sole practioner vs partnership

sole practioner vs partnership

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Hi,

Long time lurker, first time post. I have a small firm with a few staff.

I started on my own a few years ago because I didn't know anyone else who wanted to do their own thing.

I was just wondering if anyone has any input or experience about finding/teaming up with partners, or possibly even trying to merge with similar size small firms?

I'm thinking there could possibly be advantages from sharing overheads & office costs, partners could have strengths in different areas, and it might look better to potential clients?  This could also potentially allow us to go for bigger clients who don't like the sound of a sole practioner firm

The main disadvantage I can think of personally is that I would no longer be in control. 

Thanks

Replies (6)

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By Moonbeam
24th Aug 2015 07:49

Control

Of course there could be economies of scale in going into partnership with others, or setting up a limited company with others.

Many of my clients are directors with other people and it can be a fraught atmosphere.

The best of these arrangements are where the people concerned have known each other for many years before going into business. I still hear grumbles however, as inevitably control is now shared with other people and that's a compromise I wouldn't be able to put up with myself.

So only consider going into business with someone else if you really know them well.

Alternatively, take on staff and gradually build your business yourself.

 

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By Ken Howard
24th Aug 2015 10:27

Seen more failures than success

I know of several single partner firms that have merged, and unfortunately, the majority de-merged again fairly quickly!  The thing with sole partner firms is that one person is in control, and when you have two "equal" people coming together, you're really going to get issues as they're accustomed to doing their own thing, so aren't used to compromise.  

It works a lot better when there is a clear "leader", i.e. where a larger firm effectively takes over a smaller firm, the smaller firm giving up it's working practices, identity, etc., to work the way of the larger firm, and the owner of the small firm accepting a role as a subordinate partner to the large firm partner who takes the senior partner role.

My heart sinks when a new partnership client comes to see me and the two prospective partners are adament they want to be equal in every way - I rather forcefully tell them that they have to accept one to be the lead partner and have the casting vote and that they need to have their own clear roles rather than both trying to do the same things and tripping up over eachother.  Luckily most of them understand my reasoning and take my advice.  Some ignore me and do it anyway and usually end up breaking up within a couple of years.

One particularly successful accounting practice "merger" I was involved with a few decades ago, was where a 4 partner firm took over a 1 partner firm, and it was part of the deal that the sole partner would be given a new role in the new firm, with no operational contact with his old clients at all, and all his clients were immediately incorporated into the various departments as if they were new clients from a different accountant, i.e. new files, usual changeover information extracted etc.  Effectively a very clean break with no hangover from the old firm at all.  All parties involved were happy and it worked very well!

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By JimH
24th Aug 2015 10:39

Good to hear Ken
I too have witnessed uncomfortable mergers of established sole traders followed quickly by separation. I also know practitioners who are much happier after buying out their partners, with the exiting partner continuing on an agreed consultancy basis. This seems to work; perhaps it was on the lines Ken describes.

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By Maslins
24th Aug 2015 15:57

Largely agree with Ken.

Equal partnerships (whether technically a partnership of a 50:50 owned Ltd Co) frequently end in disappointment.

Combining forces is fine, but keep it clear who's in charge of what.

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By marks
25th Aug 2015 23:05

do as moonbeam says

Do as moonbeam says as that's what I am doing.  Run yourself and take on staff.

I work for myself, have one employee that have had for a year and am actively looking to take on another experienced accounts assistant.

Currently have about 180 clients and plan is to take on a CA trainee in Sept 2016, another in Sept 2017 and another in Sept 2018.  By Sept 2019 the first trainee will be qualified hopefully and out of contract and will replace them with another trainee.

Plan is to grow by 60 - 100 clients each year so by September 2018 up to about 400 - 500 with GRF of about £400k - £500k.

Have 5 staff at that time (2 experienced accounts assistants and 3 trainees) payroll costs be about £90k - £100k.  Other costs eg software, rent, training, telephone, PPS, etc etc be about £50 - £60k. So worse case costs will be £160k.

Leaves £240k - £340k pre tax per year.

I will still run the business myself and then retire after about 10 years at that level and make say another  £500k selling on at a sales rate of 1:1.

That's the plan anyway.

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By qul
26th Aug 2015 01:07

thanks very much

thanks a lot for all the advice. It may be best to keep going as we are and hopefully in a few years time 1 or 2 of the staff could become partners

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