By Alexandra DeFelice
You're at the point where you don't want to stop working, but you know you can no longer run your firm for years to come. You don't have kin to fill your shoes, and you haven't found anyone in your firm who has what it takes to run the show in your absence.
Should you sell your firm?
The answer is almost always "No," according to Max T. Krotman, JD, managing partner in the mergers and acquisitions division of Globalforce International
"Very few people want to (sell)," Krotman said. "The retention rate is much greater with a merger. We don't do a sale unless the [owner] is dead in the ground."
Common reasons for wanting to sell include scenarios such as the above, along with relocation, fear of death (illness), inability to get staff as well as when another partner leaves, making the workload for the remaining partner unbearable.
Krotman works with his clients to find a better solution. In one example, a seventy-two-year-old accountant decided to work three more years. He merged in another firm and the older accountant was able to work part-time, contribute to the bottom line, and help clients acclimate to the new firm.
Transitioning clients is one of the most important elements in these kinds of deals.
"The client highly values the blessing of the former accountant in picking the next one. He doesn't want to shop," Krotman said. "Make sure the incoming accountant knows what the client is looking for."
In 99 percent of the deals he does, the seller stays around for a short time, at least part-time, so that, absent of sudden death, it should be looked at as a merger.
That being said, the seller's involvement should be primarily with the successor, not with the clients, according to Krotman.
"They need to look at this deal not as the subtraction of their existing accountant, but the addition of additional professionals and resources," Krotman explained. "Otherwise it will be difficult to wean them off."
The "Right" Fit
So how do you know when a potential buyer is "the one?"
The right fit is someone who treats clients the same way you do. For example, if you typically return calls the same day and a successor normally does so within a week, that won't vibe well with clients.
"Make sure it's a good fit economically, professionally, and personally," Krotman said. "If the seller isn't the sharpest knife in the drawer, maybe he doesn't need to find a sharp knife, maybe he needs another fork."
Seeking and going for the highest stated price vs. the best person is one of the biggest mistakes sellers make.
"They get obsessed with upfront cash, which is almost always irrelevant if both parties have skin in the game," Krotman said. "The truth is, the best person will get you more money."
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