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 bit of 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 extended 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 critical changes to your practice to make it really ‘succession ready’.
Mistake 4: Don’t delude yourself by expecting a ridiculous price. Conversely, don't undervalue your practice. Check the market and know what your procedure is 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 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 make your firm worth more.
Mistake 8: There are many inherent problems with running a one-person 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 crucial component in the eyes of your successor. Before your succession journey, it will be important you minimise key-person dependency as much as possible. It will be important that your successor integrates effectively with your business through the transition process and, importantly, retains all your key staff. Losing key staff can be a natural value killer.
Mistake 10: Don’t rely upon your advice and experience. Influential advisors will push you to achieve higher goals and higher outcomes and ensure all critical aspects of your succession are addressed. Don’t leave anything to chance. Seek independent, quality, professional advice.