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 can be tempting to sell direct to a buyer who has emailed you direct but engaging the right expert to support you can make or break a successful sale and exit. Here are our insights to help you guide you towards the right decision:

Why Use A Broker?

If you are thinking of selling direct, consider the following questions:

Do I have the time and headspace to manage the sale process while still managing my practice?
Do I understand the market price for my practice?
Am I comfortable negotiating key commercial terms such as retention, and my transition role and package?
How do I know there aren’t other buyers out there who would be a better fit and offer better terms?
What information should I provide the purchaser, and when? What about confidentiality and client privacy?
When should I be telling clients and my team?
What should I look out for in the Heads of Agreement and Contract of Sale? Who should be preparing them?

From our experience there is a lower likelihood of achieving a good cultural fit, strong commercial outcome and well managed transition if you sell direct than 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 accounting practice?

How to Choose the Right Broker

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

1. Do they really know the accounting industry?

A generalist broker will not know the accounting market in depth and will not have access to as many active buyers as a specialist accounting industry. At DMY our Market Updates go out to more than 8,000 industry practitioners, and we have the largest pool of active buyers across Australia, averaging 86 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. Australia's licensing regime is extremely complex with each State and Territory requiring individuals and the corporation they operate within to be separately licensed. 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, Tasmania, West Australia and the ACT.

3. Do they represent sellers and buyers?

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

4. Are they quality and process driven?

The key to a successful sale outcome is a well managed sale process, where your broker does the heavy lifting for you and runs a transparent and efficient process. Everyone should know where they stand and what’s coming next. DMY's proprietary Seller’s Toolkit makes life easier for our client and achieves 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 you for a discount, you would no doubt encourage them to focus on value not price. We do the same. Saving a few thousand dollars on your broker but then selling your practice for less than market value, on less favourable terms, or with more commercial risk (or not selling it at all) is a false economy! We hear stories of practice owners being told their practice is worth 85-95 cents by a broker without even doing a proper appraisal. That's just lazy. When practice owners first come to DMY and we appraise their practice, we take them through a structured methodology and reference their situation against comparable market data. That's why we are achieving average selling prices in metropolitan locations of 108 cents in the dollar, with many going for much higher and our clients speak very highly of the service we provide: Testimonials

6. Are they great communicators and transparent with you?

There is nothing worse that putting your practice up for sale and then left hanging by your broker, 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 weekly Deal Tracker 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 with more than one broker is a recipe for a mess. Don't listen to brokers who tout that they don't operate on an exclusive basis. They are relying on the fact that the other brokers who back out because it's simply not practical. You will have two Information Memorandum's and two processes to follow and it will confuse buyers. At DMY we 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.

7. Are they able to navigate deal roadblocks?

Deals don't always go smoothly. If you are a seller you want to be working with a team of brokers who have the experience, the skills and the relationship skills to solve issues and keep the deal moving forward, or the honesty to call it as being over if that's where it sometimes gets to. It's not always the seller where DMY helps deals with roadblocks. We occasionally see buyers being given the run around by their banks when it comes to financing. We have strong networks across the Professional Service Teams in the major banks and can help steer the buyer to the right people to accelerate the financing process. Ultimately, that's a win for our client too, as it keeps the deal on track.

The Wrap

Selling your practice can feel like a daunting prospect and 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