September 17, 2023
Here are a few tips for making sure you have everything sorted out in your firm prior to considering a sale or disposal. By everything sorted out we mean the following:
Accounts in Order
All your accounts in order and fully explanatory, without anything missing. Make sure you have prepared copies of accounts that you are able to give any potential purchasers, and do not rely on those submitted to Companies House as very often they contain very little information that a buyer will require.
PII Proposal Form Available
Make sure you have a copy of your professional indemnity insurance (PII) proposal in pdf format available for a buyer to see. PII proposal forms are considered to contain most information that buyers need and are viewed as being quite accurate.
Run Off Cover
Check the cost of run-off if needed – usually anything from 2.5 to 3.5 times your last premium. You should be able to find this in your PII contract – for a whole range of reasons try to avoid communicating with your broker.
Notify Owners (Only)
Ensure you have the consent of anyone who has an interest in your business, whether this is as a shareholder, equity partner or partner, and speak to senior management (if you feel comfortable) at some point to put them on notice. Only do the latter if you have a particularly close relationship with them, otherwise you could find they run to the hills! Sometimes senior staff will entertain the thought of a management buyout, particularly if they can see the success you have enjoyed with the business. Worth considering an NDA fairly early on.
Extract Yourself
Try to make sure you are at arm’s length from the company wherever possible. Much easier said than done, but if you can recruit people to do the work you were doing on a daily basis this will help your chances of a sale considerably, because buyers like to see a freestanding unit that runs itself and not something that is dependent on the goodwill of the owner. Extremely hard to do when you are running a small company.
Make sure your internet presence is spotless
If you have any negative reviews, deal with them (obviously not by sending round the heavies but with carefully measured responses to offer to make contact, explain your company’s actions and suggest a resolution), make sure your website is up to date and contains useful and interesting information about your business and the fields of law you assist with. If you have not got a social media presence, think about getting one.
Get a Linked In account for your company if you haven’t already got one. It is very easy to do, you simply need to register your company with Linked In and create a page, so that anybody searching for your company can find you on Linked In. Make sure you have a LinkedIn profile as well.
Companies House
Ensure that the information at Companies House is fully accurate and reflects your company’s position. Try to deal with anything outstanding that is not lodged with Companies House. So many times when we come to look at a sale of a company and go on to Companies House we discover there is information missing that could easily be added, and also easily adds questions to the potential buyers’ mind as to whether or not there are issues with the company they are seeking to purchase.
User Manuals
This might not make a lot of sense, but if you have written procedures for everything in your office it is very easy for a buyer to come in, take over management of the procedures and see exactly what is done, how and when. It is important to have these in place when you are seeking a sale of your law firm so that anyone with the requisite experience could walk into your business, take over your files and staff and make the business operate smoothly and effectively.
Get a Valuation
Consider ordering a market valuation of your business together with a deal structure report. Calling up a broker and asking them to guess on a price or give a value based on a gut feeling will not suffice, neither will asking your accountant to perform a calculation. Valuations take time and effort to prepare and be useful, and it is worth obtaining one in order to get an idea of the likely value from the start of the process.
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