Last year we were contacted by a vendor looking to retire and sell his accountancy practice. He was aged 72 and had been working with his clients for longer than he cared to remember. Some of his clients had been with him for over 35 years and in some instances, their business had been passed down the generations. It was not uncommon for him to be dealing with the third generation within a family business.
He felt like he had a fantastic practice and like many vendors was finding the decision to retire and pass it on to a stranger a very difficult one to make. However with pressure from his wife and an inherent disinterest in learning yet another set of rules and regulations imposed on him, that detracted from his love of doing accounts, he felt it right to hang up his calculator and he contacted us.
We went through the normal routine of getting him to fill in our questionnaire, giving us details of his practice ie accounting systems used, number of limited companies, sole traders etc (happy to provide this to any vendors reading this blog). We also needed him to sign our proposal giving us his signed permission to market his practice. We will not start any work for our vendors without their signed permission to do so. We work in tandem with our vendors and make sure they understand what we are going to do, then we do it and then we tell them what we have done. Works a treat.
Anyway, I digress, sorry. We sent out our bespoke mailer for our vendor and got a very good response from interested buyers. We had ten buyers wanting to know more about the practice. Meetings were set up with four of them that wanted a face to face and we had three offers. The vendor chose one offer and it proceeded to due diligence. This was completed satisfactorily. But then there was a delay with the landlord re-allocating the lease together with the solicitor who appeared to go on endless holidays. When I say delay, I am not talking about a couple of weeks but am talking about over four months.
In the meantime the buyer was getting more and more frustrated with the lack of progress and threatened to pull out on many occasions. Luckily he did not and it proceeded to completion in the end.
However, and this is the whole point of this blog, the vendor fell into the trap of being naïve, innocent and perhaps willing to share too much with his clients. In the last couple of months prior to completion he told many of his clients that he was about to retire. What he did not say was that he had interviewed a number of successors, chosen one who was going to be taking over the practice and that he was going to work with the buyer through a hand over period to ensure all clients were looked after through the integration process and for up to 12 months post sale.
On hearing that the vendor was going to be retiring many of the clients decided to find an alternative accountant and the vendor lost over £50k of fees within just a few weeks. If you are a vendor DO NOT DO THIS. The buyer then re-considered whether or not it was worth his while to buy, the deal was re-negotiated to a lower multiple and the vendor had neither the time nor willingness to rebuild and replace the lost fees. At 72 years old the vendor had to deal with rather a large dent in his retirement provision.
Yes we are here to advise and instruct but we have never come across a vendor who has done this in the past. Having spoken to him he was really upset and told me that he thought his clients would be loyal and wait until he had told them he had a replacement before choosing to leave. It really shook him.
Please remember clients want to know that their accounts etc will be done. If you, as their accountant, say you are going to retire, make sure you tell them that you have a replacement lined up. Loyalty will evaporate as soon as a client thinks they are without an accountant when they need to have work done for them.
Talk to me if you want to sell or buy accountancy fees. We have done over 260 deals and the total keeps increasing. If I don’t know the answer to any of your questions I will find out. Please use Draper Hinks we are good at what we do and we care a whole lot. You can reach me at n.draper@draperhinks All correspondence is confidential.
I look forward to hearing from you. Nicola