Reducing principal dependency, motivating staff and retaining clients are three keys to ensuring the successful sale of your practice

In No More Practice 4, Jim Taggart is on a journey to maximise his earn out following the sale of his practice to Austbrokers. A key part of my role in the show involves brokering the deal and advising Jim along the way as he seeks to maximise his earn out.

This is a common challenge that many practice owners face in selling their practice. Both buyer and seller want to maximise the value that they both receive from a transaction, and there are a number of steps that owners can take to ensure the successful sale of their practice.

1.    Reduce principal dependency.

The process of reducing key person dependency is something that can only be achieved over a number of years, but it is an essential step in increasing the sale value of a practice. The main way to reduce principal dependency risk is to transfer some of the client relationships to other advisers within the business.

Systems and processes also play an important role in reducing key person dependency. This also helps commercialise advice within a business and ensure that it is synonymous with the provision of advice, rather than the individuals within it. So ideally, the less interface and client connection there is with a principal, the better.

Even a small business can adopt a corporatised model, and reporting in particular has to be strong in the case of smaller practices as this helps the owner stay in the business a little bit longer in doing a handover.

2.    Motivating staff in a sale.

Communication is critical for business owners to maintain staff morale during a transaction. Communication should start as you start the sales process to keep everyone on the same page, and it becomes particularly important when you’re looking at final candidates, and you may have two or three key staff entering a heads of agreement so everyone shares the same vision for the sale.

Communication is important because it also helps reduce fear of change. As soon as you nominate that there’s going to be a change of ownership, this means change and with change comes fear as part of the human condition. The only way you can combat fear is by having a real clear vision as to what the business is going to be like in the future and what the opportunities are for everyone involved, and you have to keep on articulating the outcomes and benefits for both the clients and for the staff.

3.    Maximising client retention during a sale.

Business owners can maximise client retention through a transaction simply by being very close to the business. By working your top 20 per cent to generate that 80 per cent of revenue, for example, only helps in communicating the value proposition the purchaser has before them.

In the current market environment, there is an art in getting the best possible buyer, and having both them and the seller genuinely believe in the value proposition, so this can be confidently and honestly communicated to clients and staff. So if both the buyer and seller know client service is not going to be compromised and this can be leveraged throughout the transaction, this is where you get full client retention.

Source: www.evotv.com.au