Discover what selling your practice entails

Discover what selling your practice entails

Whilst you may think that everything in your accountancy practice is shipshape and it’s ready to go market, an outsider may take a different view.

Selling an accountancy practice is similar to selling your car or your house – there are defects that you have grown used to and can live with quite happily, but when it comes to showing prospective purchasers around they’ll be scared off.

This blog instalment will look at the main area that will come under scrutiny or need consideration when you sell your accountancy practice.



As you are an accountant you shouldn’t need reminding that all the necessary figures required to value the practice should be up-to-date and accurate. The buyer will want to pore over the books and records as part of the due diligence process to help them understand the financial workings of the business being acquired. It is the seller’s responsibility to ensure that all records are in suitable condition for the buyer to examine, not the broker’s.


Client records and files

What sort of picture does your working papers and client correspondence paint? Whether it is paperless or in a filing cabinet the buyer will expect to see completeness and structure. Are you storing client telephone numbers in your head or are they easily accessed in a proper database?


Tax and accounts

Your records and bookkeeping may be acceptable but do you actually submit your own tax returns and prepare your own year end accounts in a timely manner? If so, are your payments up to date or is this a case of the “cobbler’s children going barefoot”. No single omission on its own will necessarily see a buyer turn on their heels and disappear faster than you can say “HMRC” but taken in aggregate several small items could set off alarm bells. You may still get the sale but at what price?



Your workers are a vital part of your business but are you the captain of a happy ship, are there ongoing disciplinary issues or problems with the quality of their work?

Or perhaps a key member of your team has announced their intention to leave, which will severely affect other staff members and client relationships.



Are you tied into a lease that the buyer may not wish to take over? Is your lease coming to an end and not being renewed, causing issues with relocation that may drive clients away or lose passing trade?

Perhaps you own the building and wish to sell or let it to the buyer as part of the package. Do you actually have a copy of your lease and are you aware of any significant clauses that may give rise to problems?



Do you have a clear charging structure that is understandable to a buyer? Are you over or undercharging? Assuming that your fees are correctly pitched and fairly charged, do your clients actually pay up in a reasonable time or is the book debt swelling slowly but surely? Your lax approach – perhaps it is more a case of generosity – may not be something a buyer will countenance.



What is your PI claims history like?


Business model

Some practices have a very specific business model that may rely on the principal’s specialist knowledge or ability to reel in and nurture new clients, leaving open the question as to how a buyer will be able to replicate this post-sale.

There are many types of practice out there and the buyer often feels he or she has the ability to learn new skills. While this may indeed be true, if one is entering into uncharted waters without any support or understanding of a marketplace, they should remember that it is usually a recipe for disaster.

An experienced accountant who has exceptional talent and wishes to go into a new field, should ask the seller to remain behind for some time to teach them the ropes so they can pick up the business. This is often a good idea for a seller who is struggling to find a buyer, but we would advise the seller to ensure that they do not get pulled into the business for too long without a properly agreed remuneration structure.


What to expect

You can expect the initial meeting to be an informal affair, not unlike a first date. Normally this establishes whether there is chemistry between the parties that will enable them to conclude the deal and work together post-sale as is usually required.

Thereafter the buyer will have a list of questions, many of which will only become apparent during the due diligence process, and you’ll have to be patient and ensure that you understand what lies behind their line of questioning.

At all stages the broker should be available to help you deal with requests and questions that you may be uneasy answering or may not be familiar with, bearing in mind that some buyers purchase practices regularly, but this is your first sale.

As mentioned earlier you will have to open all your own books and ledgers so the buyer can corroborate your claims, and they will also wish to check that your client files and procedures are in order which means inspecting some of them.

Although they may wish to speak to your staff this should be resisted in most cases, and care needs to be taken to allow the buyer’s enquiries to take place without the “wrong” members of staff finding out, in order not to rock the boat. This is probably the trickiest part of the process and there is no “one rule fits all” that can be applied.

Naturally all contractual obligations of the firm that will affect the buyer need to be examined and missing paperwork is understandably not acceptable.

The process can run from days to months, depending on the complexity of your practice and the available time for both yourself and the buyer.

Expect stress, ups and downs and the occasional bout of panic. Many deals wobble at an advanced stage but if they are handled appropriately, especially with a go-between such as a broker, these potential deal-killers can usually be dealt with – often, they are down to misunderstandings.


Should I use a solicitor?

This is a very commonly asked question by accountants prior to the sales process but in my experience the vast majority of deals between accountants do not use the services of a solicitor, which begs the question as to why this is, bearing in mind that for all other business sales it is almost unheard of not to use a solicitor.

The role of the solicitor is to ensure that all documentation is in order and all facts are disclosed properly, within a contract which will be enforceable. I would always counsel accountants to use a solicitor but I suspect that the reason why this guidance is observed mainly in the breach is that there is a belief that an accountancy practice is a straightforward business and that as both parties are regulated they can trust each other. Anecdotally this is coupled with a professional suspicion of solicitors, who have a reputation for charging vastly higher fees than accountants and “who go looking for problems” and slow deals down unnecessarily. If you do choose to use a solicitor make sure they have the requisite experience for your transaction.

Some brokers and agents provide a template contract as an optional “free extra” over and above their core service and let the accountants negotiate it amongst themselves, which will work in the overwhelming majority of transactions.

As they say in legal circles …… “caveat emptor”, but it will apply equally to both parties.


A word of warning

Whilst it is up to the buyer to perform his or her own due diligence you need to ensure that not only does everything appear right, but you also need to make sure that you are not misleading them on any points or withholding material information that could sway their decision.

As sure as night follows day, if there are any suspicions of dishonesty or lack of integrity, post- sale you will become embroiled in a bitter and costly lawsuit with the prospect of not being paid the next instalment due from the buyer, and in the meantime you no longer have your practice.


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