Six Steps to Selling Your Practice Cont....

2. Make a List of What You are Selling
Any serious buyer will quickly seek information about the seller's practice. Prior to meeting with potential buyers, you should prepare a summary sheet of what you have to sell. This description of your practice should not have any names of actual clients or businesses, but list the types of clients you have, the industries they are in, services you provide, frequency of service, fees generated, staffing, billing rate information, and specialties, if any.

By sharing this information with a potential buyer, you will be presenting a clearer picture of what the practice entails. This will assist both parties in determining whether there is a mutual interest in the sale.

3. Identify the Parameters of Your Successor
When deciding who should take over your practice, consider chemistry and continuity. Change is hard for any client, so you must seek a situation that limits change as much as possible. Find a successor you feel comfortable with. If you like the buyer, chances are your clients will too. Then, consider the following:

Size. If your clients are used to dealing directly with you, perhaps you shouldn't sell the practice to a firm that intends to have a large staff handle their accounts. Bigger is not always better. On the flip side, clients who are accustomed to dealing with larger firms with multiple specialties almost demand a successor firm who can offer these things too. Typically, different size firms have different billing rates and service philosophies, so review these areas to ensure your clients will receive the same service for a similar fee.

Availability. Above all, remember your ultimate goal of selling your practice. You must determine if a buyer has the excess capacity to ultimately replace you and any non-returning staff members. I recall someone once saying that since he was a sole practitioner doing approximately $200,000 annually, he would seek to sell his firm to another professional similar in size and focus. To this, I asked him how much excess capacity he currently enjoyed in running his practice. He laughingly suggested that he barely remembered what his wife looked like! Then I asked him how much available time the buyer he defined would have to replace him? Just something to think about.

Specialties. If you provide financial services to your clients and expect to sell that aspect of the business, your buyer will need certain licenses. And, if your practice includes providing business valuations or IRS representation, you must be sure the successor is licensed and capable in these specialty areas as well.

Background. In a world where many people are properly attempting to be "politically correct," you must maintain candor and reality in selling your practice. If your practice has a lot of clients who require someone who speaks a different language, how can you consider selling it to anyone who does not? There are practices that not only have language concerns but perhaps cultural or ethnic realities that would impact long term retention of clients. These areas need to be addressed and dealt with appropriately.

Location. The real world also dictates whether the buyer must retain your exact location, must be in the immediate area, or has a lot of flexibility geographically. Most practices do require some level of geographic consistency in the buyer, but don't always demand the exact office location. If you prepare a great number of individual 1040 returns, office location will be a factor in client retention.
To determine how portable your practice is, consider the following scenario. Imagine you are planning to continue operating your practice. Your lease is about to expire, but you cannot extend it for some reason. How far could you relocate your office and still retain your clients? If the transition is done properly, this is the same distance your buyer can relocate to.