When you are contemplating your practice succession, there is a lot to consider and a lot to do.
Let’s explore some of the most expensive mistakes you can easily avoid with a little preparation.
Mistake 1: Be prepared! You only get one shot at making the right impression. Take the time to adequately prepare your practice information and present it in a way that reflects the positive aspects of your business. Spending the time to analyse your practice and focus on those areas that drive value and those areas that detract value will pay handsomely if done well.
Mistake 2: Having unprepared financials can be a real problem – excessive cash lockup, poor debtor’s management, slow processing of work in progress, unrecognised liabilities such as long service leave, etc. These issues will present ‘red flags’ to any potential successor.
Mistake 3: If you have worked for 20-30 years building your business, you’re not going to put your successor in place over a weekend. Most likely, there is much to be done. The best prepared usually secure the best deals. You can do a lot in 12 months to make key changes to your practice to make it really ‘succession ready’.
Mistake 4: Don’t delude yourself by expecting an outlandish price. Check the market and know what your practice is really worth – ‘the market’ is rarely wrong. Importantly, make sure you have multiple parties interested in acquiring your business to ensure you get the right fit and the right deal.
Mistake 5: You don’t get what you deserve in life, you get what you negotiate. Seek quality external advice for your succession journey. Go it alone at your own peril.
Mistake 6: Finding a buyer is a lot like hooking a fish on the line you only get one chance to reel it into the boat. If you don’t represent your business in the best light in the initial meeting, it is unlikely there will be a second. Be prepared, be upfront and know what you want.
Mistake 7: Differentiating your firm from competitors can attract new clients and create new opportunities and ultimately may make your firm worth more.
Mistake 8: There are many inherent problems with running a one-man show. A lack of systems, structure, people, and processes will certainly kill a lot of potential value. Buckle up and get yourself a good pit crew!
Mistake 9: More often, when your succession is complete, your people will be a key component in the eyes of your successor. Prior to your succession journey, it will be important you minimise key-person dependency as much as possible. Through the transition process, it will be important that your successor integrates effectively with your business and importantly, retains all your key staff. Losing key staff can be a real value killer.
Mistake 10: Don’t rely upon your own advice and experience. Effective advisors will push you to achieve higher goals and higher outcomes and ensure all important aspects of your succession are addressed. Don’t leave anything to chance. Seek independent, quality, professional advice.