|Thinking of selling your practice? |
Three things to know before you hand over the keys
By Amy Burton-Bradley, Partner Julian Midwinter & Associates
The law is a difficult business, and you can’t simply lock up the office, hand over the keys and walk away whenever you want. With many smaller firm partnerships and solo practitioners approaching retirement and looking to their future, we thought it was timely to discuss the best ways to get ready to sell your practice.
The Law Society’s publication covers some of the specific legal and practical considerations of selling a practice in New South Wales, but in this piece I want to focus on some general advice that will apply whether it’s a lateral relocation, merger, acquisition, or other change to practice structure and business arrangements. Lawyers tend to focus on only one set of activities necessary to successfully sell their practice: they dwell on structuring a transaction to minimise risk and tax.
What you need to do is the bigger and more important activity of preparing the practice for successful sale or relocation by making it attractive to the right people.
Commit the time and resources to make your firm sale-ready and improve your outcome. There are two critical steps you need to take.
Step 1: Know your likely buyers
Preparation is about doing all that’s needed to maximise the probability of successfully selling on good terms. You need to know what likely buyers will be looking for.
This quick check list will help:
• Assess your competitive position within each segment of the target market
• Consider and list the profiles of the most likely buyers. To what kind of acquirer will your firm have most value?
• What will prospective purchasers look at when they assess your practice?
• Consider the best time to go to market.
• Get your communication materials spot-on.
Step 2: Make your firm attractive
Making your firm an object of desire is central to selling at all, and key to getting a good price.
This is a highly competitive market, and our take is that this is not likely to lessen any time soon. It’s likely that prospective buyers will compare your practice with others – some similar, and some in other segments. They will find many options.
Positioning your practice for sale is the most important step in maximising your overall outcome.
If you know your potential buyers and likely competition (which you will, having done the research), then you know how to position your firm to attract the right buyer and the right price.
Put your energy, effort, and investment into preparing and showcasing your practice and its achievements. Understand the strengths of your practice, and get your house in order well before putting up the “For Sale” sign.
Identify and remove obstacles and hurdles which detract from, or limit, the appeal of what you are selling.
To draw an analogy with selling your home: make the essential repairs, do the detailing to make it look its best, and present it as an attractive proposition for buyers prepared to pay the right price.
Structuring is about getting the best outcome from a transaction once a buyer has said “yes, I want it”. Don’t invest heavily in structuring a transaction until there is a transaction to structure.
By all means, maximise the position of exiting owners by careful structuring, but do that after the practice is made attractive and impediments removed.
Finally, remember that it usually takes much longer to prepare a practice for sale and successfully sell it than you expect. The flipside is that every bit of preparation and practice improvement you do will deliver benefits along the way – and not least of all in the sale price.