A misconception about bringing in a new partner to secure succession

In the last couple of months I have been asked a few times, by sole practitioners looking to retire, about the feasibility of taking on a new partner(s) who will eventually buy out the practice allowing them to retire.

This all looks fine on paper but I would seriously warn against anyone doing this. I have heard horror stories where this scenario goes terribly wrong. In one case a sole practitioner brought into his practice two new partners with a view to passing over his client base over a period of a few years in order that he could start to reduce his workload and his time commitments to the practice. He was to be paid over a number of years, by the new partners, when he finally retired. These two partners were known to him. The clients were introduced to the new partners, the staff got to know them well and the retiring partner was very happy. What could go wrong?

Just before he retired and before any payments were made, the two partners left the practice. They set up on their own and they took the majority of the clients with them. They did not pay for the client base and they left the original partner with very little in the way of recurring fees. He had built up the practice over many years and just at the point when he was going to receive his first payment, he got no money and his practice was decimated by people he thought he could trust. He now has to work for another ten years to build his practice back up to allow him to have sufficient money to retire on.

Now, not every accountant would do this but I have heard of it happening a few times, in fact it is probably happening right now to someone. A sole practitioner close to retiring is very vulnerable to someone coming in, learning the ropes, taking the clients and no payment being made. Selling the practice outright is also risky but will give a better return than having most of your clients taken away with no monies received.

If you want to talk about this, or any other matter please email me at n.draper@draperhinks.co.uk quoting reference 140513