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handing over the baton
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Selling your practice to the staff – is there an elephant in the room?

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Handing over the practice baton to an ambitious and trusted staff member can be a tempting option for accountants looking to retire, however, as Norman Younger warns, it’s important not to forget about the elephant in the room.

13th Feb 2023
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It’s a question that remains one of the most vexing issues small practitioners face when they have professionally qualified staff members who know the clientele well and embody the practice ethos.
One would think that the answer is a no-brainer.

It is and it isn’t.

For the ambitious accountant who aspires to own their own practice, it is not even a question, especially as many have sat patiently, confident that the day will come, even for stubborn practitioners set on being carried out of their office in a wooden overcoat!

It is however a very different matter for the boss. Of course the advantages are as clear as day:
•       Continuity for staff
•       Less chance of clients leaving
•       100% trust in the buyer, obviating the need for reverse due diligence
•       Sellers knows they can get on with the buyer during handover and post-sale

A word of caution

But unfortunately, such benefits can obscure the harsh reality of the situation, which could potentially destroy the practice, immediately or post-sale to a third party.

The most common issue faced is that staff are unable to raise the funds, something exacerbated since the infamous “mini-budget” that wasn’t.

For a long time they may have exuded the confidence that their acquisition would not be a problem. Yet, deep down, you knew that they would never commit, because they were scared to put their home up as collateral, or could never raise the necessary funds especially if the practice was growing.

Will you accept an earn-out if it is their only option?

Sometimes the thought of being responsible for the whole practice frightens them, especially dealing with their colleagues as their employer rather than as their peer.

This becomes a real headache if one of your workers can manage to pull off the deal but not another who is equally senior or experienced and also had their sights set on partnership - hell hath no fury like an accountant spurned!

All too often I have dealt with sellers who have been led a merry dance for months or even years until they have woken up and smelled the coffee.

Managing these tensions while allowing you to get the retirement deal that works for you takes proper planning and experience, and the sooner you address the issue the better.

Replies (4)

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By NewACA
14th Feb 2023 11:07

I recall being groomed to purchase a practice by a retiring accountant 10 years ago (I was a manager at the firm and I did want to own my own practice). I did want to buy it, but I really had no money/home to re-finance to even purchase the necessary first third value of the block of fees which was over £100k. In the end, I just set up on my own and managed after 5 years to have 2/3 of the value of the prior firm (money worth - not pinching clients!). I did purchase a small block of fees a few years later after starting, for £30k, just to see what it was like after a local accountant presented me with the opportunity - I saw it as a good way to get experience of the process for when I one day sell out. I must say, it was highly stressful taking on even just £30k of new business, with a sudden rush of lots of extra new clients to keep happy and move over to our systems, go around and meet and so forth all within say a month, all the while lookiing after my existing client base, even though it was done out of season: February. I am so glad I never did purchase the original much larger firm I was offered. It also meant I got to take on the clients I wanted, get my own name rather than taking on someone else's name and problem clients who had been groomed, or allowed to behave in certain ways I wouldn't put up with.

Thanks (1)
Norman Younger
By Norman Younger
14th Feb 2023 13:28

Sometimes the best deals you make are the ones you avoided

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Lone Wolf
By Lone_Wolf
14th Feb 2023 13:37

I wonder why the director of a company who deals with accountancy practice sales would write an article urging accountants to sell to 3rd parties... :D

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Replying to Lone_Wolf:
Norman Younger
By Norman Younger
14th Feb 2023 16:02

Possibly it is because he speaks from a position of authority given the situations he comes across

If oyu read the article carefully you would see it does urge to sell to an outsider, but to address the issue properly

Anyway, the director's name is not Mr V Putin so anybody using another broker can still attend hotels without fear of falling out of the window

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