Options for Vendors Post Sale - What You Need To Know

Published September 2023

When it comes to selling your practice, there are numerous options available in terms of your own role beyond the sale. Let's take a look.... 

The Options

1. The 12 Month Transition
In this scenario, the owner is ready to down tools and exit the practice after a well managed handover to the new owners. 12 months is the most common length of transition as it is typically co-incides with the period of retention.

What the time involvement of the seller looks like over those 12 months can vary considerably though:

• For a $1.5m practice this may be closer to full time with some tapering off in the second half.
• For a $500,000 practice this may be closer to full time for, say, three months then a much quicker wind down, with the second six months being more on an ad hoc consultative basis.

From a buyer's perspective they are generally comfortable with 12 months and a Vendor time commitment that balances the Vendor continuing to add value while still actively transitioning clients across to the purchaser.

2. The Accelerated Transition
Sometimes external circumstances dictate that the Vendor needs to transition faster, eg in six months. Some purchasers may see more risk in terms of client retention but it can be possible - particularly if the Vendor has set up the practice to not be reliant on themselves and there are a capable team with good client relationships.

Sales of bookkeeping practices are the other example where we can see faster transitions as the regular monthly client touch points mean that purchasers get up to speed far quicker than in a compliance-based accounting practice.

3. The Extended Transition

Here the Vendor is looking to sell their practice but wants to continue working for a longer period of time. We find this increasingly common - either because they want to stay involved with clients (without the stress of running a business!) and/or still need to maintain an income stream.  We had one client recently who sold his practice and took on an exciting new role with the purchaser and is intending to remain working for at least another five years. He has been re-energised with his change of role and work environment and also now has the flexibility with eight week annual leave to enjoy some extended travel which was never available to him as a practice owner.

We find many buyers are open to an extended transition. They like that the Vendor wants to stick around because it helps with the retention of clients. 

The Wrap

In summary, there is always more than one option available when you are selling your practice. Our recommendation is to always be clear on your "why" ie what is your motivation for selling, what does a successful outcome look like,  and what are you planning to do with your time post sale.  This will help guide you to choose the right option.

On a final point,  there are few times in your life when you get to create your ideal role.  At the time of selling your business is one of them. Embrace this moment and go for it! If you still want to keep working with your clients but only want to work 2 days per week, or if you only want to work eight months per year and take off to Europe for the other four months, be bold and sell the value of this to the purchaser. From our experience, many purchasers will be open to any reasonable requests and will work to fit in with your requirements as they will see the greater benefit to them of de-risking their acquisition.

At DMY we have many conversations with practice owners weighing up their options and can provide a useful independent perspective. To discuss this article in more detail and what it may mean for your situation, contact one of DMY's Directors below: 

Mark Emney

Mobile: 0434 079 530
Email: mark@dmyassoc.com.au

Daniel Jones

Mobile: 0401 493 773
Email: Daniel@dmyassoc.com.au