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Succession: Are you prepared?

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31st Dec 2012
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Whatever your age or experience, there will come a time in every practitioner's life when you start planning for succession.

While there are various methods of handing over or selling your firm, including family takeover, selling internally to employees and sourcing other local companies, less traditional methods are emerging from the woodwork. 

One option is to go online. AccountingWEB has its own Opportunities section, which while not solely a location for retiring practitioners to sell or value their firm, is an avenue to do such. However, a website aimed directly towards those selling their firms or looking to buy was launched recently. 

Retiringaccounting.co.uk is a platform for accountants to have their firms valued and bidded for by other accountants or those seeking to buy a practice. 

While perhaps a positive for those with no available successor, selling online has a number of pros and cons. 

This article examines the general theme of succession and looks at what benefits selling your firm online could hold for you.

Questions to ask when planning succession 

Using examples from Jeremy Kitchin's 2011 article on succession, here are a few basic questions to ask yourself before planning succession.

  • Does the partnership state a specific age when owners sell or pass on their equity?
  • Has a successor be identified? If not, what will the firm do in an emergency situation?
  • When and how will clients be transferred to the successor?
  • What type of successor development plan does the practice have? 
  • Will the retiring owners continue to work full or part time at the firm, or at all?
  • How strong is the next tier of management?
  • If a sole practitioner, do you have a practice continuation agreement in case of sudden death or disability?

AccountingWEB member advice

AccountingWEB members debated the issue of succession on Any Answers, all seeming unanimous on one succession issue: the importance of client happiness.

"It's something I keep thinking about and it fills me with dread,"  said ShirleyM, who is afraid of being ripped-off when selling her firm and clients running for the hills at the sight of potentially raised fees. 

“When I retire, my first priority will be my employees and my clients.”

N.Draper, however runs a brokerage, putting buyers and sellers of accountancy fees together.

"The best deals are always those where there is a good personality fit," they advised. "Get the fundamentals right and you have the basis for a good deal that will work for both sides."

Some members were concerned online sales could take away from an "organised, proper handover" however, by eliminating a real-world personal touch, such as R.E Robinson, who warned about the importance of due diligence and careful planning. 

Paul799 advised those planning to sell up not to "run away" and to foster relations with other local sole practices to see if a takeover could be on the cards.

Trust seemed to feature high on the agenda for HudsonCo, who has experience of picking up clients from other retired or retiring accountants. 

"I think it is much better to have an organised handover to someone you trust than to let your clients drift away because you are no longer providing the service they require," they said.

"Consider selling out to the right person so that your clients have what they need."

But how can you tell who the right person is?

Expert advice

ICAEW head of enterprise Clive Lewis advised there are a number of aspects to consider when selling your firm: 

  • Start as early as you can, considering who might succeed you internally or externally - know your exit routes
  • Facilitate a smooth transition by sticking around for a period to introduce your successor to clients
  • Preserve your anonymity for as long as possible, especially if you are synonymous with the business 

“There is an old adage that as soon as you start a business or firm, you should start planning your exit. I’m not with this school of thought, however, as when you start you don’t know where it’s going to go. Certainly, once you get to a certain stage, you should review what your exit routes are," Lewis said.

“If you are planning an exit, you need to start as early as you can. You need to think about who might succeed you, including considering selling to employees. If you don’t want to sell internally, what other kind of buyers there are. For example are there any rival firms or competitors you could sell to?” he added.

Online selling 

"I can see the advantages of selling online, such as attracting interest. But in the end, a buyer and seller are best met face-to-face and discussing details that way, including what the offer is and data of the sale," argued Lewis. 

One useful aspect of online selling is the preservation of anonymity, he added. 

According to Lewis: “You want to keep the fact you’re leaving as confidential as possible as you don’t want clients getting wind of your leaving until you have a firm proposal in place. I can see the benefit of selling online in this."

However, you shouldn't skimp on service just because you're selling online and should always strive to find a buyer who will replace the high standard of service you provide.

"Accountancy is an incredibly personal service. If a client is used to a high level or service, it can be hard for them to think that a replacement is going to provide that same standard."

Further reading:

Replies (3)

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By carnmores
31st Dec 2012 19:29

im only just getting over the
Recession

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Replying to lionofludesch:
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By david5541
02nd Jan 2013 12:21

local chances

I have heard someone in the local area near my work has just had a family bereavement but has been looking for help how could i use the chance?

so often local news gets neglected amongst all this. on this subject.

 

its not a though the idea could be sold to my boss is it?

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FT
By FirstTab
01st Jan 2013 22:06

Very helpful
Thanks Rachael I found this article very helpful.

The pitfalls of buying block fees were well made by 2 people who commentated on a blog on this subject https://www.accountingweb.co.uk/blog-post/you-could-buy-blog-fees

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