Use a Broker to Sell Your Practice, and How to Choose the Right One

Why Use A Broker To Sell Your Practice, And How To Choose the Right One

 

Selling your practice is a big decision. It’s your lifetime’s work and many of your clients are now longstanding friends. You want your team to be well looked after, and you are typically going to need to work with the Purchaser for 12 months through transition.

Engaging the right expert to support you can make or break a successful sale and exit. We know that not every practice will choose DMY - and we choose not to work with every practice that comes to us - but here are our top tips to help you guide you towards the right decision:

 

Why Use A Broker?

 

Some practice owners choose not to use a broker, for example when they receive an unsolicited approach. If that is your intention, consider the following questions:

  1. Do I have the time and headspace to run the sale process on my own, while still managing my practice?
  2. Do I really understand the market price for my practice?
  3. Am I comfortable negotiating other key commercial terms such as retention, and my transition role and package?
  4. How do I know there aren’t other buyers out there who would be a better fit and offer better terms?
  5. What is appropriate to provide the would-be purchaser, and when? What about confidentiality and client privacy?
  6. What should I be asking the buyer?
  7. When should I be telling clients, and my team?
  8. What should I look out for in the Heads of Agreement and Contract of Sale? Who should be preparing them?

DMY’s contention from talking to owners who have sold direct is that it can still generate a good outcome. But in many cases they end up selling below market price, on terms less favourable and with potentially more commercial risk than if sold through a well run broker-led process.

You wouldn’t sell your home direct to someone who knocked at your door so why do the same with your practice?

 

How to Choose the Right Broker

 

Once you have decided to engage an expert to support you, here are the key questions to consider to help you choose the right one:

1. Do they know the accounting industry?

We see the occasional listing of a practice for sale with a generalist broker. A generalist will not know the accounting market in depth, and will not have access to as many active buyers as a specialist broker dedicated to the accounting industry. 

At DMY our regular Market Updates go out to more than 8,000 industry practitioners, and we can access the largest pool of active buyers anywhere across Australia, averaging 76 buyers per listing in metropolitan locations.

 2. Are they correctly licensed? 

Never sign up with a broker until they have disclosed their correct licenses to you. Unfortunately, a number of brokers in the accounting industry are not correctly licensed everywhere they operate.  They put their clients, the sale and themselves at risk. Australia's licensing regime is extremely complex with each State and Territory requiring individuals and the corporation they operate within to be separately licensed. But that's no excuse to cut corners. 

At DMY we currently hold 20 separate individual and corporate licenses to operate. Each State and Territory maintains public registers of license holders which can be accessed here: New South Wales, Victoria, Queensland, South Australia, TasmaniaWest Australia and the ACT.

3. Do they have conflicts?

Many brokers represent both sellers and buyers. We don't know how they do it. It confuses clients and leads to messy perceived and actual conflicts of interest. That's why we only represent sellers. That's good news for our clients as we bring more buyers to the table and we are equivocally only representing one client: the seller.

4. Are they quality and process driven?

Our sales process is highly structured from start to finish. We do the heavy lifting for our clients and run a clear and efficient process for both seller and buyer. Everyone knows where they stand and what’s coming next. For example, when we appraise clients, we take them through a structured methodology and reference their situation against comparable market data.

Our proprietary Seller’s Toolkit also makes life easier for client and achieve a better outcome, faster. Whether it is our high quality Information Memorandum (we get regular feedback they are the best in the industry), our Heads of Agreement templates, or guidance notes for that all important first meeting with a buyer, we support our clients every step of the way.

5. Do they deliver great value?

If a potential client asks us to price match a competitor., we always encourage them to focus on value not price (just as any good accountant would in the same situation). Saving a few thousand dollars on your broker but then selling your practice for less than market value, on less favourable terms, or with potentially more commercial risk, or not selling it at all, is a false economy.

At DMY our goal is to offer the greatest value and have the most satisfied clients. We are achieving average selling prices in metropolitan locations of 110 cents in the dollar,  and our clients regularly rate us 9 or 10 out of 10 for our performance.

6. Do they communicate regularly and transparently

When it comes time to put your practice up for sale and secure your legacy, it’s a big deal. A really big deal. And you don’t want to be left hanging, not knowing what progress is being made. How many buyers have enquired? What stage are they at? What is their feedback?

At DMY we provide every client with our customised Deal Tracker on a weekly basis together with regular debriefs via phone, Zoom or face to face. This means they always know where they are at in the sales process and what is coming next.

7. Will I be locked in to a contract I can't get out of? 

Working exclusively with one broker is sensible. And in fact DMY will only work with clients on an exclusive basis. However, what we won't do - unlike other brokers - is tie our clients in to 12 month contracts that they cannot get out of.  DMY clients can typically terminate their engagement at 30 days notice if they choose. We want to represent clients who want to work with us, not who are contractually bound to do so.

 

 The Wrap

 

Selling your practice can feel like a daunting prospect. For most owners you only do it once in your lifetime. The good news is that you don't need to do it alone. There are experts out there who do this for a living. Every day. Talk to them.

To discuss this article in more detail and what it may mean for your situation contact one 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