Selling your practice: They think it’s all over
In the final part of this series Norman Younger asks after you’ve sold your accountancy practice, what next?
In the first four articles about selling your accountancy practice I started with an introduction of the subject and took you through the sales process. Now, in the final piece in the series I am going to cover matters relating to after the sale, which can be the most critical point in the process in as much as getting it wrong can have disastrous consequences that play out over many years in the worst scenarios.
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During the initial part of the marketing and sales process you will be quietly be looking forward to receiving a lump sum but once the completion deadline draws closer many sellers are hit by a sudden feeling of panic when they realise that their main source of income is about to evaporate, leaving them with the challenge of how to use the lump sum to replace that income.
It’s pretty pointless sticking it in the bank with interest rates so low, but conversely you do not wish to take too much risk with your nest egg, so how do you strike a happy medium? Doing nothing is not an option as, assuming your outgoings were commensurate with your income, the funds could be gone in three or four years for most retiring accountants if they simply lived off the capital.
At this juncture it is well worth remembering that while accountants are competent with cash preservation and management, many are not clued up on the investment scene, or worse – they think they are. Investment professionals exist for a reason and talking to them is highly recommended, even if it is simply to bounce some idea off them or let an independent third party assess your assets and liabilities in light of current and expected economic conditions in order to receive advice as to your options.
Once the ink has dried on the contract you will have a lot of spare time on your hands. Younger accountants will probably take some time out and then launch a new business or perhaps ramp up their involvement in an existing business. The trap to steer clear of for them is not to let the time out become permanent as it is very easy to lose momentum and drift while funds dwindle.
For the older accountant retirement is likely to beckon as a natural step, which may allow for existing interests to be pursued more actively or perhaps new ones to be ventured into. However, one area that is often overlooked is that of voluntary or charity work, be it business mentoring or hands on support in a local hospital in a volunteer role. It is extremely rewarding and for many retirees as they get older it gives them a purpose in life that may otherwise be absent.
As a wildcard, depending on where you are on the age scale and on your inclination for pastures new, why not think about retraining for a second career. You don’t have to aim to be a rocket scientist but there are myriad options out there and you’d be surprised how little time some courses take and how soon you could be supplementing your pension with a lifestyle job allowing you the flexibility that you have waiting so many years for.
Duties to buyer
It is well worth being aware of what you are agreeing to when you sign the contract in terms of post-sale duties and obligations to the buyer that will take up your time, be it as a consultant or to be available for a specific period of time at certain hours. You may not be able to commence your eagerly anticipated and long-awaited backpacking tour of Nepal quite so quickly after receiving your funds.
There will also be non-contractual obligations which are common sense and demonstrate goodwill towards the buyer, perhaps even if only showing kindness and doing the decent thing. It does no harm and can only stand you in good stead in the event of any argy-bargy in a worst case scenario.
Run off insurance is crucial, aside from any regulatory obligations imposed upon retiring members. Do not be tempted to cut corners as the cost of a claim could be potentially ruinous and the cost of good cover may be far cheaper than you think, but always make sure the cover you obtain is adequate both in terms of financial safety and the small print.
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It pays to speak to a specialist broker as such insurance is invariably less straightforward than you may believe with cover ranging from claims occurring to claims made policies, and even between insurers the same phrases may have different definitions.
Duties to clients
You no longer have a contractual duty to your clients so if any matter arises it is important that both parties realise the limitations imposed on you. If the matter relates to documents from your tenure as their accountant they are very likely to be in the hands of the buyer but if they have a problem with the buyer you could well be affected through clawback provisions if they leave the new incumbent.
It may well be that you have the ability to resolve the problem swiftly to their satisfaction. Perhaps something has been lost in translation (possibly quite literally) between the buyer and your former client, and you had the same problem in the past and therefore have to solution to hand, or it could be something fresh that you feel the need to get involved in simply to avoid reputational damage.
It will reward you handsomely, even if only through the prevention of a loss, to endeavour your utmost to ensure that the client’s issue is resolved and this will necessitate working with all parties. Whatever you need to do make sure you keep records of matters arising and how and when they were addressed by the buyer or yourself, just in case you come to blows financially and proof is required to reject or substantiate any claim or rebuttal. Remember that the buyer may be withholding funds as part of the deal and it may be you who needs to the resolution more than the buyer, aside from any moral duty to your former client.
Lastly, always bear in the mind the possibility of unknown unknowns. Long tail events perhaps but unnerving nonetheless. Some buyers are understandably nervous and at the slightest whiff of trouble will fire of a solicitor’s letter to mark their territory.
Keep calm and acknowledge their concerns while making every effort to remain focused and remind them that you are there to assist and are cognisant of your responsibilities as ultimately you share the common aim of a smooth transition.