Extracting yourself from the business
We are involved in the buying and selling of solicitors’ firms and accountancy practices across the UK and further afield. Sellers can be anybody from a sole practitioner through to a very large partnership or company, but the usual aim of owners selling up is to get out of the day-to-day humdrum of running a business, and to free up the owner to do something completely different.
A few tips for sale:
1. Stay at Arms Length
Over the time we have been involved in the sale and purchase of solicitors and accountancy firms, one thing has always been quite clear, and that is that the key to a successful sale is to distance yourself as far as possible from the business you are seeking to sell.
How is this possible and why would you want to distance yourself from a business you are looking to sell? The answer is simple. When you come to sell a business, you are selling a unit of enterprise that can be measured according to its financial performance. If the unit of enterprise is centered around you as an individual then you become the economic factor in the sale. If you are the economic factor in the sale then being that your aim for selling is usually to get out of the business and have nothing more to do with it, then if you are not part of the sale the value of your business is going to be considerably lower.
2. Standalone Operation
Buyers of businesses want to take on a unit that operates on a standalone basis, without too much additional effort or input from themselves or anyone else. If you have been the chief operator of the business for some time, with the clients and the work being generated and coming through you, the chances are if you leave there is not much left in the business of value to the potential purchaser.
To give a quick example – take an average conveyancing practice with ten staff operating in a high street setting. There is one partner and he has been in the business for 40 years. A lot of the work is either walk-in or via personal recommendation, and the personal recommendation is very often via the partner. The partner still undertakes a good sized caseload on a daily basis and has regular customer contact.
Contrast this with a conveyancing practice with ten staff operating from a high street with a partner who has no contact with the customers, does not handle a caseload, but instead is involved in the administration and business development of the company. The customers of this company come via the marketing and business development undertaken by the partner.
The second set up is going to be worth considerably more than the first. A purchaser could take over the second company quite comfortably and sit back and watch it continue to work. The same purchaser would have to put in considerable work into the first company to ensure that the value return of the first company remains the same.
3. Aim for a Cash Sale
There is a business rule of thumb that to have an effective departure from a business you own, you need to take a cash sale and walk away without staying involved. Naturally this is difficult to achieve, particularly in a legal setting, but it is possible if a buyer can see the value you have created in your business. Staying involved in a business that you have sold but continue to work in can be difficult as you will no longer be the controlling party, and stress levels may be higher because the purchaser is going to have demands on your time and effort, whereas before you worked for yourself.
Think very carefully about your daily involvement in your business – can you delegate a good proportion of your work and turn your role more into a solely managerial position than a fee generator and fee earner? Do you need to recruit a second in command to work as you?