Selling your practice: Ethical issues
While professionals have always worked within an ethical framework the whole concept now threads its way throughout the business and political worlds like a stick of Blackpool rock, setting the expectations bar high.
Failures or simply a lax approach on the ethical front are no longer simply dismissed with a tut-tut and a wag of the finger, their ramifications can extend far and wide , potentially bringing avoidable grief to all parties in a sale – staff , clients , the purchaser and yourself.
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Preparing your staff for the sale is one of the most challenging aspects of the deal especially as it lies with a complex framework of employment protection legislation, usually covering areas such as redundancy and TUPE. It pays both morally and financially to engage expert legal advice with specific regards to your staff and their rights prior to embarking on the sales process, irrespective of any lawyers that may be engaged on contractual matters relating to the practice sale itself.
Staff matters essentially break down as inward facing and outward facing. The inward considerations start with deciding which members of staff to tell first and when to do so. Typically a trusted lieutenant within the firm will be brought into the loop early and is usually assured of a secure future within the deal context or if not, certainly a financially rewarding departure. You now have now driven a wedge between an ‘inner circle’ and the rest of the staff. Explaining it to them and managing their expectations is not easy and is likely to lead to tension and accusations of favouritism, with the potential as a basis for an unfair dismissal lawsuit especially if there is bad history.
If you know that a relocation may be on the cards it is only fair to allow staff the maximum possible time to make alternative employment arrangements but if they are brought into the frame too early it could cause unnecessary anxiety and stress for them and their family.
You should also consider paying your staff a windfall, perhaps with conditions attached, as recognition for their role in your success. It is also sound business practice at such delicate times as it does not take much for a disgruntled staff member to torpedo a smooth transition or to subtly threaten to do so.
Outward facing considerations are typically whether the buyer and his existing employees are going to be a good fit for your staff, both culturally, ethnically and in terms of the respective work ethics and firm’s ethos. Once your personal obligations to the buyer have been discharged , typically within 12 to 18 months , you cannot expect your staff to suffer in your absence while you enjoy the fruits of their years of toil helping you build your practice, even if you have shared a piece of your good fortune with them. Any financial bonus is not a bribe, it is a reward.
Future career prospects and wages should also play a part in thinking about your staff. Not every firm may take the same progressive approach to staff career development as you have done nor are they necessarily as bountiful at special times in the year or after a good set of results.
In what might seem paradoxical in terms of undertaking due diligence it would be good practice to check out the satisfaction of the buyer’s staff as well as making it clear your approach to your staff and your aspirations for them.
Obviously the sale of the practice is ultimately to benefit yourself, but staff are more than simply ‘tools of the trade’, are stakeholders who deserved to be recognised as such and even if you have to make some compromises at least let them know you care and you tried.
When it comes to the ongoing welfare of clients your mindset should be 100% of the opinion that you have chosen them a suitable replacement accountant who will deliver them a similar style of care and who also has at least as good technical ability. Although the sale contract will mandate that fees have to be in line with what clients have been used to the buyer may be seeking to offload certain sizes of client or types of business, which could mean another change of accountant in a short period, something that is clearly unfair to your clients, so it is not unreasonable to include this point in your negotiations.
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Another point to cover is whether the purchaser intends to close your office to take advantage of stripping out overheads. Are your clients prepared to travel the requisite distance to the new location? In spite of online and virtual accountancy services growing rapidly not every type of client is willing to relinquish a traditional face-to-face service that may entail several visits a year to your office depending on the services required and the complexity of their finances.
Will the client see the partner like he did at your firm or do they claim to offer as a good a service with minimal partner contact? It may only be perception but to many people it is a important – I recall as a junior being told by a senior staff member that clients “wanted to speak to the organ grinder, not the monkey!” It made such an impression on me I still remember it almost 25 years later.
Regarding your ethical duty to the purchaser, although most matters will be covered contractually, ask yourself honestly whether or not there are any grey areas that ought really to be disclosed, or more precisely how would you feel if you were going to discover some unpleasant facts for which there was no recourse. For example, you may not have received a complaint or been formally notified of a disciplinary matter involving the good name of the practice but you know it’s coming , not if – but when. Or perhaps a member of staff whom you suspect of dishonesty but could never quite pin it down. I am sure you can think of other instances that have moral if not contractual duties.
Finally, it is critical to ensure that “the cobbler’s children are not going barefoot”. Is your decision to sell a wise one? How are you going to support yourself and those nearest and dearest to you without that regular and predictable income flow – starting in business (and prospering) is harder than you might think or haven’t you noticed while handling the affairs of your clients.
What’s the best way to deal with moral questions arising in connection with the sale of your practice? One answer is to stand in front of a mirror but the best one is to take impartial advice.