One of the smartest and fastest ways to grow fast is to purchase another practice, especially if it’s undervalued.
The buying process, however, is full of hidden perils. Identifying the right firm, negotiating the right price and integrating the purchase into your practice are three of the riskiest decisions you will ever make as a practice owner. Making a practice sale-ready and selling it for an optimal price is equally risky. The difference in selling a practice for 90 cents in a dollar fees and receiving $1.20 is huge. Yet, buyers and sellers of accounting firms continue to commit costly but avoidable mistakes. When it comes to buying and selling practices, we have learned much about what works, what doesn’t, and why and submit these as the most common mistakes
Mistake 1: No plan to maximize value
Without preparation any prospective offers can only be at the lower end of the scale. All that glitters is not gold acquisitions rarely meet the buyer’s expectations. You do not know when an opportunity may walk in the door. Be prepared! Make your practice sale-ready
Mistake 2: Ignoring ugly financial warts
P & L: Cash lock up, etc.
Balance Sheet: Unrecognised liabilities.
Mistake 3: Lack of preparation time
If you have worked for 20-30 years building, or assisting to build a firm, you’re not going to decide over a weekend what to do. There is much to be done. Whether you are a buyer of a seller, the best prepared usually secure the best deals.
Mistake 4: Delusions of granduer
Don’t delude yourself by expecting an outlandish price (seller or purchaser). Check the market and know what it is really worth. All too often due diligence is not carried out.
Mistake 5: Making a bad first impression
Finding a buyer or seller is a lot like hooking a fish on the line you only get one chance to reel it into the boat.
Mistake 6: Looking like everyone else
Differentiating your firm from competitors can attract new clients and create new opportunities and ultimately may make your firm worth more.
Mistake 7: Running a one-man show
Buckle your safety belt! You are about to begin the most unpredictable race of your life so you’ll need a good pit crew.
Mistake 8: Letting key assets walk away.
There is a window of opportunity of about 18 months in which cultures may be merged get this wrong and you may finish up just like Stockford Ltd. Ouch!
Mistake 9: Getting soft advice or none at all
Don’t rely upon your own advice and experience. Effective advisors will push you to achieve higher goals.
Mistake 10: Managing your own negotiation strategy
You don’t get what you deserve in life, you get what you negotiate.
Author: ATL Network: Is your practice Sale Ready?