Whatever route you choose for exiting your practice, you should plan well in advance - at least 3 years before your intended exit date. It is all too easy to be so busy working in the practice that you don't work on the practice, but it takes time to prepare your practice for an internal transition or an external sale.

Prior to entering into any discussions, it is important that you as a practice owner have a ballpark figure in mind that you want to achieve. It needs to be realistic figure of course!

If you are selling to anther practice without using a broker or adviser, then in initial discussions you should only provide a summary of fees and clients without any identifiable information. A buyer may want to see a summary of fees that have had any software costs recharged to clients removed, so have that ready too. Make sure you have a signed non-disclosure agreement in place before you provide a potential buyer with access to client files.

If you use a broker or adviser, check that they require potential buyers to sign a confidentiality agreement, and that they only identify you to a potential buyer with your agreement.

The first thing a buyer will do is look at your financials. If these are not up to date then it can raise a red flag as to what other areas are not up to date - for example if there is a backlog of client work that needs doing.

The buyer will do due diligence so your financials must stand up to scrutiny. Make sure that any ex-clients have been removed from your turnover figure. Your work in progress may also be examined for indications of how much work has been delievered for payment already taken, so improvement in this area prior to a buyer looking at your financials will help.

Whilst this may seem obvious, it can be tempting to sell for a higher multiplier to a practice that may not be the right fit, than to sell for a lower multiplier to a practice that mirrors your own practice.

A potential buyer with the same culture, software, service level and a similar fee structure to your practice is likely to be the best fit and minimise client departures post-sale, reducing the likelihood of a clawback claim. It will also make the transition easier for your clients.

Most sale agreements will include a clawback clause that will allow the buyer to deduct a percentage of the remaining balance if any clients leave the practice during that period. A well planned transition, and a willingness to stay on post-sale to help with the transition, can help minimise clawback.

You can negotiate a provision in the sale agreement that prohibits the buyer from raising the fees during the clawback period as that could trigger client departures. You should also consider negotiating a clause that gives you the right of discovery if the buyer does seek to reduce the balancing payment under the clawback clause. This will allow you to look at the relevant client files and even speak to the clients to ensure that any losses are legitimate.

Some practice owners want to sell their practices and walk away completely. However if you are willing to do some consultancy work post-sale then you can work that into the sale agreement - you can work a day a week, for example, to help transition clients to the new practice. Some clients will require greater care when transitioning and your on-going presence will provide them with assurance.

ACCA requires that members who cease to practise maintain professional indemnity (PI) cover for a six year 'run-off' period. This cover provides protection should any claims arise from work done whilst the member was active in practice. 

If a professional negligence claim is made after you have sold your practice, your liability will depend on what was agreed with the buyer so it is important that this is discussed and forms part of the sales agreement. The buyer will be adding your practice to their existing PI policy.

Generally if it is just a sale of assets and trade or block of fees only, then the buyer's insurers will ask to see your last completed proposal form, policy schedule and claim history. It is usual that the past liability is insured by the seller through a run-off policy - maintaining your own run-off insurance provides you with the assurance that you have cover for your past liabilities and are not dependent on someone else maintaining this cover for you. If you are arranging run-off cover then most insurers are happy to note the addition to the buyer's policy and review their revised fee income and premium at next renewal.

If it is a share capital purchase and the buyer becomes responsible for the past liability of your practice, their insurers will still ask to see your last completed proposal form, policy schedule and claim history. However they will usually charge a pro-rata premium to the buyer based on the fee income of your practice.

The PII market has become more challenging in recent years with some insurers withdrawing from the PI market for accountants, and others reducing their overall exposure to risk. Appropriate run-off cover is more difficult to secure now.

Very few insurers, if any, will consider providing run-off cover for a risk that had been held insured with another underwriter prior to cessation. So in the run-up to selling your practice, consider placing your PI cover with a stable, A-rated insurer and engaging the services of a specialist PI insurance broker such as ACCA's recommended broker Lockton.

Lockton has written this article about the PII considerations when buying or selling a practice. 

Make sure there is good communication with clients, the buyer and your team. That will ease the transition for everybody.

If you have started thinking about shaping your practice exit but feel you need help, you can consider engaging a coach specificallly to help you prepare for your exit. There are well-known coaches for accountancy practice owners that have run practices themselves, and many are open to a free initial discussion to see if you would benefit from their help.